Savings 5% – 10%
Housing 0% – 35%
Utilities / Phone 3% – 7%
Food 5% – 20%
Transportation 6% – 20%
Medical / Dental / Insurance 2% – 8%
Clothing 2% – 4%
Debts / Loans 5% – 20%
Personal / Kids 2% – 15%
Entertainment 10% – 15%
Pets / Miscellaneous 0% – 10%
There are ranges because some people may spend more in one category and less in another. How much you spend could be influenced by your needs, location, level of income, lifestyle, etc. Just remember you want to be accurate! Don’t just guess your percentages. If you estimate that you spend 4% on clothing but you really spend 15%, you’re going to face many months of wondering why you can’t pay your bills.
To see how your own spending lines up with the percentage guidelines, do the following:
1. Assign each monthly expense to a category listed above
Example: Student Loans and Credit Cards → Debts
2. Calculate the total expense for each individual category
Example: Student Loans ($300) + Credit Cards ($100) = Debts ($400)
3. Using your total monthly income, calculate your own percentage for each category
Example: (Debts x 100) / Total Monthly Income = Percentage
(400 x 100) / 3,000 = 13.3%
4. See how your total compares with the suggestions above
Example: 13.3% = 15% – 20%
You may be surprised by the amount of income you spend on various types of expenses. The preceding guidelines are recommended percentages, so don’t be overly concerned if your percentages are different, especially if your income is either very high or very low. Also remember that some percentages may not change – even if you have a larger income; for example, just because you have twice the income of someone else, it doesn’t necessarily mean you spend twice as much on food.
Other factors to consider are preference and importance. For example, say you spend 10% on clothing, but you spend less than 5% on transportation because you walk everywhere. In this case, you’ve exceeded the percentage guidelines in the clothing category, but you may be balancing out with the low transportation percentage. Now, if you’re over the percentages in most categories, then you may want to consider changing some things because that could mean you’re burying yourself in debt.
Once you figure out where you currently stand financially, you can see if changes need to be made. For example, say it’s hard for you to pay the rent each month, and after you calculate the guidelines, you see that you’re spending more on personal items than you thought. The result? You can adjust your spending habits to cut down on personal items, so you can put that extra money towards keeping a roof over your head.
Want to make the whole process easier? Ask your Money Coach about a spending plan worksheet that can handle adding, subtracting, and other calculations that may be involved.
Better yet! Consider Wallet, our online money management tool. Wallet can help you create budgets, see your financial accounts and activity in one place, and provides alerts for things like overspending, low account balances and due dates for bills.
Your Money Coach can help you explore how you might categorize, calculate, and adjust when necessary, to build a budget that’s accurate and better reflects your financial goals. For more education and resources, call your Money Coach today at 888-724-2326.
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