What are the Most Common Household Budget Percentages?

Following a budget is like a combination of a financial roadmap and peace of mind. By taking charge of how and where to spend your money, you enable yourself to control your money, rather than your money controlling you. Knowing how much money to allocate for certain expenses can be confusing if you have never had a budget in the past. Let’s explore a good place to start.

What Do We Mean by ‘Household Budget Percentages’?

Household budget percentages refer to the portion of your monthly income that is set aside for each expense covered by your budget. These were determined over time to reflect what a person can reasonably expect to pay for certain things. When following these rules of thumb, it is less likely that your budget will be derailed by allocating too much for one expense and not enough for another.


Common Household Budget Percentages

When looking at the following percentages, you may think that one or two categories don’t apply to you or that there is something else you need to have included. This is normal. The following percentages are based on the average spending rate of people. Your individual situation will determine your priorities, which will vary from the next person’s priorities. For example, a single mother of three kids is likely to spend a higher percentage of her income on rent and food than a couple who both work and have no kids. The couple may need to spend more on insurance or may be able to put a higher percentage in savings. Use these numbers as a base guideline and tweak to fit your personal situation.

Giving, Tithing, and Charities

Giving and tithing are important things to many people. By setting aside a percentage of your income for these things, you are able to know you have met your wish yet at the same time not spent money you need for other areas. Ten percent of your original budget is considered a fair percentage.

Housing (renting or mortgage payments)

Housing, whether for rent or mortgage payments, is going to take up the largest percentage of your income. Ideally, twenty-five percent of your income should go in this category. Many people, however, feel that thirty-five percent is a much more reasonable goal.

Debt Reduction

Most of us have debt that we are trying to pay off. Five percent of your budget should be set aside to reduce the amount of money you owe.  This is one area of your budget that can be increased if you end up allocating less to other categories, such as insurance or food.


Utilities include electric, gas, water, sewer, internet, and telephone. Five percent of your budget should be assigned to this category.

Food & Groceries

Food is another category that varies widely depending on your circumstances. On average, ten percent of your income can reasonably be allocated here. For those on special diets, the percentage might need to be increased. For many others, five percent is plenty to cover eating for the month.

Transportation Costs

Transportation includes anything related to a personal vehicle, taxi or bus fare and parking fees. Ten percent of most budgets go to these things. If you routinely walk or bike, the percentage can be greatly reduced.


This category includes co-payments and medications that aren’t covered by insurance. Set aside five percent of your budget to cover the costs in this area.


There are several types of insurance you may need to pay each month. These include home, auto, and health insurance. If you keep a separate category for insurance, plan on ten percent.

Personal (for everything that doesn’t fit nicely)

There are things like cleaning supplies and personal hygiene items that don’t fit nicely into other categories. This category includes them and things like gifts or that new clothing item you are looking at. Plan on allocating five percent of your budget for these items.

Recreation & Leisure

Let’s face it, you need time to relax and do things simply for the fun of it. Maybe you want to attend a play or take that special someone to dinner. Allocate five percent of your income for entertainment and recreation.

Savings and Investments

The future won’t take care of itself. Setting aside ten percent of your money for savings will help you accumulate funds for large items you may want, emergencies, or retirement.


How Tracking and Understanding Your Percentages Can Help

By taking time to track the percentages in your budget, you get a clearer picture of where your money is going. If you see you are spending much more on housing than average, you can ask yourself if moving to a smaller place might be beneficial. If food or utilities seem to take up a large part of your budget, you can seek ways to cut costs in those areas.


Putting it in Action

Actual figures sometimes make it a lot more realistic than simply stating percentages. Let’s take a look at two sample budgets. The first is based on the average household income in California. The second is based on the average household income in the United States, which is somewhat lower.

For the sake of these examples, we’ll use the census definition of “household’. A household is not necessarily a family unit but is any group of people, related or unrelated that share an apartment or house. Household income, therefore, is the combined money of all adults that share expenses within the unit. The way to work out a household budget when more than one person is contributing an equal amount is to figure out each category’s monthly amount and then divide by the number of people contributing to determine each person’s share. Onto the examples.


Example 1

According to the census bureau, the average household income in California is $66,000 dollars per year. This means that the average household has $5,500 dollars for a monthly budget.

Housing represents 25 percent of your budget so you can afford rent or mortgage payments of $1,375 dollars a month.

Ten percent of your income is to be put aside for giving and tithes, food, transportation, insurance, and savings. For each of these categories, an ideal budget would have you setting aside $550 dollars each.

The remaining categories of your budget include utilities, health, recreation, debt reduction and personal expenses. For each of these, you need to set aside five percent of your household income, which amounts to $275 dollars a month per each category.

Example 2

For this second example, based on the average household income in the United States, get out a paper and pen and work through the figures with me. The average household income in the United States is $59,000 per year. Take the 59,000 and divide it by twelve (the number of months in a year) and you end up with $4,900 dollars each month to work with.

Rent/Mortgage payments take up the largest percentage so you want to start with that number. Multiply $4,900 by 0.25 (25 percent) and you end up with $1,225 dollars to spend on rent or a mortgage payment.

Next, you have five categories that are set up to receive ten percent of your monthly income. These are giving/tithes, food, transportation, insurance, and savings. Take your $4,900 and this time multiply it by 0.10 (ten percent) and you come up with $490 dollars to put into each of these five categories.

Finally, the last five categories each need five percent of your budget. Go back to that $4,900 and multiply the $4,900 by .05 (five percent). This comes out to $245 dollars each for utilities, health, recreation, debt reduction, and personal spending.


But, what if….?

Many of you are probably thinking something along the lines “Well, I don’t have this or that expense or don’t spend as much as I have listed.” Or, “What if I have expenses that aren’t listed, such as school tuition?” That’s the great thing about this form of budgeting. These figures are a starting point. The percentages add up to one hundred percent.

If, after say three months, you find you aren’t spending a whole ten percent of your income on food and maybe are only spending seven percent, you can sit down and tweak your budget. Look at other areas that could benefit from that extra three percent; maybe you could help reduce your debt quicker or contribute more towards savings?

The same principle relates to categories. These categories cover what the majority of people face each month. Your household may have others that are more important and not have ones such as insurance that is included here. In that case, take the percentages allocated for the unnecessary categories and re-assign them to where they are needed. For example, if your insurance needs are already covered in other ways, that leaves ten percent of your income open to being spent on tuition costs or music lessons for the kids.

The whole concept of having a budget is to help you gain control of your financial health so you can be free to enjoy the fruits of your labor. You may find it confining to take the time to perfect your budget as financial circumstances have a way of changing over time. Keep in mind that very few people hit on the exact percentages right from the start. Having a budget, however, that works well for you, is ultimately a vehicle to freedom; so keep at it.


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