How do you know if you are spending too much money on rent, food, or gas? Without a guideline to set budget percentages, it is impossible to tell. To give you a better idea, in this post, I share with you recommendations on how to distribute your money and what percentage of your income should go to what.
YOU CAN READ THE BLOG POST ON BUDGET PERCENTAGES, LISTEN TO THE PODCAST, OR WATCH MY VIDEO LESSON.
Budget Percentages: How To Distribute Your Income
These are the percentages that personal finance expert, Dave Ramsey recommends for your monthly expenses.
As a trained Ramsey Solutions Master Financial Coach I believe these guidelines will help you optimize your finances.
And, before we get started, if you are married make sure you share this information with your spouse.
In order to put together a realistic budget, both spouses need to get on the same page and agree on their spending plan.
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Monthly Expenses: Dave Ramsey Budget Percentages
As a designated Ramsey Solutions Master Financial Coach, I have implemented these percentages in my budget, and let me tell you, they work!
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What Percentage Of Your Income Should Go To What?
The following spending recommendations are based on your net income, meaning the money that you actually take home after your employer deducts taxes, health care costs, and contributions to your retirement or pension plan.
Note that the recommendations do not add up to 100%. Instead, they offer a range of percentages that are appropriate for each spending category.
Budgeting Percentages And Priorities
Before focusing on spending percentages, we actually need to establish spending priorities.
Not all expenses should be treated equally.
You should cover these four necessities first:
- Rent or Mortgage
- Food
- Transportation
- Clothing
Now, le’s also set expectations on what is defined as “necessary” to live.
- When I say rent or mortgage, I am talking about having a decent place to live, not a new home with a pool and a finished basement, or a cool city condo that is out of your budget.
- When I talk about food, I mean groceries that you buy at the store to make home-made meals and lunches.
- I am not talking about eating out at restaurants. Those expenses should be treated separately in your entertainment spending category.
- transportation, I am talking about covering your expenses for a reliable car and gas. It is not a necessity to spend hundreds of dollars financing a new car or SUV. And finally, for clothing, I am talking about having the appropriate clothes for the season.
If you are like me and have a closet full of clothes, but “nothing to wear,” you could probably eliminate spending on clothes completely.
But, if you have children that are growing like weeds, like mine, then, of course, it will be a necessity to allocate some money to keep them from wearing highwaters, especially if they are in high school.
I don’t want any teenager to grow up traumatized about their style!
How Should You Allocate Your Income?
Now that we have defined our necessities let’s get into the recommended budget percentages.
GIVING: 10-15%
If you are familiar with Dave Ramsey, you know that he is huge on giving.
The recommendation is that you allocate 10-15% of your income for tithes, offerings, and gifts to charity.

I have put it at the top of the list because if you don’t make it a priority, it won’t happen.
It’s hard to give off the leftovers because we never have any money left at the end of the month.
SAVINGS: 10-15%
I also put the savings category at the top of the list, because unless we are intentional, there will be no money left at the end of the month for savings.
Get into the habit of saving at least 10-15% of your income every month.
A good portion of this money should be put away to build up your six-month emergency fund.

If you are following Dave Ramsey’s baby steps, which I totally recommend you do, then start by saving $1000 and then tackle your consumer debt.
When you have paid all your debts except your house, then focus on building up your emergency fund to 6-months of expenses.
When you are done, then focus on investing 15% of your income for retirement.
Not to get too complicated here, but I also recommend that you keep another separate savings account, also referred to as a sinking fund, for expenses such as vacations, buying a new car, or making renovations or repairs to your home.
BUDGET PERCENTAGES FOR BASIC LIVING EXPENSES
RENT OR MORTGAGE: 25-35%
Try to keep your mortgage or rent cost at around 25% of your take-home income.
For example, if your monthly household income after taxes is $5,000, then a good goal for your monthly mortgage payment or rent would be $1,250.
I recommend that you only consider buying a house if you can afford the monthly payment on a 15-year fixed loan.

Quite often, people finance their homes for 30-years to be able to afford the monthly payment. But you end up paying a whole lot more on interest!
You should avoid 30-year mortgages and stick to 15-year terms.
So, if you have a 30-year mortgage and your monthly payment is above 25% of your income, you definitely bought too much house.
You should also keep in mind that as a homeowner, you are also responsible for maintenance and repairs. So your cost of owning a home will always be a lot more than just paying the mortgage.
UTILITIES 5-10%
Budget between 5-10% of your income to pay for utilities. I am including here the basic necessities, such as paying for the water, electricity, trash, and gas bills.
I do not consider cable, internet, Disney +, Netflix, etc., as a necessity.
Those expenses should be part of your lifestyle or entertainment categories.

FOOD: 5-15%
This is one of the budgeting categories that many of us struggle with the most. There is not a universal answer for how much one should spend on groceries and household items.
A safe rule of thumb is to spend between 5-15% of your income on food.
However, your budget will depend on many particular factors, including:
- Your income
- The size of your family
- The cost of living in your area
- Your lifestyle
For someone with a high salary, for instance, $20,000 per month, spending 15% percent on food might be too much. That would be $3,000 a month.
If you have a family of five, that’s a lot of money on food, unless you are having caviar and toast every morning!
On the contrary, if you bring in $2,000 per month and you have a family, feeding them for an entire month on $300 will be almost impossible.

Whether you have a high or low income, make sure that you are doing a budget every single month. If you have a small income, it is especially important to keep track of where every dollar is going.
Determine a percentage that makes sense with your income, your lifestyle, and your family.
It’s important to mention that the food budgeting category does not include expenses for eating at restaurants.
Eating out is not a necessity and should be part of your entertainment category.
If you are on a tight budget, you should use your income to purchase groceries.
Making home-made meals, and packing lunches for your entire family will save you hundreds of dollars.
It will also have a positive impact on your health because you can control what you put in your meals.
If you are in debt, you should not be going out to restaurants. You need that money to pay off your debt.
Having extra money will help you achieve other financial goals and improve your quality of life.
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TRANSPORTATION: 10-15%
This category includes your metro, bus, Uber, car payment, parking, insurance, gas, and maintenance.
Ideally, I would like for you not to have a car payment!
It may sound crazy, but it is possible. My husband and I haven’t made a car payment in over ten years, and I am telling you, it’s incredible.
While you pay your car off, try to keep your transportation expenses between 10-15% of your income.
But promise me that you will do everything in your power to pay off that car as soon as possible.
I have to insist because most people spend money on cars, but don’t save for emergencies, retirement, or college.

We have been conditioned to believe that we need a “good” car to get around safely. I also recognize that many of us tie up our “success” to the type of car that we drive.
But, until we understand that a vehicle is not an asset and instead, an expensive object that loses value every time we drive it, we’ll not take advantage of the opportunities that driving debt-free can offer to create wealth.
Just imagine, what would you do with an extra $300, $400, or even $700 per month if you didn’t have a car payment?
That’s how much many people spend on their monthly financing!
What if instead of making another car payment every month, you invested $500 per month into retirement.
Depending on how old you are when you start, and how you choose to invest your money, you could have enough to retire a millionaire.
Ten years ago, I didn’t have that perspective. I was just working, making payments, and had no idea that purchasing a vehicle with cash was even possible.
But when I found out that other people were doing it, and that my car was not going to break when the loan term was over, I decided to keep driving it debt-free.
Instead of financing another, we saved the money. Three years later, we bought me a “used” car with 38 miles. Not 38K miles. 3-8. We got a heck of a deal, and we paid cash for it.
Then we did it all over again and replaced my husband beater with a “new-used” truck. I will never have another car payment. If we could do it, you can too.
CLOTHING: 2-7%
This is another spending category that will vary according to income, size of your family, lifestyle, and even your profession.
Again, if you are in debt and have plenty of clothes in the closet “but nothing to wear,” you don’t need to spend any money on clothes.
If you have little kids that are in growth mode, I understand you will have to spend some money here.
Try to buy stuff on sale, or even better, go to garage sales and thrift stores. You can get amazing deals.
I still shop at Goodwill all the time. I can afford to go to Macy’s and drop $50 on a pair of jeans for my son. But guess what, they will have holes in the knees within two days.

We are not spending money for the sake of putting holes in clothes. So, until my son can wear jeans and not make holes in the knees, I will buy used stuff.
It’s not that I want my kids to wear cheap clothes because I am a mean mom. It is the principle.
I find Levis jeans at thrift stores all the time, and for less than $3. Why spend $50 on a pair of new pants that will be destroyed in ten minutes, when you can pay $5 for the same result.
I know, I exaggerate sometimes, but you know what I mean.
Now, if you don’t have any consumer debt and love to go shopping, by all means, go knock yourself out with your 7% per month.
I am all about working hard and enjoying all the things, debt-free. So, have a blast!
BUDGET PERCENTAGES FOR LIFESTYLE EXPENSES
HEALTH CARE: 5-10%
For this category, I am assuming that your employer already drafted the cost of your medical insurance.
So, unless you have a chronic or medical condition that requires expensive treatment, allocating 5-10% of your income to health expenses is a decent amount.
If you are not using that money every month, I recommend that you set it aside in a separate savings account or envelope.

Let it grow so that if you have a medical emergency or an unforeseen expense, you have a cushion there to get you out of trouble.
If you do have medical conditions that require a lot of expenses, you should talk to your insurance provider to understand what are your maximum out-of-pocket expenses every year.
Make it a goal to save enough money to cover that amount, so that you can pay your medical bills without getting into debt.
PERSONAL EXPENSES: 5-10%
Nobody likes to fill like they just work to pay the bills. That’s why it’s essential to have a little cash for discretionary expenses.
Include in this category expenses such as your manicures, visits to the hairstylist, and your Starbucks fix.
The amount that you decide to spend in this category should be in line with your income and financial goals.

Again, if you are in debt, you should use every extra dollar to pay it off. In that case, drinking coffee at home, DIY manicures, and more scarce visits to the hairstylist would be a wiser choice.
You need to make temporary sacrifices for the greater benefit of becoming debt-free and building wealth.
ENTERTAINMENT: 5-10%
Let’s start here with a word of caution: Entertainment expenses can easily bust your budget.
That being said, include in this category expenses such as eating out, cellphone bills, sports, cable, Netflix, movie tickets, toys, vacations, etc.
A good rule of thumb is to allocate between 5-10% of your budget in this category.
And just like I said with every discretionary spending category, if you are in debt, you should seriously consider cutting the lifestyle as well.
Many people use credit cards to supplement their income, especially to cover expenses like vacations and to eat out.

The problem is that if you don’t have cash in the budget to pay for those, you will not have the money either to pay for the credit card bill in full.
Little by little, things can get out of control. A $2,000 vacation at a high-interest rate can become a $4,000 nightmare over a couple of years of dragging that credit card debt.
Instead of overextending yourself financially, opt to be honest with your friends and family.
There is nothing wrong with saying no if you don’t have the cash to pay for it, regardless of who is inviting you to join the fun.
Remember, if you really want to win with money, you need to make sacrifices in the short term to win the long term game.
DEBT: 5-10%
Again, ideally, you want to be in a situation where you don’t have any consumer debt.
Paying off your house sooner than later should also become a goal of yours if you’re going to build some serious wealth.
In the meantime, try to keep all your consumer debt (not including the mortgage, below 10% of your take-home income.

Conclusion: Budget Percentages
What Percentage Of Your Income Should Go To What?
Sticking to a budget, precisely one designed with these percentages in mind, won’t be easy. But believe me, these percentages to allocate your money will set you up or financial success.
So, let’s recap.
You should follow these percentage recommendations for your monthly budget percentages:
- GIVING: 10-15%
- SAVINGS: 10-15%
- RENT OR MORTGAGE: 25-35%
- UTILITIES 5-10%
- FOOD: 5-15%
- TRANSPORTATION: 10-15%
- CLOTHING: 2-7%
- HEALTH EXPENSES: 5-10%
- PERSONAL EXPENSES: 5-10%
- ENTERTAINMENT: 5-10%
- DEBT: 5-10%
Be patient. It takes time to figure out how much you are spending and on what. But that information will allow you to make adjustments to get closer to your financial goals.
Remember, always cover your four priorities:
- Housing Expenses
- Food
- Transportation
- Clothing
If you are married, make sure to discuss the budget with your spouse. Sit down and put it together, committing to make cuts to pay extra on your debt.
As the month progresses, keep track of your spending and focus on your bigger goal.
Temporary sacrifices will always be necessary to get ahead, but that is the only way to make a plan for financial success.
INFOGRAPHIC: BUDGET PERCENTAGES BY CATEGORIES

Related Posts To Budgeting Percentages And How To Budget Your Income:
- 7 Tips To Improve Your Financial Wellness
- How To Do A Monthly Expenses Snapshot
- The Budget Pad: Organize your Income, Track Expenses & Save Money
- Dave Ramsey’s Baby Steps
- Our Family Grocery Expenses For February 2020

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