Reprinted from Credit Counseling Service (

A lot of people wonder how much of their income they should spend on their home, vehicle, groceries, clothes, etc. Below are some guidelines to give you a general idea and provide you with a starting point for your budget. Based on your income, family circumstances, and the part of the country you live in, your allocations may be very different.

To work with these budgeting guidelines, begin by developing your budget with the money you have available after government deductions from your pay cheque, but before voluntary deductions such as IRAs, pensions, or other savings. If you have expenses such as high debt payments, childcare, school expenses, or giving, you will need to reduce your spending in other areas to allow for these higher expenses.

Breakdown of Cost of Living Budgeting Categories

  • Housing: 35%
    mortgage / taxes / rent/ insurance / water
  • Utilities: 5%
    phone / cell phone / gas / cable / internet
  • Food:10 – 20%
    groceries / personal care / baby needs
  • Transportation:15 – 20%
    bus / taxi / fuel / insurance / maintenance / parking
  • Clothing:3 – 5%
    for all members of the family
  • Medical: 3%
    health care premiums / specialists / over-the-counter
  • Personal & Discretionary:5 – 10%
    entertainment / recreation / education / tobacco/alcohol / eating out / gaming / hair cuts / hobbies
  • Savings:5 – 10%
    Plan to save money for expenses that don’t occur every month, as well as for your future. Then you’ll have a little extra available when you need it.
  • Debt Payments:5 – 15%
    Many people find that their budget is quite tight when their monthly debt payments are close to 23% of their net income.

How to View These Budgeting Guidelines

These guidelines have been created for someone who really needs to put together a tight budget. If finances aren’t strained in your household, you can decide to be more relaxed and go beyond the guidelines in areas as long as you’re doing two things: 1) you’re not spending more than you earn, and 2) you’re allocating some money towards savings (savings are absolutely necessary for life’s many unexpected expenses. Don’t rely on credit for these unexpected expenses. Rely on money you’ve saved).

The category in these guidelines that people will most commonly exceed is the Personal & Discretionary expense category. The guidelines suggest you spend 5 – 10% of your income in this category. However, if you happen to have young children in daycare, have high education costs, take nice vacations, tithe, or have hobbies or recreational interests that aren’t cheap, you’ll quickly exceed the suggested maximum for this category. Please know there is nothing wrong with exceeding this limit as long as your budget balances (your expenses don’t exceed your income).

You may also notice that if you spend the maximum amount in every category, you’ll exceed 100% of your income. These guidelines are only recommended ranges. Life is all about choices, but you can’t choose the maximum amount in all spending categories. Spending more in one category may mean that you’ll have to cut back in another category to make your budget balance.