Recommended Budget Percentages: How Much Should You Spend?

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Over the past year, some people have found themselves underemployed, while others are worrying about losing their jobs. Many have lost control over their money. How can you know exactly what you’re spending? With a well-balanced budget, you can finally get a handle on your finances. 

What Is a Well-Balanced Budget?

A budget is simply a plan for managing your money. It takes account of your incoming and outgoing funds. Budgeting helps you understand how much money you have and where you’re spending it.

A well-balanced budget helps you prioritize your spending so you have enough money to cover your monthly expenses. Your ideal budget is unique to you, based on your own priorities, values and choices.

Why Should You Have a Budget?

If you don’t currently have a budget, you might think you have more to spend than you actually do. If you do have a budget but it doesn’t show exactly what’s coming in and going out, you might end up overspending without enough cash to pay your bills.

Make Your Money Work for You

How To Set Your Budget Percentages

The popular 50/30/20 rule of budgeting advises people to save 20% of their income every month. That leaves 50% for needs, including essentials like mortgage or rent and food. The remaining 30% is for discretionary spending

Here’s some more guidelines on setting your budget percentages:

  • Housing: 25-35%
  • Food: 10-15%
  • Insurance, such as life, medical, home or auto: 10-25%
  • Transportation or auto services: 10-15%
  • Savings: 15-20%
  • Entertainment and leisure: 5-10%
  • Health: 5-10%
  • Clothing: 5%
  • Personal expenses: 5-10%

Keep in mind that these are only recommended budget percentages for your monthly savings and spending. Find the right allocation for your particular financial situation.

Make Your Money Work for You

What’s Included in a Well-Balanced Budget?

Now that you know what your monthly budget percentages should be, let’s break down some of the expenses that should be included in your budget.

Your Net Pay

Your take-home pay, also known as your net pay, is your income after the deduction of taxes, benefits and other contributions. Some common deductions include:

  • Federal, state and local income tax
  • Social Security and Medicare contributions
  • Retirement account contributions, such as 401(k), Roth IRA, or 403(b)
  • Medical, dental and other insurance premiums

Emergency Expenses

Can you cover a $1,000 emergency expense without using a credit card? Here are some examples of situations where an emergency fund is necessary.

  • Major appliance repairs or replacements
  • Last-minute travel
  • Unexpected tax bills
  • Medical emergencies
  • Car breakdowns
  • Job loss

Keep your emergency savings separate from your other savings to ensure you can cover unexpected events.

Irregular Expenses

Irregular expenses include any bills that are infrequent but easily predictable. These can be veterinarian bills, online subscriptions, vehicle registrations and insurance payments made annually or biannually.

Make Your Money Work for You

Monthly Living Expenses

Your monthly living expenses typically include recurring payments such as your rent or mortgage, car payment and utilities. What you typically spend on things like groceries, hair grooming and clothes is also included. You can use an online calculator to configure your monthly living expenses budget.

How Should You Build Your Budget?

Begin By Tracking Your Expenses

Maybe you know how much you earn, but do you know where every penny goes? Tracking both income and expenses gives you the whole picture. These steps can help you stay on course.

Step 1: Examine Your Account Statements

Take inventory of all of your bank accounts — including checking, savings, and credit cards — to accurately identify your spending. This gives you a sense of your monthly cash flow.

Step 2: Categorize Your Expenses

Start by grouping expenses into the categories mentioned above. Make sure to take into account both fixed and variable expenses. Fixed expenses are less likely to change from month to month, such as rent, mortgage, food or utilities. This can allow you to adjust your budget for more variable expenses, such as healthcare, clothing or travel.

Step 3: Adapt To Changes

As you track your expenses, be prepared to make necessary adjustments as your financial situation changes. You may have to move money around to compensate.

Good To Know

Before breaking down your budget percentages, carefully consider your spending habits and savings needs. Tips such as the 50/30/20 rule can help you hone in on your ideal budget percentages and will lead to better money management.


Remember that what you include in your monthly budget depends on your own values, needs and priorities. These values can help shape your financial decisions when deciding on your budget percentages. Finding your perfect budget balance can help you save and spend with confidence.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Kathy Evans is a personal finance freelance writer and entrepreneur with a technical writing and instructional systems design background. She holds an MS in technical writing and informational design and is currently a doctoral student in instructional technology at Towson University. Through work experience in the federal government as well as commercial and nonprofit industries, she has focused her freelance writing on finance, investing and economic content with a specialization in budget coaching.  

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