If you have a small income, it is especially important to keep track of where every dollar is going.ĭetermine a percentage that makes sense with your income, your lifestyle, and your family. Whether you have a high or low income, make sure that you are doing a budget every single month. Monthly expenses: depending on your salary, family size, and lifestyle, budget 5-15% of your income for food. I recommend that you only consider buying a house if you can afford the monthly payment on a 15-year fixed loan. Try to keep your mortgage or rent cost at around 25% of your take-home income.įor example, if your monthly household income after taxes is $5,000, then a good goal for your monthly mortgage payment or rent would be $1,250. BUDGET PERCENTAGES FOR BASIC LIVING EXPENSES RENT OR MORTGAGE: 25-35% Not to get too complicated here, but I also recommend that you keep another separate savings account, also referred to as a sinking fund, for expenses such as vacations, buying a new car, or making renovations or repairs to your home. ![]() When you are done, then focus on investing 15% of your income for retirement. When you have paid all your debts except your house, then focus on building up your emergency fund to 6-months of expenses. ![]() If you are following Dave Ramsey’s baby steps, which I totally recommend you do, then start by saving $1000 and then tackle your consumer debt. The recommendation is that you allocate 10-15% of your income for tithes, offerings, and gifts to charity. If you are familiar with Dave Ramsey, you know that he is huge on giving. Now that we have defined our necessities let’s get into the recommended budget percentages. I don’t want any teenager to grow up traumatized about their style! How Should You Allocate Your Income? If you are like me and have a closet full of clothes, but “nothing to wear,” you could probably eliminate spending on clothes completely.īut, if you have children that are growing like weeds, like mine, then, of course, it will be a necessity to allocate some money to keep them from wearing highwaters, especially if they are in high school. And finally, for clothing, I am talking about having the appropriate clothes for the season. It is not a necessity to spend hundreds of dollars financing a new car or SUV. transportation, I am talking about covering your expenses for a reliable car and gas.Those expenses should be treated separately in your entertainment spending category. I am not talking about eating out at restaurants. ![]()
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