What do you think of when you hear the word ‘budget’? Do you think of something restrictive or something that gives you freedom? By nature, most people hate living on a budget. They think you can’t enjoy life on a budget. However, we know that’s not the case. A budget is actually a tool to help manage your finances, and it’s essential to your personal financial health and literacy to know some common monthly household expenses.
This applies whether you live on a budget or not.
When you know your average monthly expenses, you know exactly where your money goes each month. It lets you identify areas to cut back and save money. It also lets you see if it’s possible to reach a specific goal. If not, you can make changes to improve your chances of reaching that goal.
Living on a budget may not be for you, but you don’t want to blindly manage your money. This post shares a list of some common monthly household expenses and offers tips for reining in spending if you’re off track.
Common Monthly Household Expenses
We all have different life circumstances and situations. However, we all have similar monthly household expenses, including:
Everyone has the above expenses, and the first two are usually fixed in nature. Other expenses are variable or not occur each month. Some of those expenses are:
- Health care
- Child care
- Personal care
- Miscellaneous (ex., subscriptions, haircuts)
Regardless of your individual situation, the only way you can know your average monthly household expenses is by staying on top of your bills.
This does not mean you have to live on a budget, but you do need to know how you spend money each month and if you must look for ways to save money.
Below are nine common monthly household expenses and what you can do to save money on each.
1. Housing Expenses
Whether you own a home or rent, you have housing expenses and they should be at the top of your list of bills to pay. For the purpose of our article, we’ll discuss owning a home since landlords often pay a majority of housing-related expenses for renters.
If you own a house, you have the following monthly expenses:
- Mortgage payments
- Monthly utilities like water, electric, or gas
- Repair and maintenance costs
You should aim to spend no more than 30 percent of your gross monthly income on housing. You can lower these costs in several ways, from living in a lower cost of living area to having a roommate. Housing is your largest monthly expense, so you don’t want spending to get out of hand.
Overspending on housing, or any other area, directly impacts how much income you have to apply towards other areas.
If you own your home, you may benefit from refinancing the mortgage. Even a reduction of one percent can significantly lower your monthly payment. You can even keep your payment at the same amount and pay off the mortgage faster.
LendingTree is an excellent option to refinance your mortgage. The platform lets you compare up to five lenders at once to find the best match for your needs.
2. Transportation Costs
Like housing, we all require transportation. For many that means owning a car. That often means having a car payment as most people are unable to buy a car with cash. Car payments are a drain on your monthly budget, especially if you overextend your budget to buy one.
If you have a car payment, it should not account for more than ten percent of your monthly gross income. For example, if you gross $4,000 per month, your payment should not exceed $400. However, the average car payment is over $500 per month.
If you spend more than ten percent of your income on a car payment, you need to find a way to reduce that cost. You can do any of the following:
- Sell your car and buy a lower-priced one
- Sell your car and use public transportation
- Drive your current car for longer
- Combine trips to spend less on gas
With a little creativity, you can lower your transportation costs and have extra money to apply to other needs.
3. Food Costs
Food waste is literally throwing money in the trash. The average American loses over $500 to food waste each year, or $165 billion as a country. That is a staggering number, and one that’s relatively simple to lower. The key is to plan accordingly and be conscious of where you’re spending your money.
I love to meal plan because it helps me save money and reduce food waste. We eat about 90 percent of our meals at home each month, and I don’t get tired of the kitchen because I meal plan and prep weekly.
If you have no idea where to start when it comes to getting a meal plan, check out $5 Meal Plan. This affordable program gives you grocery lists, recipes, and meal lists to help you save money. You can try it out for free with a 14-day trial.
Whether you meal plan or not, make sure you use the best grocery rebate apps to get cash back at the store.
4. Health Care Costs
We all know how expensive health care expenses are to manage. Whether you purchase your own coverage or get it through your employer, you can see how much you spend on it each month.
Managing health care costs go hand in hand with managing your finances. Choosing lower cost options directly impacts your monthly budget without impacting quality of care.
Below are a few ways to save on health care costs:
- Choose generic over name-brand medication
- Use an HSA plan with your high-deductible healthcare plan – Lively is a great option
- Negotiate with the doctor’s office for a lower bill if you pay in cash
Education is key when saving on health care costs. Make sure to ask questions of your doctor and pharmacist to find the best available low-cost options. The last thing you want is to receive short-term savings at the expense of long-term pains.
While not directly health care related, vision costs should also be included in this category. It’s easy to overspend in this area and impact your budget.
Unfortunately, debt must be included in our list of common monthly expenses. Countless people struggle with debt, whether it’s consumer or student loan debt.
If you have credit card debt, you must treat it as an emergency and pay it off as soon as possible. The sooner you pay it off, the sooner you can apply those funds to other expenses.
Online lenders like SoFi can help you slash rates in half or more so you can pay off the debt quicker. SoFi lets you borrow as little as $5,000 to consolidate your debt, or lower rates.
After completing a brief application, SoFi provides your rate which can be as low as 5.99 percent. The lender charges no fees, so you don’t have to spend anything additional out-of-pocket.
Read our review of Sofi here to learn more about the lender.
You can do the same thing if you have student loan payments. As of 2016, the average monthly student loan payment was almost $400, according to the Federal Reserve.
If you have student loans and they’re taking up too much of your budget, refinancing those loans is often the best way to find relief.
*Related: Want to save more money? Check out our guide on bills you can negotiate to garner more savings.*
Credible is a terrific option to refinance your student loans. The Credible platform lets you compare up to ten lenders at once, and you can find rates as low as 2.15 percent, with auto pay.
Like refinancing a mortgage, you can even keep the same payment to pay off the loans faster.
6. Entertainment Costs
What’s classified as an entertainment expense varies widely. Anything you spend money on that provides entertainment value counts, including:
- Cable TV
- Going to the movies
- Date nights
- Going out to eat
- Buying a fun item you want
This area of average monthly household expenses can easily get out of hand. It’s vital to monitor these costs so they don’t overtake other areas of your budget. If you’re not sure where to start getting your entertainment budget under control, the easiest place to begin is with your cable TV.
The average cable bill is $110 per month, but you can use a streaming provider for less than half that cost and still get the same content.
Hulu with Live TV is a good option, providing over 60 channels for $64.99 per month.
Read our review of the Hulu Live TV channel lineup to learn what channels you receive and how the service works.
If all else fails, there are plenty of fun things to do at home when you’re bored to entertain yourself.
7. Personal Care Expenses
Personal care expenses include items you need to groom and care for yourself. These do not include going out for lunch or grabbing a cup of coffee, as those fall under food costs. Personal care expenses are limited to items such as:
- Gym or health club memberships
- Clothing for work
- Hair cuts, or anything grooming related
Like other areas, looking for ways to cut costs is important. For items you buy at the store, you may want to use cash back shopping apps to help mitigate costs.
Childcare is likely one of your biggest typical monthly expenses if you have young kids. If possible, try to look for alternatives to paying high childcare fees. Even a babysitter who comes to your house can save you money.
Some may even have kids of their own so your child won’t lose out on the socialization aspect that childcare centers provide. Family members or friends would probably love to help out. All you need to do is ask!
If you can afford to stay home or decide that you and your spouse can have alternating work schedules, either of these options are perfect ways for you to watch over your child instead of paying for childcare!
9. Miscellaneous Expenses
Miscellaneous expenses include anything not already mentioned. These may be variable expenses, or expenses you don’t incur on a regular basis, such as:
- Subscription services
- Holiday and birthday gifts
- Pet costs
- Vacation costs
This area also spans a wide spectrum. For subscription services, you may want to use a service like Trim to negotiate lower prices on your behalf or completely cancel the service.
Either options lets you bank the savings. You can also read our guide on the best bill negotiation services that work like Trim but may find other opportunities to save.
Go Make A Budget
If you follow the list of common monthly expenses, the goal is to make a budget. You may not want to make a budget, and that’s fine. But you should find some way to figure out how you spend your money. There’s power in knowing that.
If you do want to know how to make a budget, you need two key pieces of information: your income and your monthly expenses. To determine your income, look at your pay stubs to get an idea of how much you earn each month. If you’re salaried, that is an easier number to determine.
For hourly employees, it’s best to take your previous month’s income as a base.
You want your income to be more than your monthly expenses. If they’re not, you’re at risk of living paycheck-to-paycheck or worse, taking on debt. If this is the situation you find yourself in after going through your budget, reread this post.
There’s a lot to take in from this list of common monthly household expenses, including ways to cut back and save.
For further information on what you should spend each month, read our guide on recommended budget percentages by category to start.
It’s important to regularly review your expenses to see how much you’re really spending. Oftentimes, you’ll find you’re spending too much on some monthly expenses and need ways to save money.
To get the most accurate picture, I recommend going line by line to analyze each expense to calculate how much you’re spending annually. This takes work, but it’s a great way to find better ways to make your money work for you.
What other areas do you think belong on our list of common monthly household expenses? What is your highest monthly expense? How much money do you try to save each month?