Budgeting Guidelines for Managing Income and Debt


Examining graphsSmart household budgeting is part art, part science. It’s a personal exercise that offers you the opportunity to decide what’s most important to you. To get started, think about what you must have and what you can live without, or survival economics. Then, find out how to make the most of what you have, or lifestyle economics.

The following are guidelines — not rules — for determining how much to budget as a percentage of your take-home income.*

Housing: 25-35%. These costs include rent or mortgage payments, plus insurance and any repairs or maintenance.

Utilities: 5-10%. Take seasonal changes into account. Power, gas, water, sewage, trash and the like are all utilities.

Transportation: 10-15%. Include in this expense insurance and gas — not just a car payment. And while a car payment is technically a debt, it’s debt with a specific purpose.

Food: 5-15%. Food is a necessity, but how much you spend depends on your desired lifestyle and habits. If you spend more here, be sure to spend less in some other categories. Think about looking for more coupons or taking advantage of rewards programs in many grocery stores, or even eating out less frequently.

Entertainment: 5-10%. Including entertainment as a category is an important way to balance having fun now vs. later. Entertainment should include things like cable or satellite TV, Internet service, and phone service, including cell phone plans.

Debt: 5-15%. Technically, a mortgage or car payment is debt (if you have them), but we don’t include them here, because they are a part of your living expenses. Student loans and credit cards are included.

Savings: 5-10%. Include saving for short-term goals like a vacation or a new pair of shoes, as well as your emergency fund for whatever may come. Don’t dip into your emergency fund for something that isn’t an emergency — keep the funds separate.

Retirement: 10-20%. Ideally, your savings rate should be 20%, which would reflect investment plus matching. From you as an individual, strive for 14%. At least make sure you are taking advantage of any employer matching funds.

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