Financial commentator and author of the Herald Sun’s weekly column, Barefoot Investor, Scott Pape, writes that the 60-20-20 concept is a money management plan that according to Pape, allows you to set a budget which will then run on autopilot provided you stick to it.
The 60-20-20 money management plan is user friendly and works by setting aside 60 percent of your income for essentials like the mortgage, rent, food and utilities, allocating 20 percent for savings, and the remaining 20 percent to be split evenly. 10 percent of this should be apportioned for discretionary spending like going out to the movies, splashing out on dinner ¬ anything that makes you happy and the other 10 percent should be put aside for more extravagant long term leisure activities such as an overseas holiday, new furniture, or a wedding ¬ anything that will cost more than a few weeks wages.
Pape wisely suggests paying off credit cards and personal debts before starting a savings plan by initially using the 20 percent savings portion.
The beauty of this plan is that once you have worked out a budget and allocated the appropriate splits there is no need to constantly revise and stress as the 60-20-20 budget plan will automatically keep track of your savings and expenditure ensuring you are living within your means.