Guide To Budgeting Living Expenses

You’re undoubtedly used to those bills coming in every month, such as your housing costs, food, and car insurance, but you may sometimes wonder if there’s a way to better manage them. Budgeting for your recurring living expenses can help you take control of your cash and spend and save smarter.

While there are various techniques you could use, a good starting point can be to first get a handle on your needs vs. wants and next determine which budget technique will work best for you.

What Are Living Expenses?

Basic living expenses, as the name implies, are ones necessary for daily living, with main categories including housing, food, clothing, transportation, healthcare, and relevant miscellaneous costs.

Although not everyone would define basic living expenses in the exact same way, here is a breakdown of expenses to consider.

Housing

For homeowners, this can include their mortgage payment, property tax, and insurance payments, along with monthly utilities and basic maintenance costs.

If living in a condo, this includes condominium fees. For renters, it can include the monthly rent payment, utilities, renters insurance, and any other housing-related costs they’re responsible for paying.

Food and Beverage

Basic expenses would include buying groceries for the family, but not restaurant food or other optional food or drink expenses. So while, yes, dinner at a sushi restaurant is technically food, dining out doesn’t count as a basic living expense. You could do without it.

Clothing

This includes clothes for work and school for the family, plus footwear, underwear, outerwear, casual clothing, pajamas, and so forth. Designer clothing and other pricier items are typically not categorized in basic living expenses. The same holds true for buying a cool sweater that’s on sale but you don’t truly need it.

Recommended: Ways to Save Money on Clothes

Healthcare

Expenses in this category can range from monthly payments for healthcare insurance, to copays and additional bills from doctors, dentists, specialists, and so forth. It also includes copays for prescription medications and over-the-counter meds.

Transportation

Transportation expenses can include car payments and insurance, gas, and maintenance. It can also include Uber and taxi expenses, public transportation tickets, parking fees, and so forth.

Other Expenses

Cleaning supplies for the home or apartment, personal care items, cell phone and internet bills, and similar items can also be included in a list of basic living expenses.

Minimum Debt Payments

Not to be overlooked are making sure you stay current on such things as student, car, and personal loan payments, as well as at least the minimum due on credit cards.

Average Living Expenses in the USA

The average living expenses can vary greatly depending on where you live and your household size. Here is a snapshot of a few locations across the country and how much monthly living expenses are, using data from the Economic Policy Institute.

Wants Versus Needs

The challenge, in many of these categories, can be to successfully determine which of these expenses are truly needed and which are extras that would be more appropriately categorized as “wants.” In and of itself, there’s nothing wrong with paying for “wants” that fit within the budget but, for the purposes of making a basic living expense budget, it’s important to tease them apart.

Paying a cell phone bill, for example, could be considered important for safety and to facilitate communicating with work and family. Getting the latest and greatest cell phone for its bells and whistles, meanwhile, is crossing over into a want, not a need.

In the 1970s, something called the Growth-Share Matrix was developed, and it may help people who are wondering how to categorize living expenses and then prioritize them. The process includes listing all expenses, and then putting wants in one column and needs in another. Each column can then be divided into high or low priority. So, when budgeting living expenses, there would be four categories:

•   High-priority needs

•   High-priority wants

•   Low-priority needs

•   Low-priority wants

Another way to name these categories is:

•   Must have

•   Should have

•   Could have

•   Won’t have

This makes it easier to see what must be paid and what is optional. When making a budget, it can make it easier to choose where to put any discretionary funds. In other words, these methods may be able to help people answer these questions: What are living expenses that must be paid? Which ones are more optional?

When making a budget, it’s important to also account for any credit card payments, personal loan payments, student loan payments, and other debts that must be paid. After documenting all these expenses, figuring out how to calculate living expenses is as easy as some quick math. Figuring out how to budget for these expenses is the next item on the agenda.

Allocating Your Income

Although no two financial situations or budgets are exactly the same, there’s been a long-standing rule of thumb when making a budget that says people shouldn’t spend more than 30% of their after-tax income on housing.

According to the U.S. Bureau of Labor Statistics’ most recent analysis of how people spend their income, the percentages stack up as follows:

•   Housing: 32.9%

•   Transportation: 17%

•   Food: 12.9%

•   Personal insurance/pensions: 12.4%

•   Healthcare: 8%

•   Apparel and services: 1.2%

This accounts for nearly 85% of what people, on average, have been spending. It shows that, on average, people are slightly above the recommended percentage for housing expenses.

3 Types of Living Expense Budgeting Methods

There are numerous ways to craft a budget; in fact, we’ve created a guide to cover the different types of budgeting methods. One of the keys to effective budgeting is picking a strategy that allows for consistency. Here are some approaches to consider:

1. Proportional Budget

For people who have divided up their expenses into needs and wants, proportional budgets may make sense. This is a budgetary strategy where monthly income is divided into three categories:

•   Needs

•   Wants

•   Savings

In one type of proportional budget, known as the 50/30/20 rule, 50% of income would go towards needs; 30% towards wants; and 20% towards savings and debt repayment beyond the minimum. It typically makes sense to do this calculation with after-tax income, which is take-home pay.

Advantages of a proportional budget include that it’s a simple formula, which may make it easier to stick to. Plus, it keeps a focus on the big picture, clearly distinguishing between needs and wants. It can also be a useful method for people who want to save money in a straightforward way.

However, this budget method may not work well for people who are still working on separating needs from wants. And if a person’s needs currently take up more than 50% of income earned, then the 50/30/20 percentage breakdown may work as a goal vs. something that can be fully implemented right away.

Recommended: 50/30/20 Calculator

2. Line-Item Budget

A line-item budget is a granular method where you track expenditures, line by line, in relevant categories. This can be helpful for people who want to keep their focus on spending money on basic living expenses because they can easily see how much of their money is going into what category.

This approach offers clear financial tracking and detailed insights into spending patterns, but lacks flexibility and can be time-consuming to manage.

3. Envelope Budget

The envelope system is another way to create a household budget, and it may be the most hands-on way to manage money. People using this method withdraw enough money from the bank each month to cover each budget category. Then, they put the appropriate amount for each category in a separate envelope: housing expenses in one, grocery expenses in another, and so on.

Once a particular envelope is empty, then no more money can be spent in that category for that month, unless cash is taken from another envelope, which reduces the amount that can be spent on that envelope’s category.

This method can work well for people who appreciate a tactile way of handling money. If you’d prefer not to work with cash, you can adapt the envelope method to a cashless system using digital tools like a budgeting app or spreadsheet.

Recommended: Money Management Guide

Budgeting Tips

Here’s some advice as you create and live on a budget:

•   When creating a budget, look for expenses that can be eliminated or at least reduced. For example, you might cut a streaming service or two or drop all that you subscribe to and find free entertainment through your public library’s resources.

•   It is also wise to incorporate savings into a budget. If you don’t already have a healthy emergency savings fund, you might first focus on that. “You’ll hear that a healthy emergency fund should cover between three and six months’ worth of living expenses — rent or mortgage, bills, food, and other essentials,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “Since you never know when an emergency might happen, it’s best to keep your fund relatively liquid.” Once that’s funded, you might then save for other personal goals, including retirement.

•   Consistency is key. When budgeting is a part of daily life, it can make it much easier to reach financial goals than when it’s a sporadic activity. If budgeting fades from focus for a month, don’t quit. Get right back on track.

•   Finally, when help is needed, ask for it, whether from trusted friends and/or relatives or a qualified financial advisor.

What If Your Income Doesn’t Cover Your Living Costs?

If your income doesn’t cover your living expenses, you have two options (or you could do a combination of both):

•   Reduce your expenses. You might take a roommate, move in with a family member for a while, start shopping at warehouse clubs, or decide not to eat out as often.

•   Increase your income. This might mean looking for a new job, training up for a different career, or starting a side hustle.

These methods can help you cover your living costs. Worth noting: If part of the issue is considerable debt that is negatively impacting your spending power, you might meet with a nonprofit credit counselor for advice on eliminating that drain on your funds.

The Takeaway

Understanding and managing your living expenses is a critical step toward achieving financial stability. By clearly identifying your needs vs. wants and choosing a budgeting method that fits your lifestyle, you can take better control of your money and make more informed financial decisions.

Whether you’re looking to trim costs or boost your earrings, smart budgeting can help you live within your means and work towards your financial goals. Your financial institution may offer tools to help you track your money and budget successfully.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are considered living expenses?

Living expenses are the minimum expenditures needed to survive. They typically include housing and utilities, food, clothing, healthcare, insurance, and minimum debt payments.

What is the average living cost in the U.S.A.?

The average monthly expenses for American households total $6,440, according to the most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics (BLS).

What salary is needed to live comfortably in the U.S.A.?

The salary needed to live comfortably in the U.S. will depend on many factors, such as cost of living, location, and household size and configuration. In Bankrate’s 2025 Financial Freedom Survey, nearly half (45%) of all adults said they would need to make $100,000 or more a year to feel financially secure; roughly one-quarter (26%) said they need to make $150,000 or more; and a smaller group (16%) said they would require over $200,000.

About the author

Kelly Boyer Sagert

Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q325-062