A generic budget: Guidelines for spending categories

Rules of thumb help you see if your spending's a little out of whack or a lot

Question for the CreditCards.com expert

Dear New Frugal You,
I'd like to know how much of a person's income should be spent in each category. For instance I only make $2,150 per month payable on the first. I have no savings right now because I used that for car repairs and moving expenses. So, how much should be spent for one person on rent, utilities (heat, electric, computer, phone), food, gas, bills such as car insurance, pet food, etc. Thanks. -- Judy 

Answer for the CreditCards.com expert

Dear Judy,
Judy, you're wise to tie your expenses to your income level. It's the first and most important step to taking control of your finances.

Let's begin by giving you a generic spending plan. It's designed for after-tax income. To find out how much you can spend in any area, just multiply your monthly after-tax income times the percentage. For instance, according to the plan, you can afford to spend $688 on housing ($2,150 times .32 = $688).

Budget category
Typical budget percentage
Example with a $2,150 monthly income
Housing 32% $688
Auto 15% $323
15% $323
Insurance 5% $108
Debts 5% $108
Entertainment 7% $151
Clothing 5% $108
Savings 5% $108
Medical / dental 5% $108
Miscellaneous 6% $129

Some things you'll need to decide for yourself. I consider a phone to be part of having a residence, so my cellphone bill goes with housing. You might think it's more for entertainment. Neither choice is right or wrong. Just choose what seems best for you and keep it in the same category each month.

Also, remember that this is just a guideline. You'll need to adapt it to your situation. For instance, if you live and work in a major metro area, you might spend more on housing and clothing than the guideline recommends, but because you can use public transit (and not a car), you may need less for auto.

Or, if you're raising teens, your clothing and food categories might need to be higher. Of course, that means that something else will need to be lower.

One of the most important decisions is how much you'll spend on housing. It's especially critical for singles. For instance, we figured that you could spend $688 for housing. Remember, that includes any utilities. In many markets, you can't rent an apartment for that amount. So you'll need to decide whether you'd rather have a roommate to share costs or take some money from another category.

Housing and auto are two areas where it's easy to spend so much that you can't make up the difference in other categories. Be especially careful with any commitment (lease or payments) in those areas.

Using a spending plan can help you to make better decisions. That's because you have a yardstick to measure your choices. Sure, you love that apartment with the great swimming pool. But, comparing the $1,200 per month rent to your spending plan reminds you what you really can afford. Realizing it before you sign a lease can help you avoid a lot of pain (and debt) later.

The other advantage of a spending plan is that you'll also be able to identify any areas where expenses are increasing or are running higher than your plan.

Ultimately, only you can decide how much you should spend for electric, computer or phone. What's a luxury for me might be a necessity for you. But, having a guideline should help you put together a spending plan that will help you make good decisions about your spending and achieve your financial goals. 

See related: Making a budget? Break down the 'Big 4' expenses first, 7 tips for using your yearly credit card summary as a budgeting tool, Your first budget in 3 easy steps, 8 tips for squeezing a budget even tighter

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Updated: 02-23-2019