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How to Determine Budget Percentages

If you’ve never budgeted before—or you’re wondering how your spending compares with everyone else’s—you might wish you could see some recommended budget percentages, national spending averages, and other helpful stuff like that all in one place.

Hey! This is that place!

And listen, we aren’t about to give you a one-size-fits-all budget percentage guide. Because your life isn’t one size fits all! How much you should spend on this and that in your budget can vary depending on your income, household, location, goals, lifestyle—so many things.

But there are a few standards to follow. So, we’ve pulled them together with other helpful info to guide you as you’re setting up (or fixing up) your budget! Are you ready for this? (Yes.) 

Here. We. Go.

Guidelines for Setting Your Budget Percentages

Let’s break down some national averages and budget percentage recommendations for common budget categories and budget lines.

Money

Start budgeting with EveryDollar today!

If those words are new to you, think of a budget category as a folder, and the budget lines as files inside it. Or maybe a category is like a playlist, and the lines are like songs. (Hm . . . maybe you should make a good money playlist to get you in the budgeting mood.)

And one more thing: If you’re reading this as you set up your first budget, don’t stop with the numbers we give you. Look up your own! Open your online bank account or get out those bank statements and see what your past spending reveals.

giving

Giving

We believe in giving. Always. Tithing to your church, donating to charities, supporting worthy causes—even if you’re in debt. Generosity shifts the focus off of us (our problems, our financial shortcomings) and reminds us of our blessings. Giving is good for you and for others, and we recommend giving 10% of your income.

saving

Saving

Heads up: You’re about to hear us mention the 7 Baby Steps. A lot. This is the proven, guided path to save money, pay off debt, and build wealth. (Aka how to win with money.)

If you’re wondering what’s typical here, the average American saves around 9% of their income.1 But this is a great example of how a percentage or even an average shouldn’t set a standard for you. How much you’re putting in savings each month depends on several factors!

When it comes to the savings category of your budget, think about these three reasons to save: emergencies, big purchases and wealth building. Since budget percentages for these can vary, let’s talk through each one.

Emergencies: Set aside $1,000 in the bank right away. (We call that a starter emergency fund, or Baby Step 1.) This puts a cash buffer between you and those life happens moments. If you’ve got debt (which we cover later) keep that emergency fund at $1,000 until you’re debt-free (which is Baby Step 2).

When the debt’s gone, you need to save up what we call a fully-funded emergency fund (Baby Step 3). This is three to six months of expenses and will protect you against bigger emergencies, like job loss or your car going kaput.

It’s hard to tell you what percent of your income to put toward your emergency fund. Basically, if you don’t have one yet, you need to cut back on any extras and get intense on stuffing cash into your savings until you do!

Big Purchases: Another reason to put money in savings is if you’re planning any big purchases. This includes saving up for a reliable car to replace the one you know is on its last legs (er . . . last tires?).

The key word here is know. When your car breaks down, to your complete surprise, that’s a job for the emergency fund. But when you know your beater is hanging on by duct tape and prayer, that’s when you start saving for a replacement.

Home repairs work the same way, really. Some are surprises. Some aren’t. So, keep your eyes on your stuff so you’ll know when to put money in savings for those necessary big purchases.

What about the fun big purchases? Like vacations, new furniture or that boat to make all your fishing dreams come true? You should save up cash for these too! But get to the luxuries after you’re debt-free and have some solid financial security. (The boat can wait!)

Again, there isn’t a set percentage here. Just remember—the more money you throw at a goal, the quicker you get there!

Wealth Building: The final reason to save up money is for wealth building. Once you’ve paid off your debt and are sitting on top of that fully funded emergency fund, it’s time to start saving for the future!

This time, we have a solid percent for you: At this stage of the game, you should be investing 15% of your gross income for retirement savings.

Pro tip: Learn more about walking the 7 Baby Steps.

food

Food

Eating in, eating out. When we’re not making or consuming food, we’re thinking about food, right? It’s no wonder this budget line is one of the hardest to wrangle.

While we don’t have a set percent here, we can give you some national averages of what Americans spend on groceries each month in the “moderate” spending range:2

  • Singles age 19–50 spend $267 to $315.
  • Couples age 19–50 spend $640.
  • Families of four spend between $928 and $1,109.

What about restaurant spending? The average per household is $2,375 a year (around $198 a month if you divide it equally).3

As you start budgeting, these numbers might help—but know that the size of your family, any dietary restrictions, and your lifestyle will all affect your spending here.

As you budget from month to month, pay attention to what you plan versus what you normally spend. Are you over budget? Why? It could be that your expectations are unreasonable—or that your spending is! Both can be fixed. You’ll just need to work at it.

Pro tip: Get the Rachel Cruze Meal Planner and Grocery Savings Guide.

utilitiesUtilities

The utilities budget category includes electricity, water, natural gas or propane, and trash services. These all can vary based on where you live and how many people you live with!

Here are some helpful stats—the average “consumer units” (similar to households) spend:4

  • $414 a year (about $35 a month) on natural gas
  • $1,516 a year (about $126 a month) on electricity
  • $682 a year (about $57 a month) on water

Pro tip: Learn how to save money on your electric bill.

housing

Housing

Housing (or Shelter) should be no more than 25% of your take-home pay. This includes your rent or mortgage payments plus tax, insurance, HOA fees and private mortgage insurance.

So, when you’re crunching numbers to see if you can afford that lavish apartment complex with a pool, pet spa and playground—remember 25%. When you’re plugging totals into the Mortgage Calculator to see if the neighborhood of your dreams would actually become the monthly payment of your nightmares—remember 25%.

(Also, remember these numbers: 15-year fixed and 10–20% down. They’ll help you when you’re house hunting.)

Spending anything over 25% a month on your housing will make the rest of your budget percentages tight and can turn what’s meant to be one of your greatest blessings—your home—into a financial burden.

P.S. This percentage will change when you’re on Baby Step 6, which is all about paying off that home early. When you’re mortgage-free, you won’t have to worry about putting 25% toward housing anymore! All that money can go to living (and giving) like no one else!

Pro tip: Learn how to save on home expenses.

transportation

Transportation

Gasoline, car tag renewals, oil changes—it all adds up. This category will vary depending on where you live, whether you have a long commute to and from work, what you drive, and whether you have access to great public transportation. On average, American households in 2020 spent:5

  • $1,568 on gasoline, other fuels and oil (just over $130 a month)
  • $263 on other forms of transportation (just over $21 a month)

Pro tip: Learn how to save money on gas.

healthHealth

This category is an excellent example of how percentages can change from month to month or year to year.

If you go to the optometrist to update your glasses prescription, or you fall off the stage while performing in Macbeth and literally break a leg, you’ll spend more on your health that month than the next month when you’re just fine. If your kid needs braces, that’s a couple years of higher health expenses.

On average, American households in 2020 spent $1,034 total (about $86 a month) on medical services and supplies.6

Pro tip: Save money on things your health insurance doesn’t cover.

insurance

Insurance

Though insurance isn’t fun to talk about or spend money on—it is a must. No matter where you are with your money goals or Baby Steps, these four types of insurance are essential: health, home, auto and term life.

We also recommend identity theft protection, long-term disability insurance, umbrella/liability insurance (if you’ve got a net worth of at least half a million dollars), and long-term care insurance (if you’re 60+).

All of these vary based on, well, a ton of different things like your age, previous health concerns, the kind of car you drive, your personal driving history, the size and location of your home, your assets, and the list goes on and on.

The best thing you can do here is take our Coverage Checkup. You can make sure you’ve got the coverage you need—and not more. (Yeah, crazy, but some people are over-paying and over-covering!) You’ll also get an action plan for any insurance you’re missing.

childcare

Childcare

With childcare, we’re talking about making a budget category to cover any expenses needed for parents to work—not the extra babysitting money for date nights. (That can go under the entertainment category, which we’ll talk about next!)

The average cost of childcare ranges from $10,700 to $15,900 a year per child (about $892 to $1,325 per month).7 Of course, this varies based on where you live, the kind of childcare you pick, and how many kids you have!

Pro tip: Learn more on how to budget for childcare.

entertainment

Lifestyle or Entertainment

If you want to buy tickets to see your favorite boy band perform with the local symphony, you’ll need a lifestyle (or entertainment) category. The average American household spends $2,912 a year here—which is about $243 a month.8

But let’s be honest for a minute: If you’re in debt or living paycheck to paycheck with nothing in savings—cut out this budget category until you’ve got financial security. Yeah, it sucks to say no to things for a season, but it’s just a season. It’s worth the sacrifice now to get you to a better place with your money in the future!

budget percentages

coffee

Personal Spending Money

The amount of personal money you budget for each month depends on your income and Baby Step. If you’re saving up an emergency fund or paying off debt, any fun money spending should strike this balance: It should be low enough to help you get to your goals quickly but just enough to keep you from falling off the budgeting wagon.

Looking back at those national averages, American households spend $646 a year (about $54 a month) on things labeled as “personal care products and services” and $1,434 (about $120 a month) on “apparel and services.”9

And here’s an important callout on clothing: If you need clothes for growing kids who don’t fit in their things anymore, that’s different than wanting this season’s latest and greatest because you love fashion. Wants like this should go under personal spending and are covered after needs.

backpack

Miscellaneous

It’s hard to plan for everything and still make a zero-based budget—unless you create a miscellaneous category for about 5% of your take-home pay.

This is for the things that pop up in a month but aren’t actual emergencies. You’ll be ready if your kid gets a last-minute invite to a friend’s birthday party. With a miscellaneous category, you can grab a gift without derailing your budget.

The miscellaneous category is also great for those times you underestimate how much you’ll need for a certain expense. Let’s say you get the water bill, and it’s a little more than expected. Just move some money from the miscellaneous category to the utilities category.

If you don’t end up spending anything from your miscellaneous category, give yourself some high fives. (Okay, so that’s mostly just clapping, but that works too.) Then put all that extra cash toward your current Baby Step!

debt

Debt

If you’ve got debt, it’s time to cut out extras, lower your spending, and look into ways to up your income. All the extra money you add to the budget from doing these things should go to paying off your debt.

We aren’t giving you a set percentage—we’re saying throw everything you can at this super important money goal.

Because the thing is, debt robs this month’s income to pay off the past. You can’t get ahead when you’re constantly paying for the past. So, free up your paycheck (all of it) by getting debt out of your life. Pronto.

Pro tip: Use the debt snowball method to pay off your debt. Fast.

How Do I Determine the Right Budget Percentages?

So, it’s not about putting yourself inside this budget percentage box with everyone else in the whole entire budgeting world. That. Doesn’t. Work.

If you want to make a budget that does work (for you—in your stage of life, with your income, Baby Step and money goals in mind), our best piece of advice is to check out Ramsey+.

Okay, cool cool—but how will Ramsey+ help you budget? Well, start a free trial, and then go watch Budgeting That Actually Works. In five short lessons you’ll learn how to set up a budget that fits where you are so you can get to where you want to be!

Then put the lessons in action by downloading the premium version of our budgeting tool, EveryDollar. Premium means features like bank connectivity (which makes tracking your transactions throughout the month simple and accurate) and budget reports (which show you your spending and income trends).

The truth is, it doesn’t matter if you’ve budgeted never or a million times—you can do it with confidence. Starting right now. Think about the numbers we’ve shared here, look at your own numbers, start that free trial to Ramsey+, and get your money working as hard as you do.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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Answer a few questions, and we'll create a plan tailored just for you. It only takes three minutes!
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