A few years ago at a financial wellness event a participant asked me: “Is there a rule of thumb for how much I should spend on things like clothing or food?” I’ve always thought of personal finances as more personal than financial, and how much to spend in specific categories certainly seems like a personal decision. Still, it can be helpful to see how others pattern their spending plan as you begin to craft your own.
While my husband and I use a budget to track our spending, I had never calculated what percentage of our income was going to each spending category. With the help of my trusty budget companion Mint I was able to determine the percentages in less than an hour. It was a very valuable activity — I highly recommend it! Just keep in mind, you’ll want to modify the guidelines below to fit your own values and goals. Here’s what I discovered:
Housing, Internet, and Utilities (35%): Housing is the largest line item on our budget. Our apartment payment each month includes rent, monthly fees for our storage unit, and parking in the heated garage. We knew when we moved downtown this bill would be a big one, but that it would also reduce many of our bills: no more gym payments (since there’s a gym in our apartment), less gas cost (since we could walk to restaurants and entertainment), and no home maintenance expenses (since we would be renting).
Rule of Thumb: Conventional wisdom has been to spend about 30% of your budget on housing. However, many would say this recommendation is outdated since the cost of living can vary widely by location.
Savings (20%): Currently, we’re saving to buy a new home, gifts for Christmas and birthdays, an emergency fund, home gym equipment, and more. While my husband’s student loans are in forbearance, we’ve put the money for those payments into our high-yield savings. When we begin paying on the loans again, we may decide to put what we’ve accrued toward his loans or toward another savings goal.
Rule of Thumb: You may have heard of the 50/30/20 rule, where you spend 50% of your income on essentials, 30% on non-essential or discretionary expenses, and 20% on savings and/or debt repayment. Limiting our non-essential expenses during the pandemic has allowed us to stash a lot more away in savings. I hope we’ll be able to bring this savings rate with us into the new normal.
Groceries (11%): Our grocery bills skyrocketed during the pandemic for a few different reasons. First, while having our groceries delivered has helped us stay safe, it has added delivery and tip costs. Second, since we aren’t eating inside restaurants, we get nearly all of our food from our grocery order. Third, I’ve fallen even more in love with baking and cooking, especially trying out new recipes — which often requires purchasing additional, unique ingredients. So, in some ways, I consider part of our grocery bill a hobby cost.
Rule of Thumb: I couldn’t find a clear rule of thumb for groceries. It appears people spend 6-15% of their budget on food. This is certainly one of those categories that varies based on family size, inflation, food quality, and food preference.
Car (10%): Recently my husband and I decided to become a one-car family. Hybrid/remote work and our downtown apartment made this choice fairly painless for us. Now, we only have the costs for my husband’s vehicle: gas, car payment, and insurance.
Rule of Thumb: The general rule of thumb seems to be 10-15% spent on a car, including maintenance. After we move to a new home, we anticipate having another vehicle, so I know these costs will go up again. Hopefully by then we’ll be close to paying off my husband’s car.
Giving (5%): I will be very honest: This number is NOT where I’d like it to be. I had thought we were giving away about 10% of our budget, but we neglected to boost our giving amounts as our salaries increased. In reality, we were giving away about 4% of our income. Over the last year, we have increased the amount of our regular, budgeted gifts, and we hope to continue this until we reach 10%.
Rule of Thumb: There aren’t any good rules of thumb for this from financial experts, but various faith traditions do offer different guidelines. Regardless of your faith tradition, I think there’s incredible value in including generosity in your budget. If you haven’t already, you may want to take this opportunity to put together your own giving strategy.
Dining Out (5%): At the beginning of the pandemic, we decided to get takeout for our once-a-week date night. We did this to support local restaurants, give me a break from cooking, and make date night extra special. To support these local businesses, we tend to order like we would if we were eating at the restaurant: appetizers, salads, main dishes, and desserts, and we tip the same percentage as we would for indoor dining. Often we end up with enough food to eat the next day for lunch, which helps justify the expense.
Rule of Thumb: This is another one where there is no clear rule of thumb. The amount never seems like much in the moment, but it can really add up over time. In my case, I was astonished that we were spending as much on dining out as we were giving away. It helped me see how much room we already have in our budget to grow in our generosity.
For the sake of brevity, I’m focusing on these larger categories. However, one of the smaller areas of our budget that really surprised me was our subscriptions. We had far more monthly TV and other types of subscriptions than I knew. Luckily, we use them all, but it’s helped me get a clearer sense of how much space these items are taking up in our budget.