Writing a budget is key to reaching your financial goals. Knowing how to budget with percentages is a great place to start if you are struggling with your cash flow. When you know how to budget with percentages, you can easily see where you might be overspending.
It never ceases to amaze me when people come to me for advice. They are overwhelmed by their finances. They know they want to manage their money better, but they’re not sure where to even start.
It makes me so sad for them when they actually sit down and realize how much of their money has been wasted because of their poor planning and lack of knowledge when it comes to finances. They wish someone had sat them down and really mapped out how to manage their money before they made such a mess of it.
If that is you, you’ve come to the right place. This website was designed for people who want to do better, but don’t exactly know how to get there.
The thing that will bring about the biggest change is your budget. Starting a budget and having the self-control to stick to it will help you reach your financial goals.
I know, I know. “Budget” isn’t exactly a very fun – or popular – word. But it’s the only thing that will work! Unless of course you win the lottery, which is highly unlikely. And even then you’ll probably squander it all in a few years. Without a plan, I know I would.
If you don’t like the word “budget,” don’t use it. For a long time, instead of calling it a “budget” we called it our “money plan” or our “spending plan.” For some reason these code words tricked our minds into loving the idea of a budget without really using the dreaded B-word.
Over and over again, I’ve sat down with friends and family to help them set up their own budget. Er, spending plan. And I’ve quickly come to realize that most people don’t even know how much they should expect to budget for certain categories. Many people don’t know how to use categories to really look at their spending patterns.
When my husband and I first decided to wage war on our debt and aggressively pay things off Dave Ramsey style, we had no idea what our categories were and how much money should go towards each one. We had to learn the hard way that having almost 50% of our income paying off debt was not such a good plan. Dang student loans. They getcha every time!
Once we learned what we were aiming for and knew how to wisely steward what little was left over, we were able to cut back on some frivolous things that we were wasting our money on. In turn, we were able to use our money wisely and pay off over $80,000 of debt.
There is power in knowing these little percentages and applying them in your own budget! I scoured the internet, comparing countless budgets and categories and percentage recommendations. After doing my research and applying my own personal experience, here are the recommended percentages for each category.
- Debt – Credit cards, car payments, school loans —> 5-10% of income
- Savings – This includes short-term savings and long-term retirement planning —> 10-15% of income
- Housing Expenses – This category is filled with a lot of subcategories. Anything that is related to your home and living in it. Your mortgage or rent, water and utilities, electricity, cable and internet, phone/cell bill, etc. —> 30-35% of income
- Transportation – This includes gas, car insurance, and oil changes. Or taxis, subway and bus tickets if you live in a big city. —> 10-15% of income
- Food – I think this one is pretty self-explanatory. —> 10-15% of income
- Entertainment/Fun – Same here. —-> 5% of income
- Clothing – Ditto again. —-> 5% of income
- Home Maintenance – Any minor home repairs, fun decor items, or odd jobs that need to be done around the house should come out of this category. —-> 5% of income
- Miscellaneous – This is for all of the odds and ends that don’t fit nice and neat in any of the other categories. Things like hair cuts, school expenses, etc. —-> 5-10% of income
I hope these percentages help you better prepare your own budget. As always, feel free to reach out with any questions you might have. I absolutely LOVE hearing from my readers, and I would love to help in any way I can.
Remember, the percentages aren’t set in stone. You can spend less in some areas, and more in others. As long as you are being wise with your numbers and intentional in your spending, there are no hard and fast rules.
If you are looking for free finance printables to help you stay even more motivated, enter your email in the little box at the bottom of this post to get instant access to my Simple Finance Toolkit that is an exclusive perk to my subscribers. It is filled with printables that will help you keep your finances organized. Budgeting forms, savings trackers, and goal setting forms are just a few of the freebies included.
What is your biggest setback when it comes to budgeting your money? Have you ever heard of using percentages to make your budget?
**Sidenote: Homeowner’s insurance, health insurance, and short-term disability insurance are all things I highly recommend everyone have as well! Usually, these insurances are taken out automatically which is why I didn’t include them in our list. Homeowner’s insurance is taken out as part of our overall home mortgage payment. And since our health insurance and short-term disability insurance are provided through my husband’s employer, they also come out automatically in his pay.**