How to Determine the Best Budget Percentages for YOU

March 30, 2023 5 min read

If you're trying to improve your financial situation, creating a budget is a great place to start. However, one size does not fit all when it comes to budgeting. Each person's financial situation is unique, so the percentages that work for one person may not be suitable for another. It's essential to determine the best budget percentages for you to achieve your financial goals effectively.


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When determining your budget percentages, the first step is to establish your financial priorities. These are the essential expenses that you must pay each month, such as rent or mortgage payments, utilities, groceries, and transportation costs. Once you have a good understanding of your priorities, you can allocate the appropriate percentage of your income to cover them. The remaining percentage can then be distributed among discretionary spending and savings.

Another critical factor to consider when determining your budget percentages is your income. If your income fluctuates, you may need to adjust your budget percentages accordingly. Additionally, your stage of life, financial goals, and lifestyle choices can all impact the percentages that work best for you. Taking the time to analyze these factors and create a personalized budget can help you achieve financial stability and peace of mind.


Budget Categories

Essential expenses

  • Housing: includes rent or mortgage payments, property taxes, insurance, and maintenance costs.
  • Utilities: includes electricity, gas, water, sewer, and garbage.
  • Transportation: includes car payments, insurance, gas, and maintenance costs.
  • Food: includes groceries, dining out, and snacks.
  • Healthcare: includes health insurance, doctor visits, prescriptions, and medical procedures.
  • Insurance: includes life insurance, disability insurance, and other necessary types of insurance.
  • Debt: includes paying back accumulated credit card debt, student loans, or other forms of debt you have acquired. 

Discretionary spending

  • Entertainment: includes movies, concerts, sports events, hobbies, and other forms of entertainment.
  • Dining out: includes meals at restaurants and cafes.
  • Travel: includes vacations, weekend trips, and other forms of travel.
  • Shopping: includes clothes, electronics, and other items that are not necessary for your basic needs.
  • Personal care: includes haircuts, manicures, and other personal grooming expenses.


  • Emergency fund: includes money set aside for unexpected expenses like car repairs, medical emergencies, or home repairs.
  • Retirement: includes savings for your retirement years.
  • Major purchases: includes saving for a down payment on a house or a new car.
  • Other savings goals:includes saving for a child's education, a wedding, or any other specific savings goals.

Remember that these categories and percentages are just a guideline, and you should adjust them based on your specific financial situation and goals. By breaking down your budget into these categories and tracking your expenses, you can gain a better understanding of your spending habits and make adjustments to ensure that you are on track to meet your financial goals.

Allocating Percentages to Your Budget

The percentages of your budget for each category can vary depending on your financial goals, income level, and lifestyle choices. However, here's a general guideline for the recommended percentages for each category:

  • Essential expenses: 50% - 60% of your budget. This category should include all your necessary expenses, such as housing, utilities, transportation, food, healthcare, and insurance.
  • Discretionary spending: 10% - 30% of your budget. This category should include expenses that are not necessary for your basic needs, such as entertainment, dining out, travel, shopping, and personal care.
  • Savings: 10% - 20% of your budget. This category should include money set aside for emergencies, retirement, major purchases, and other savings goals.

It's important to remember that these percentages are just a guideline, and you should adjust them based on your specific financial situation and goals. For example, if you have a high income, you may be able to allocate a larger percentage of your budget to discretionary spending or savings. Alternatively, if you have a lower income or significant debt, you may need to allocate a larger percentage of your budget to essential expenses and debt repayment.

The key is to create a personalized budget that aligns with your financial goals and allows you to manage your money effectively. By tracking your expenses and making adjustments as needed, you can achieve financial stability and peace of mind.


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Where To Start With Your Budget

Embarking on a budgeting journey may initially seem like a daunting task, but in reality, it's a straightforward process that can significantly benefit your financial well-being. To begin creating a budget that works for you, there are a few key steps you can follow. By taking a methodical approach, you can better understand your income and expenses, prioritize your financial goals, and ultimately take greater control of your finances. Allow me to outline these essential steps for you.

  • Determine your income: Calculate your monthly income, including your salary or wages, any bonuses, and other sources of income.
  • List your expenses: Make a list of all your monthly expenses, including essential expenses, discretionary spending, and savings. You can use the categories mentioned earlier in this conversation as a guide.
  • Calculate your total expenses:Add up all your monthly expenses to get your total monthly expenses.
  • Compare your income and expenses: Compare your total monthly income to your total monthly expenses. If your expenses are greater than your income, you'll need to find ways to cut back on your spending.
  • Set your budget goals: Determine your financial goals, such as paying off debt, building an emergency fund, or saving for a specific goal. This will help you prioritize your spending and adjust your budget accordingly.
  • Allocate your budget:Allocate your budget percentages based on the recommended percentages mentioned earlier in this conversation, or adjust them based on your specific financial situation and goals.
  • Track your spending: Track your expenses regularly to ensure that you are staying within your budget. You can use budgeting apps or spreadsheets to help you keep track of your spending.

Remember, creating a budget is not a one-time task, and it requires regular monitoring and adjustments. By staying committed to your budget and making adjustments as needed, you can achieve your financial goals and gain control over your finances.

In Conclusion…

Creating a budget is a crucial step in achieving financial success, and determining the best budget percentages for you can be a highly personalized process. It requires careful consideration of your income, expenses, and financial goals. By taking the time to assess your spending habits and prioritize your financial objectives, you can establish a budget that is tailored to your unique circumstances.

Remember, budgeting is not a one-time task but a continuous process that requires regular review and adjustment. As your income, expenses, and financial priorities change, your budget will need to adapt accordingly. It's essential to remain flexible and open-minded throughout this process, as it may take some trial and error to find the budget percentages that work best for you.

Lastly, keep in mind that the most important aspect of budgeting is to stick to it. Developing healthy financial habits takes time and effort, but the rewards are worth it. By staying committed to your budget and regularly tracking your progress, you'll be well on your way to achieving your financial goals and securing a stable financial future.

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