11 Recommended Budget Percentages By Category: How Much Should You Spend?

One of the best ways to reach your money goals is to follow a monthly budget. While people often believe budgeting is restrictive, it can create freedom when done wisely.

The key is using a simple formula. For example, Dave Ramsey provides a roadmap to being successful with your money through his baby steps.

He prescribes a similar methodology with his views on recommended budget percentages by category. Everyone’s situation is unique, but his ideas provide an excellent guide to achieving financial stability.

Here’s how to apply it to your life.

What are the Recommended Budget Percentages for Each Category?

Ramsey suggests 11 categories for a household budget. These include:

Remember that each situation is different. You may want to include additional categories or remove several if they don’t fit your goals.

It’s ok to add or remove categories and adjust your budget percentages depending on your unique needs. Read our guide on Dave Ramsey’s baby steps if you’re struggling with your finances and want to get on track.

Budget Categories Explained

Making a budget is simple when you follow the suggested categories, but you may not know what to include in each section.

Here is what you should include for each budget category.

Giving: You can give ten percent of your monthly income to a cause that’s important to you. This may include anything from your place of worship to an organization that you want to support.

Saving: Ramsey recommends saving ten percent of your income in a retirement account or 401(k). Read our guide on the best Roth IRA providers if you need to start saving for retirement.

Food: This should include what you buy at the grocery store. It should also include dining out. Basically, if it’s something your family buys to consume, it should go in this budget category.

Utilities: This includes your cell phone, cable, internet, electricity, and gas. Utilities are easy to overspend on, so look for ways to save money.

Housing: This is for your rent or mortgage payment. If you pay property tax, HOA dues, or something else that is housing-related, it should go here.

Home repair costs and maintenance expenses also fall into this category.

Regardless if you rent or own, you must determine how much is ok to spend and not negatively impact your budget. Read our guide on how much you should spend on rent to learn more, assuming you don’t own your home.

Transportation: Regardless of whether you take the bus or drive a car, it goes in this category. Don’t forget to include car maintenance expenses, gas, and auto insurance costs.

Insurance: Car and home insurance go in their respective categories, but this is for disability, health, and life insurance. This also includes any other kind of coverage you might need.

Health: Anything you spend for health-related needs goes here. This can include co-pays, medication, or visiting the dentist.

Recreation: We all need fun money, and this is where fun fits in. Anything you do for entertainment, from going to the movies, seeing a sporting event, or attending a concert, should go here.

Personal: Expenses for personal care, like clothing or haircuts, go here.

Miscellaneous: This is a catch-all category for things that don’t fit well in another budget category.

Using Budget Categories to Save Money

While simple to follow, there’s a lot that goes into the recommended budget percentages. To stretch your spending, you want to find ways to lower your spending.

For instance, you may find that you’re spending too much on transportation or utilities. Reducing costs in those areas frees up funds to apply to other categories.

You want to assess your needs in all areas to streamline spending.

Read our guide on over three dozen ways to save more money every month to increase savings.

If you manage follow just a few of the tips you might be able to save $500 per month with a little effort.

How Does Debt Fit in Your Budget Categories?

Debt is not found in Ramsey’s plan. The reason for that is simple. He suggests you pay off debt as quickly as possible by paying as much as you can to your personal debt.

This includes the following:

• High-interest consumer debt
• Student loan debt
• Car loans

Anything that is not a mortgage should be paid off as soon as possible. Keep in mind that this may require you to spend less in any budget category that you have the ability to make cutbacks in.

Paying off your debt helps you avoid financial trouble and living paycheck-to-paycheck.

How to Pay Off Debt

There are two main methods to kill debt, including:

• The debt snowball (which Ramsey recommends)
• The debt avalanche

Here is how the debt snowball works.

Here is how the debt avalanche works.

Ultimately, it doesn’t matter which method you use. What’s vital is that you pay off your debt.

SoFi is an excellent resource to help you do this. It helps you consolidate your debt into a lower-rate loan to pay back.

However, before you do that, you want to build an emergency fund of at least $1,000. Don’t stop once you reach $1,000, though.

Instead, use a savings account to pay yourself first with each paycheck you receive to grow your savings.

CIT Bank is a great option for that and has a minimum balance requirement of just $100 to start.

As you eliminate debt, you can direct those funds to the appropriate categories in concert with your financial goals.

Why Use Budget Percentages?

It can be simple to create a budget, but if you’re a novice, it could be a challenge. You see your take-home pay and might not know where to start in managing where it should all go.

This was the situation I was facing when I had $50,000 in credit card and student loan debt.

I was spending far more than the recommended ten percent on entertainment. As a result, I was saving nothing. Facing bankruptcy, I met with a credit counselor.

She walked me through the idea of using budget percentages to manage my spending. This zero-based budget acted to give every dollar a purpose and, eventually, kill debt.

If you’re facing a similar situation, read our guide on the top bankruptcy alternatives that may serve you better.

You may not have debt to conquer, but the percentages are helpful for tracking your spending, planning for large purchases, and building wealth.

How to Use Budget Percentages to Achieve Your Money Goals

It is important to remember that recommended budget percentages are merely suggestions. We all have different goals and circumstances.

You need to create your budget in a way that’s going to suit your needs. For example, saving ten percent of our family’s income is insufficient for our needs.

We strive to save 30 percent or more of our income for retirement since we want to quit working before the traditional retirement age.

As a result, we cut back in categories like housing and transportation to make that possible. We also devote more spending to travel, so we reduce expenses in recreation to fund that desire.

How to Track Your Budget as a Couple

Tackling your budget as a couple is essential to success. Your partner may have different spending triggers or might not always track spending consistently.

Instead of seeking to make one partner feel like the other is trying to restrict their freedom, work together as a team. Be honest, and work together to establish the money goals you have as a couple.

It’s best to do this with the assistance of a budget software program. There are various options you can use. Some are free, while others require a small expense.

Read our guide on the top free budgeting tools to use if you don’t want to spend money on an app.

Find one that works for you and use it together. This will help each partner feel ownership over the budget, which leads to greater success.

How to Evaluate Your Budget

Living by a budget isn’t a set it and forget it type of thing. You want to regularly revisit your money plan.

Depending on your needs, it’s best to reassess your spending at least semi-annually, if not quarterly. This helps you see what you’re actually spending in each budget category.

For example, your fixed expenses in one area may increase, requiring you to allocate more funds to it. Or, you could find that you need to create a sinking fund to manage your variable expenses like gas or food.

Analyzing your spending and expenses regularly will help make your budget more efficient.

Additionally, your goals may change from the beginning of the year. This means you might need to adjust spending.

Regardless of your situation, it’s best to use alternatives to Mint.com to identify your spending habits. Look at what you’re spending, what you budgeted, and areas that need attention.

A tool like Rocket Money can help with this. It offers a free budgeting app you can use to analyze all transactions and bills to find areas of opportunity.

Read our Rocket Money review to learn more.

Remember, each situation is different. You want to align your budget with your specific goals to increase your probability of success and give you more ownership over your finances.

Bottom Line

No budget is the same, and your budget percentages will change over time. The key is to get started, then analyze what works best for your lifestyle and goals over time.

Budgeting is often seen as restrictive or burdensome by novices. It doesn’t have to be that way. By following a simple methodology, you’ll have greater freedom and can build wealth.

What’s one area you really want to cut back on in your budget? 

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