Budgeting 101

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60/20/20 Budgeting


Safety: 60 per cent
Safety means allocating 60 per cent of your take-home on food, shelter and footy memberships!.. It should divide up into something like this.

MORTGAGE: 30 per cent.

FOOD: 15 per cent

CAR: 10 per cent

MOBILE and broadband: 5 per cent.


Knowing how much it costs can be scary, but powerful – so work out your percentages. In times of trouble, this is the minimum amount you need to bring in to keep the lights on.

Savings: 20 per cent

Allocate 20 per cent of your hard-earned to savings.

Hold On –  If you’ve got any credit card debt or personal loans you’ll need to do the following:

Firstly, save $2000 into a bank account – a high-interest online savings account.

Secondly, start paying off your minor debts by attacking the smallest one first, knocking it over, and then moving on to the next biggest one – and keep going. I call this method domino your debts, because you knock them down one by one. (Major debts, car loans and the mortgage will take longer.)

Now you’re (mostly) debt-free, you can begin paying yourself – every dollar you put into your savings account is like getting a pay rise at work without doing anything.

The best legal tax dodge is superannuation (yep still despite the gov’t best efforts 🙂

Then you have a choice.

You can aggressively pay down your mortgage (or, if you’re renting, you can aggressively save for your deposit), or you can begin building an investment portfolio of direct shares, property etc.

Splurge: 20 per cent

You are hereby directed to go out and spend 10 per cent of your money on crap that makes you feel good – shoes, booze and anything else you want. The other 10 per cent of your splurge money should go to longer-term splurges – overseas holidays, weddings, divorces, anything that is going to cost more than a few weeks’ wages.

The best place for keeping your splurge funds is in an online bank linked to your everyday accounts.

The key is to make sure your splurges don’t drain your bank.

Think about the big goals you have over the next year, and chunk them down to weekly amounts.

Next Steps

This sounds like a lot of, like, work.

The 60-20-20 plan can put your money on autopilot.

That’s the beauty of this plan. Once you’ve crunched some numbers and set up your accounts, the system should run by itself.

Here’s how to get started:

  1. Over the first week keep tallying up your expenses (click on Budgetless to see how we can make this part easy!), so you know where the money is going.
  2. When you calculate your percentages for safety, savings and splurging, make a few calls to see if you can screw down your suppliers..
  3. Keep a float of $500 in your savings account so you don’t accidentally overdraw and get hit with fees.
  4. For your 10 per cent pocket money, take it out as cash each week. It’s a psychological thing.

Casinos use chips so you don’t freak out when you gamble away your hard earned. Credit cards work the same way.

Cold, hard cash is a lot harder to spend.

  1. Once you have this plan in place you won’t have to worry about money again.

That frees you up to focus on using the miracle of compound interest to turbocharge your wealth plans.


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