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This is more of a hypothetical question I have been curious about. I am looking for a general answer for the average person not a specific answer tailored to my exact situation. So I will not be including information about my self.

I would like to know what is a normal amount to spend on various expenses.

For example: Is 20% of my income too much for housing?

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Unless you tell us what your income is every month, we can't determine if 20% is to much, we need other expenses. If you are spending more then 50% of your income on housing you have a problem. –  Ramhound Jul 16 '12 at 14:46

2 Answers 2

My answer will provide a general guideline, which is what I believe you are asking for. You must keep in mind, a budget is not a one size fits all type of deal and should be personalized.

With that said; lets begin. All my numbers will be based on your 'take home' cash, meaning the money you get after taxes, 401k contribution, or any other amount withdrawn by your employer. I also assume you have no revolving debt.

 - Housing 25%
 - Transportation 15%
 - Groceries & Restaurants 13%
 - Savings 10%
 - Utilities + Phone 10%
 - Medical + Health 5% (this can may vary drastically see below)
 - Entertainment 5%
 - Attire 5%
 - Clubs, Organizations & Charity 5%
 - Gifts/Other 5%
 - 2% is for possible errors in budgeting (pretty common)

If you spend less on one category you can always transfer that amount onto another. So for example, if you take public transportation and your cost is less then 15% you can allocate the remaining amount between which ever categories you like. Your savings budget will also depend on your age, investment returns, and other various risk factors you might be exposed to. If your employer does not provide you with a 401k or contribute to any retirement plan I suggest you consider raising the amount in the savings category.

The most important thing is to stay within your budget and realizing that you should spend money in this order -> Necessities, Savings, Luxuries. You have a 2% margin of error for any times you may go over budget. Cutting into that 2% should be a warning sign that tells you; "hey, I'm going over budget I need to cut back on something". So don't make a habit of it, otherwise you may find your self quickly going past that 2% line and falling into debt.

A note on medical expenses: The 5% I suggested may vary depending on where you live, your current state of health, your income, and what options your employer offers for healthcare. You may find your self spending less or more. Your health is considered a necessity, so if you find your self spending more you should adjust your budget accordingly.


Another budget is the 50/30/20 rule.

In this budget you start with your after-tax income not your 'take home' cash. So do not deduct any 401k contributions or any other amount withdrawn by your employer.

The breakdown:

 - Limit your necessities to 50% - If you can go a few months without it and not suffer any serious consequences, it's not a necessity. (e.g. Organic free range chicken, dining out or going to Aruba - NOT a necessity) (Examples of necessities: utilities, housing, car insurance, child care)
 - Your wants make up 30% (e.g. organic free range chicken, vacations, entertainment ect.) It's important to note that some wants may feel like needs and you should be careful what you consider needs.
 - The rest of the 20% goes towards your savings and repaying debt.
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There are many different budget planing systems available:Example A, Example B, Example C. The problem with giving a hard set of numbers is that many vary by location and your age. For example if you have dependents your medical costs and life insurance costs will be completely different from somebody without kids or a senior citizen.

Big categories such as telecommunications expenses fall into both a necessity and entertainment. A basic phone cell phone plan is a necessity, the latest 4G phone with unlimited minutes and data is not a necessity. These split categories make it difficult to say somebodies spending in one category is too big. These split categories also allow a rationalization to occur. I need a phone vs I need that cool phone.

Savings is very important, but you have to look at general savings vs retirement vs savings for college. Some items such as student loans, once you commit to them, move from a want to a necessity.

So how to begin:

  • I feel that you need to start with gross pay when doing your budget. This makes you account for 401K or pension calculations as part of it. It also makes you look at your taxes throughout the year. Do you want a big refund or a small refund?
  • Record everything you spend. Some do this by making notes in a notebook, others pull apart their debit and credit card transactions.
  • Then categorize everything. You will have to split come categories into necessities and wants.
  • Then adjust to control categories that seem out of whack. Note what you can do now: fewer restaurants; what you can do soon: change carrier when the contract period is up; and what will take longer: move to a smaller place.
  • To determine what needs to be adjusted depends on your goals: saving for college, start saving for retirement, move to a bigger house, or not have a negative balance every month.

Note: In the US 20% for housing is well within norms.

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