How Much to Spend on Every Item in Your Budget

If you’ve just begun to use a budget, you’re likely tracking your spending to see where your money is going each month. Are you going over budget? That much is easy to tell, but how do you know where you’re spending too much and where you might benefit by cutting back? We’ll break down the ideal amount to spend on every item in your budget.

Keep in mind your individual needs in each category might fluctuate. If you live in a big city, for example, you may be forced to spend more on housing but will save in the area of transportation. These figures are meant only as a guide to show you what’s normal, so you can get a clear picture of any sector where you’re overspending.

The Bureau of Labor Statistics keeps annual tabs on the average American family’s spending, and here is the allocation they found:

Housing: 33.6%

Transportation: 17.6%

Food: 12.9%

Personal insurance/pensions: 10.8%

Healthcare: 7.1%

Other: 6.4%

Entertainment: 4.9%

Cash contributions (charity): 3.6%

Apparel and services: 3.1%

As you can see, housing is by far the biggest expense for most American families. Depending on where you live, you may have little to no control over this category. But the others are more flexible. If you calculate your own budget and find you’re spending 10% of it on entertainment, for example, it may be time to rethink your priorities.

There’s no right or wrong answer when it comes to how you allocate your money, as long as you spend less than you make each month. However, if you’re working to pay down a debt or save up for a rainy day, it’s a good guideline to use just 70% of your income to cover all of the above, and use the remaining 30% toward paying off debt and contributing to your savings.