Hey There, I’m Melanie! I am a former CPA turned personal finance blogger and mom of three. When you ‘Budget With Mel’, you’ll develop monthly budgets, cost-cutting tactics, and learn new behaviors and beliefs about money. It’s time you took the stress and confusion out of your personal finances.
Hey There, I’m Melanie! I am a former CPA turned personal finance blogger and mom of three. When you ‘Budget With Mel’, you’ll develop monthly budgets, cost-cutting tactics, and learn new behaviors and beliefs about money. It’s time you took the stress and confusion out of your personal finances.
If you've ever wondered if what you're budgeting for certain categories is too much or too little, today I'd like to share recommended budget percentages for your household budget.
We personally follow these guidelines and in some categories come in way lower than the recommended percentages.
Before starting Dave Ramsey, we were way over the recommended budget percentages in many categories.
So if you find that you are too, don't worry you can ALWAYS find a way to cut costs , and I have some great resources on my blog to help you do that!
When it comes to budgeting, I like to keep things simple and straightforward.
A successful budget is a written, zero based budget that has specific guidelines for spending.
Once you have a written, monthly budget, you can use the recommended budget percentages below to gauge how you're doing!
If you are over on a certain category, try to find a way to cut your costs.
You do not want to overextend yourself financially and live in constant money stress!
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According to Dave ( famous last words in my house ), the three principles of any solid financial plan are to save, spend and give.
Most people forget the give part.
As Christians, we tithe 10% of our gross income to our local church, and try to set aside additional money to give as well, what we call our "spontaneous giving fund."
Giving softens our hearts and frees us from dependence on money, allowing us to see God as our ultimate provider.
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Dave recommends investing at least 15% of your gross income every single month after you have your emergency fund fully funded.
We invest in Roth IRA's through our employers plan up to the match percentage, and invest the rest in mutual funds recommended by our financial advisor.
If you don't have an emergency fund, start by setting aside at least 10-15% every month (try to aim for more) until that is fully funded, then start investing.
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Groceries should not eat up more than 10-15% of your income every month.
Do not estimate this number if you are not on a budget, because I can say with 90% certainty that you're best guess is way off :)
My LEAST favorite budget category is groceries, but it is the area that we improved the most!
We spend only $300 per month on groceries/household items.
I use a meal planning service called $5 Meal Plan to help me stick to my grocery budget.
Every Friday I get a custom tailored meal plan delivered right to my inbox! If I don't like that weeks meal plan, I can login to the site and build my own.
See the resources listed below for more information on how I save thousands every year on groceries!
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Utilities includes expenses such as trash, electricity, water, internet and cable.
This is relatively straightforward, but if any of the expenses in this category are busting your budget (like cable TV), then find a way to make these expenses as low as possible.
We cut the cord on cable, and have DirectTV now, which is about half the price!
Additionally, we bum off my parents Netflix account... we're millennials ;)
Housing is rent or mortgage PLUS real estate taxes, insurance, repairs, and any HOA or other dues/fees.
Beware! Housing is the hole that is sinking most families incomes.
Your mortgage (or rent) and other housing items should not be more than 25% of your total TAKE HOME pay.
If you don't stick to this rule, it might not be right away, but at some point you will start to become a slave to your mortgage payments.
When you're first married and have double income no kids, it might be easy to make a mortgage payment that is 30-40% of your total take-home pay.
However, most people don't stay in the double income no kids situation.
Add in a couple kids, a stressed mom who decides to go part-time, sports and school activities, medical emergencies, and suddenly that mortgage payment starts to sink your ship, leaving no room to save or invest.
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Transportation includes gas, car repairs, parking fees, registration and dues, etc.
Make sure you have a sinking fund for car repairs (and home repairs), otherwise when murphy hits, it will be a big blow to the budget!
We don't want you eating beans and rice for two months straight because your car broke down.
Set up a sinking fund so you can be at ease when murphy hits... and I promise he will hit !
The health budget category includes prescriptions, doctor visits, dentist visits, medical bills, and anything else related to these.
Spending on health will obviously fluctuate month to month, so I'd once again recommend setting up a sinking fund for unforeseen medical expenses.
A really short definition of a sinking fund is just a budget category that rolls over every month (the balance rolls over).
So if you start budgeting $100 a month for medical needs and you don't have any medical expenses this month, you'd carry that amount over to the next month and keep adding to it every month.
Be sure to have a fun money or personal spending budget category, to allot for the extras in life!
It's absolutely essential that you allow yourself some splurge money (even if you're getting out of debt).
Depriving yourself will not work, it'll just lead to a major budget buster!
Personal spending cash is for things like latte's, manicures/pedicures, fast food, or even larger extra expenses like hair highlights!
L ife insurance, health insurance, auto insurance, long-term care insurance, disability insurance, and any other insurance you can think of would fall under this category.
The goal is to keep total insurance costs (even the ones in other categories) below 25% of your income.
So although homeowners insurance would technically go under housing, we want to look at all insurance as a whole as well.
Similar to your personal spending or fun money, the recreation category is for dining out, date night, or any other family activities you want to do.
Maybe you are planning on going to a concert, fair, or to the water park with your kids. Or you'd like to get in shape and purchase a gym membership.
These are the kind of expenses that should be posted against the recreation category.
The miscellaneous category is for things that pop up during the month that are not an emergency.
It's nearly impossible to have a zero based budget and plan for everything unless you have a miscellaneous category.
Use the miscellaneous fund for expenses like a birthday party you forgot about, the family that came to visit, etc.
If you have trouble sticking to your budget even after trying it for a few months, using cash envelopes for the tricky categories is the way to go!
The budget categories that can be the hardest to stick to include groceries, personal spending, and dining out.
The envelope system is a tool in your arsenal you can use to stick to your budget.
You don't have to use the envelope system for every budget category, just the categories you tend to overspend on.
To get my free cash envelope template, subscribe above!
Simply creating a budget isn't going to help you stick to it. Using cash envelopes to curb spending and help you stick to your plan is key!
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Life changes, your needs change, your circumstances change, and thus your budget will change.
Don't be naive or set yourself up for failure by refusing to change your budget as your life changes.
For instance, if/when you have kids, your budget will look quite a bit different than if you're single or married with no kids.
Constantly be tweaking your budget, but only for legit reasons ;)