What should your budget look like?

Pinching Pennies
Money management means you control your money; it doesn’t control you. It’s about ensuring that each dollar goes where you decide it should. Budgeting plays an important role in money management, but what should your budget look like? Consider the following suggested guideline for your expenses as you plan and develop your budget:

  • Housing: 25-35% (mortgage or rent, utilities, taxes, insurance, repairs)
  • Food: 10-15% (groceries, dining out)
  • Auto/transportation: 10-15% (auto loans, gas, insurance, repairs, licenses, tolls, train/bus fare)
  • Church and charity: 10% (tithes and donations)
  • Health care: 5-10% (medical, dental, and vision insurance; prescriptions)
  • Clothing: 3-7% (clothes, shoes, outerwear)
  • Recreation and entertainment: 2-10% (movies, club memberships, vacations, TV, internet)
  • Savings and investment: 5-15% (retirement savings, investment programs, general savings)
  • Personal/household: 2-7% (cleaning supplies, gifts, cell phones, pets, child care)

Obviously, you can’t spend at the high end of each category and have a balanced budget. Additionally, if you need to save for your children’s college, pay down existing debt, or have other expenses specific to you, other percentages must be adjusted to compensate. Remember: the total must not be more than 100%. Your priorities and goals determine your personal percentage allocations.

If your household income after taxes is $50,000, your budget might look like this:

  • Housing: 25-35% $15,000 (30%)
  • Food: 10-15% $7,500 (15%)
  • Auto/transportation: 10-15% $5,000 (10%)
  • Church and charity: $5,000 (10%)
  • Health care: 5-10% $5,000 (10%)
  • Clothing: 3-7% $1,500 (3%)
  • Recreation and entertainment: 2-10% $3,500 (7%)
  • Savings and investment: 5-15% $4,000 (8%)
  • Personal/household: 2-7% $3,500 (7%)

The most important aspect in creating a budget is setting realistic goals. Wanting to put 15-25% of your income into savings is admirable – but is it realistic? You want to challenge yourself, but not to the point where you consistently fail to meet your goals. Tracking expenses before setting up or finalizing your budget should give you a good idea of what things actually cost and help you set realistic goals for your budget.

2 thoughts on “What should your budget look like?

  1. Pingback: Determining your cash flow « Covenant Trust Company

  2. Pingback: The 5 best New Year's resolutions for your money - LIFE 97.3

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