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When I started budgeting, I realized I was spending about 10% of my income on junk.
Coffee shops, junk food, eating out at restaurants and fast food places, and dumb online purchases were a few of those things.
When I really started focusing on my budget and looking at where my money was going (and how much of it), it was eye-opening!
So, how can using household budget percentages in your monthly budget help YOU?
Why use household budget percentages?
Budget percentages are so great for keeping your budget in check.
They’re especially great for beginner budgeters, since the thought of mindlessly allocating money to each household budget category can be a daunting task.
It can cause failure pretty quickly, in the form of over-drafting on your bank account or allocating too much to one category and not enough to another.
Budget percentages are also helpful for keeping your finances in check when things take a shift in your monthly budget.
Say, for example, you are shifting your main focus to paying off your debt.
You might lower your percentages in one category to add more to your debt payoff.
In that case, it’s helpful to have your household budget percentages figured out ahead of time so you know exactly where you can fluctuate on things a little.
You might have allocated 10% of your monthly budget to restaurants, fast food, and coffee. In that case, you know you can cut that out or lower it and add a 5-10% boost to your debt payoff.
Having these percentages figured out ahead of time allows for more flexibility with less headache for your budget now and in the future.
What are typical budget items?
The budget categories that are most common for everyone’s budget is housing/utilities, transportation, and food.
Beyond that, there are a lot of variabilities that could affect your budget categories.
For example: do you have a home phone line? If not, there’s no reason to add that into your monthly budget categories. But that might not be the case for your friend or relative, who has a landline!
Your budget is very personal and unique to you and your family.
It’s important to sit down and figure out exactly what applies to you before you can start allocating a particular percentage to each of your general budget categories.
If you need help with this, check out this list of over 150 potential budget categories to narrow down your own budget, or download your free printable below.
What should your budget percentages be?
When you’re figuring out your percentages, you should be applying those percentages to the general budget category items.
Trust me, that’ll make your life a lot easier!
Let’s break it down, looking at typical budget items. The examples for each main category aren’t all inclusive!
- Housing – mortgage/rent, utilities, insurance, home security system, HOA dues
- Utilities – electricity, gas, internet, phone, cable
- Food – groceries, fast food, coffee shops
- Charitable giving – offering, charities
- Transportation – auto loan, fuel, car insurance, DMV fees, parking fees
- Clothing – adult/kid clothing, work clothing
- Medical/health – doctor, dentist, prescriptions, vitamins
- Personal – salons, toiletries, grooming
- Recreation – fun money, outings, vacation
- Debts – credit cards, student loans
- Saving – travel, home improvements, retirement, college savings
Remember: each of these general categories look different for every person/family.
A family of 4 shouldn’t have the same food budget as a family of 2. Or you may be putting off buying any new clothes for a no-spend challenge, so that category won’t apply to you.
You should give some thought as to where your money goes and what you anticipate you’ll need to be covered before really diving into your monthly budget.
Now that we have that figured out, let’s take a look at some of the most popular budget techniques out there.
Dave Ramsey’s household budget percentages
I feel like Dave Ramsey‘s budget percentage recommendations are some of the more in-depth out there. It really breaks down by major category, so it’s a great set of guidelines for the beginner.
Let’s take a look at what Ramsey suggests:
- Giving: 10%
- Saving: 10%
- Food: 10-15%
- Utilities: 5-10%
- Housing: 25%
- Transportation: 10%
- Health: 5-10%
- Insurance: 10-25%
- Recreation: 5-10%
- Personal spending: 5-10%
- Miscellaneous: 5-10%
You’ll notice that debt isn’t in this list.
This list was constructed based on the hope that all of your debt (minus your mortgage) has been paid off.
If you’re not one of those lucky people to have no debt, you’ll have to lower as many of these categories as possible to pay off your debt quickly.
That might mean cutting your saving (like for a vacation), recreation, personal spending, and miscellaneous down to bare necessities until you pay off your debt.
Here’s a handy calculator to help figure out rough dollar amounts for each of your budget categories.
The 50/30/20 method has really gained popularity. Especially since it’s so easy to remember!
The negative about this budgeting method is it can be very vague, and might be overwhelming for the beginner budgeter.
Since it only has three categories, it can be tough to fit everything you spend money on each month into the vague descriptions.
What are the categories?
- Necessities: 50%
- Wants: 30%
- Savings and debt: 20%
These less defined categories can leave a lot open for interpretation for a beginner.
But they could also be just vague enough for someone who has a strong grasp on their finances! It just depends on where you are in your budgeting journey.
Also, if you have debt, I think you could get ahead of it a lot faster using the debt snowball method than just applying 20% of your take-home to debt.
We used the debt snowball method when we were paying off $100,000 in debt. Some months, we were applying over 50% of our take-home toward debt. That allowed us to pay it off quickly!
Like I said: it all depends on where you are in your budgeting journey.
Reverse budgeting, or the “pay yourself first” method, has you applying your income first and foremost toward your savings (retirement, savings accounts, etc.).
Then, once those goals are met, your leftover is applied toward your bills and other necessities of the month.
The trick here is to start slowly with how much you’re applying toward your savings. If you apply too much too quickly, you leave little for your day-to-day needs.
Reverse budgeting works well for those who have a good grasp on their finances, but might find themselves coming up short in contributing toward their savings. Specifically, they might apply too much toward restaurants and hobbies before applying anything to savings.
This budgeting method can help with that.
Again though, it’s important to not apply too much to savings too quickly. If you do, other areas of your budget may suffer.
How to figure out household budget percentages on an irregular income
An irregular income (so you are not a salaried employee) can be tough to work with when it comes to your monthly budget.
You don’t know exactly how much you will bring home each month, so it’s tough to really fill in your budget.
What we do on our irregular income is budget for the minimum amount you can expect to bring home. Then, expand from there.
For example: my husband is guaranteed 40 hours/week at his job, but not always guaranteed overtime (he almost always gets overtime though).
In that case, we always budget ahead for what he would bring home on 40 hours/week. Then, we have a list in order of importance on where the money goes when there’s extra.
So if he brings home an extra $200 in overtime, we know that a certain percentage of that first goes toward extra in groceries. Then we work our way down the list of priorities until every dollar is accounted for.
How do you calculate percentages of your budget?
If you want to find out exactly how much in dollars to add to your monthly budget for each category, the math is pretty simple!
Take your projected pay for the month and multiply it by each of your percentages.
Let’s say your projected pay for this month will be $3,000. You allocate 15% of your pay to food.
$3,000 * 0.15 = $450
So you will apply $450 for the month in your food budget category.
How to stay within your household budgeting percentages
Now that you’ve sat down, figured out your household budgeting percentages, and made a plan, it’s time to actually start sticking to it!
My favorite way to stay within set budgeting percentages is using the cash envelope system.
In short, using the cash envelope system keeps you in check by you taking out the amount you allocated in your budget for each item in cash, then stuffing dedicated envelopes. Once the cash runs out for that budget item, you’re out!
That method kept us in check when we were putting everything toward debt.
There was no overspending or over-drafting because we weren’t using our debit card!
At first, I made a makeshift cash envelope system with mailing envelopes and a small 3-ring binder. My envelopes fell apart within a couple of months, since we used them so much.
Because of that, it’s worthwhile to grab a better quality cash envelope system.
Some of my absolute favorite cash envelope wallets out there:
- 12-piece Cash Envelope System for Budgeting. It comes with 24 labels to customize your envelopes, budget sheets to track each envelope, summary sheets, and a clear wallet to put it in. Or, the envelopes would fit nicely in your existing wallet.
- Clever Fox Cash Envelopes system. I like these because the envelopes are essentially indestructible (waterproof, stretchy, not easy to tear). That way, it’s easy to get a lot of use out of them without them wearing out!
- Cash Envelope Wallet All-in-one System. If you’re also in need of an actual wallet, this is a good system. It comes with a PU leather wallet with a wristlet (removable), a yearly budget sheet, and 12 envelopes, each with their own budget sheet.
- Cash Envelope System. This comes with 12 expense ledgers and 12 tear-resistant envelopes, along with a clear pouch to store your envelopes in.
- FJCA Clear Binder Envelopes. Unlike the other systems in this list, this system uses clear, plastic envelopes to store your cash. There are 12 total and it comes with a binder to keep everything together.
That’s our breakdown of household budget percentages!
Do you have your household budget categories down, or are you still trying to figure yours out? Have you tried a system, like the cash envelope system, that helps keep you and your percentages in check?
I’d love to hear from you in the comments!
Here are the products mentioned in this post: