Financial Planning: Expenses, Saving, Debt

One of my first jobs was building financial planning expert systems at a company called ‘Applied Expert Systems’ (affectionately known as ‘ApEx’, a nice overview of this ‘AI Alley’ casualty is covered in Eve Phillips’ paper ‘If it Works, It’s not AI’, page 46-49). The heart of my job as a “Knowledge Engineer” was gleaning ‘heuristics’ from domain experts that could then be coded into a computer. These ‘rules of thumb’ were perhaps the earliest inspirations for my 70-20-10 model.

Financial planners have long advocated portfolio proportions for people to balance their monthly expenditures and income. Hanson Financial recently posted a piece on the 70-20-10 rule which is quite prevalent in this field…

  • 70% Living Expenses – rent/mortgage, food, clothing, gasoline.
  • 20% Savings – 10% retirement (RRSPs, Company pension, TFSAs), 5% for emergencies (car repairs, medical expenses, unemployment) and 5% for specific goals (vacation, car, school tuition, a new computer).
  • 10% Debt – Student loans, car payments, credit cards.
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