How To Set Your Budget Percentages

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Over the past couple of years, many people have lost control over their money due to the increased costs of goods and services. So how can you know exactly what you’re spending? With a well-balanced budget, you can finally begin to get a handle on your finances. But you can also take it a step further by setting budget percentages.

How To Set Your Budget Percentages

You should set your budget percentages in a way that works best for you. 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% of your income is for discretionary spending. But that doesn’t work for everyone.

Another option is the 60/40 budgeting method. With this method, 60% of your budget is focused on expenses you’re committed to each month, such as housing, food, transportation, insurance — and also other monthly reoccurring expenses, such as gym memberships and streaming subscriptions. The other 40% is split evenly between the following four categories: debt and long-term savings, short-term savings, retirement savings and “fun” money.

Budget Percentage Breakdown

To find the right allocation for your particular financial situation, you can begin by determining the percentages for your basic living expenses or debt repayment before allocating percentages to categories for nonessential expenses.

Budgetary Item Allotted Percentage of Monthly Income
Housing or mortgage payments 25-35%
Food 10-15%
Medical, home or auto insurance 10-25%
Transportation or auto services 10-15%
Savings 15-20%
Health 5-10%
Clothing 5%
Entertainment and leisure 5-10%
Personal expenses 5-10%
Make Your Money Work for You

Why Should You Use Budget Percentages?

When creating a well-balanced budget, it’s important to use budget percentages if you want to account for every dollar you earn and know how much you are allocating toward each category.

What are the five budget categories to start with? Some basic budget categories include savings, housing, transportation, consumer debt and monthly living expenses, such as groceries and utilities.

Other Expenses To Include in a Well-Balanced Budget

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

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. Most experts recommend building an emergency savings fund worth three to six months of your expenses.

Working Towards Your Financial Goals

You might need to reconsider your budgeting percentages if you are also saving money for a specific goal, such as a down payment on a vehicle or home. For example, if you allocate 15% to 20% of your net pay to your savings goal and an additional 10% to your emergency savings, that’s 25% to 30% of your net pay going toward savings, which might put a strain on your budget.

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

How Should You Build Your Budget?

Building a budget isn’t difficult, but it does take time. Here are the steps you should take.

1. Determine Your Monthly Net Income

Your take-home pay, also known as your net pay, is your income after the deduction of taxes, benefits and other contributions. In other words, it’s the money you’ll use to fund your budget each month. Some common deductions from your gross pay include the following:

  • 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

2. 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.

3. Track 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. You can use an online or printable budget template or spreadsheet, or you can invest in budgeting software to help you track your expenses each month. 

4. 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.

5. 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.


Remember that what you include in your monthly budget depends on your 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.


Here are the answers to some of the most frequently asked questions regarding budget percentages.
  • What is the 50/30/20 budget rule?
    • 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% of your income is for discretionary spending.
  • What percentages should you use for your budget?
    • Though breaking down your budget in percentages is based on your unique financial situation, here is a good general breakdown:
      • -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%
  • What is the 70% rule for budgeting?
    • The 70/20/10 budget rule works by allotting 70% of your income for monthly bills and everyday spending such as cell phones, groceries or utilities, then 20% goes to saving and investing and 10% goes to debt repayment.

Cynthia Measom and Caitlyn Moorhead contributed to the reporting for this article.

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.


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