





See our Free Money page for the best ways to get free money now (sign up bonuses, missing money, and more).

At the end of the month, do you look at your bank account balance and wonder where all the money went?

If you’re like many Americans, you can’t even estimate your expenses, let alone list them. If that sounds familiar, then this article is written especially for you.

The best way to overcome such a situation is by simply creating an effective budget, and sticking to it. Yes, you’re right. It is easier said than done, which is why we are going to help you take the first step towards budgeting your monthly expenses.

The questions you may be thinking are:

Where do I start?

What am I supposed to include?

What should I omit?

What percentage of my income should I allocate for each category?

These along with hundreds of other questions may be on your mind as you think about a personal budget.

In this article, we are going to discuss how personal finance expert Dave Ramsey made it so simple to manage your monthly budget. We are going to guide you through some steps that you can easily grasp, after which you’ll be able to build your own budget, regardless of whether you’re using a budgeting app or a spreadsheet.

Household Budget Percentages Recommended by Dave Ramsey

Ramsey categorized the household budget and assigned percentages to each category. According to Dave Ramsey, the ideal budget is divided into eleven categories.

Charity – 10%

Saving (for future/emergency) – 10%

Food expenses – 10 to 15%

Utilities – 5 to 10%

Housing – 25%

Transportation – 10%

Health – 5 to 10%

Insurance – 10 to 25%

Recreation – 5 to 10%

Personal Spending – 5 to 10%

Miscellaneous – 5 to 10%

Here is a detailed analysis of the breakdown of this personal budget.

→ Related reading: 90+ Budget Categories to Use with Your Own Personal or Family Budget

Charity – 10%

Dave Ramsey advises to reserve 10% of your income for charitable work. You can give it to your church or to another no-profit organization that works to help others in some way (or some combination).

The charitable works may include supporting someone’s education, health, or rehabilitation. You can also add your support in providing clean drinking water or helping those in extreme poverty in some other way. In fact, there are thousands of ways you can help others.

In addition to helping others, this will have a positive impact on you as well, as it feels great to give and know that you are making a difference.

Saving (for Future/Emergency) – 10%

This is the most critical and important category of your personal budget. You must adjust all of the other categories so that this money is available for saving.

Dave Ramsey advises you to set at least 10% of your income for safekeeping, which must not be touched until and unless a truly unexpected emergency arises.

In addition to an emergency fund, this money should be saved and invested for your retirement. You should regularly track your savings percentage and try to push up your income over time to increase the percentage of savings.

Food – 10 to 15%

One of the essential parts of your personal budget is the amount of money you spend on food, and this is an area where it’s easy to spend too much. Although you want to be frugal, don’t forget that you need to eat a healthy diet as well.

Dave Ramsey advises you to spend only 10% to 15% of your income on food, which includes food purchased at a grocery store to be prepared at home, as well as meals from restaurants. A simple way to reduce the amount that you spend on food is to eat fewer meals at restaurants and prepare more of your own meals.

→ Related reading: 30 Brilliant Ways to Save Money on Groceries

Ibotta - An Amazing Cash Back App Ibotta is one of the best cashback apps that you need to be using if you like to save money. Save money on the things you need to buy at grocery stores, department stores, home improvement stores, and online. Get Ibotta for Free! Learn More

Utilities – 5 to 10%

This category includes your electricity, natural gas, water, trash services, and even your cell phone lines and TV services. No one likes to spend money on utilities, so most of us would love to be able to reduce this as much as possible.

There are plenty of things you can do to save money on electricity (including switching providers) and to reduce your water bill if you are committed to minimizing these expenses. You can also go with a discount cell phone provider or get rid of cable TV to save big money each month. There are a growing number of cable alternatives that have plenty to offer at much lower prices.

Housing – 25%

Housing is the biggest expense in many budgets. This category will include your mortgage or rent payment, as well as property taxes (if you own) and homeowners’ association dues (if applicable). It may also include homeowner’s insurance or renter’s insurance.

Of course, where you choose to live will have a huge impact on how much you spend on housing. Buying or renting a modest home is one of the best ways to keep these costs under control. Another option to offset some of this cost is to rent out a room or part of your home.

If you’re a homeowner, don’t forget that there are also a lot of other related costs of owning a home, like maintenance and repairs. Factor that into your budget as well. As a general rule of thumb, you can plan to spend an average of about 1% of the value of your home on maintenance each year.

Transportation – 10%

The transportation category includes car payments, scheduled maintenance (like oil changes), repairs, gas, tolls, parking, and public transportation.

Your transportation costs can be impacted by where you live. If you live in an urban area you may need to pay for parking on a daily basis, but public transportation options may be better.

If you’re not careful, transportation costs can easily exceed this target of 10% of the budget. Try to think of your car as a method of transportation, not a status symbol. If you view your car as a status symbol, you’ll be certain to spend more than necessary.

Health – 5 to 10%

According to Dave Ramsey, this category covers any medical expense that is not covered under your health insurance. The next category is for insurance, so your health insurance premiums will actually go in that category.

Fun fact: Ramsey classifies homesickness under this category as well. Hence, the extra money can be spent on vacations, Christmas or on any other event with your beloved family.

Insurance – 10 to 25%

Insurance is an integral part of your household budget, even though it is something that none of us really want to spend money on. There is no denying that insurance can be very expensive, and as a result, this category can account for up to 25% of your total budget.

This includes health insurance, car insurance, life insurance, long-term care insurance, disability insurance, and other policies that you may have. Everyone’s insurance needs will be different, which is part of the reason why this category has such a broad range (10-25%).

Recreation – 5 to 10%

In today’s high-paced, stress-filled lifestyle, it’s important to find some time for fun and recreation. Money spent on gym memberships, Netflix, movies, fun activities for kids, and all money spent on entertainment lies under the recreation portion of your budget. Money spent on the birthdays, anniversaries or any kind of party you are hosting or participating in also falls into this category. Of course, vacations will often account for a big portion of this expense, especially for families.

Personal Spending – 5 to 10%

Most people overlook the money they spend on their personal wants. Although it might not be noticeable, even the small expenses add up when you look at the bigger picture. However, that doesn’t mean that you should spend anything on yourself or that you must cut out all spending that isn’t essential.

This category includes things like your daily coffees, massages, trips to the salon, etc. Ramsey suggested that anything you buy for yourself like clothes, shoes, and accessories should be allocated to this category of spending.

Miscellaneous – 5 to 10%

No matter how hard you try to plan out your expenses, there are sure to be unusual expenses that will arise. This category – 5 to 10% – is for all such expenses. If something you did not plan for in the budget comes up, the money goes from this section. If nothing unexpected arrives or if you have money left over, this extra money could be put into savings.

What About Debts?

You might be thinking that the debt category is missing then yes, unfortunately, Dave Ramsey’s personal budget suggestion is for debt-free individuals. However, that doesn’t mean others can’t learn a thing or two from the above solution. One simple way of including the debt category is to cut off one percent from each category and boom, you’ve got an extra 11% to pay your debts!

According to many people’s experiences, they’ve learned proper management of a household budget and enjoy a lower-stress life thanks to the help of these category allocations. Why not try out Dave Ramsey’s formula and see how it works for yourself and your family?

READ NEXT: How to Create a Budget That Works