How to Determine Budget Percentages

When you create a budget, you are doing more than just tracking each dollar that comes in and goes out. You are also usually calculating what percent of your income should go to each spending category, as well as how much you think should go towards that bucket. That’s how you can see where you may be paying out too much of your hard-earned cash in one area.

Understanding what percentage of your income should go towards each purpose can be a valuable tool for managing your financial life. You might want to cut down on how much of your hard-earned cash is going toward food and entertainment and boost the percentage that goes to paying off, say, a student or car loan.

That’s why knowing how to determine budget percentages is a valuable tool in getting your budget and personal finances on track. Learn how to do the math here.

What Are Budget Percentages?

Even if you’ve already created a budget, you may have been thinking of it more in terms of specific dollar amounts than percentages of your income as a whole.

That’s where budget percentages come in: Rather than assigning a set dollar amount to spend in a given category, budget percentages require us to think instead about the proportional amount of our income that the dollar figure represents.

Take groceries. The USDA lists the average cost of a nutritious food plan every month, and those costs can range considerably. A couple 50 and younger might spend as little as about $595 a month on food at home or as much as $908. (That’s right: the cost of the “liberal plan” is about 50% higher that of the “low-cost plan,” according to the USDA.)

Whether either of those figures sounds reasonable may depend on what you earn, but by parsing each expense as a proportion of the whole, it’s easy to figure out how much you have to spend in each budget category. You can also look into reallocating if you were to get a raise or if your cost of living were to change (say, if you were to move).

Think of it as a pie chart: No matter the amount of cash you spend on a given category, that money represents a certain slice of the pie. Making sure that slice is the right size is important to ensure that everyone at the table — which is to say, each of your line items — will get some.

Recommended: Local Housing Market Trends

Basics of Budgeting Percentages

As mentioned, there are no hard and set rules on what percentage of income to assign to each specific budget category. After all, even the categories themselves will depend on your personal needs and wants. (Maybe you’re a frequent flyer with a budget line item for international travel, for instance, or a music aficionado who has to stash some cash for your growing vinyl collection.)

That said, there are some basic rules of thumb that can be used as a starting place and then customized for individual needs.

Example Budget Percentages

If you ask five financial experts what percentage of your money to allot to a given category, you’ll probably get five at least slightly different answers.

But here are some basic example budget percentages that many experts can, more or less, agree on:

•   Housing (rent or mortgage, including property tax and other expenses): 25%
•   Insurance (such as health insurance, auto insurance, and life insurance): 10%
•   Groceries: 10%-15%
•   Transportation (including gas, parking, and maintenance): 10%
•   Utilities (such as electricity, internet, and water): 10%
•   Savings (including retirement): 10%
•   Entertainment (movie nights, dinners out, etc): 10%
•   Clothing: 5%
•   Miscellaneous: 10%

That “miscellaneous” category gives you the opportunity to devote more cash to categories that you consider worth splurging on, get busy repaying debt, or make charitable donations.

But again, this breakdown is just a starting point. You’re in charge of which expenses matter most to you!


💡 Quick Tip: Make money easy. Enjoy the convenience of managing bills, deposits, transfers from one online bank account with SoFi.

The 50/30/20 Rule

One popular form of proportional budgeting is the 50/30/20 budget rule, originally popularized in All Your Worth: The Ultimate Lifetime Money Plan, written by Sen. Elizabeth Warren and her daughter, Amelia Warren Tyagi.

Per this rule, you’d divide up your income and spend 50% on needs, or essential items; and 30% on wants, or nonessential items; and commit 20% to savings.

Of course, you’d then have to further extrapolate how much of that 50% would go to housing vs. food, for example, and how much of that 30% would go to dining out vs. streaming services.

In Warren’s estimation, that 20% would also cover the money being put toward debt repayment, but of course, this isn’t the most aggressive debt-repayment strategy available—and a fifth of your income might not be enough to meet both retirement savings goals and debt repayment goals.

Which is to say, once again, that budget percentages are all about personalization. Which line items do you need to prioritize? Which can you minimize and cut?

How to Make Budget Percentages Work for You

Starting with the guidelines above, you can put budget percentages to work for you to help make your money map more effective … and also to ensure your money is going where you want it to go, rather than allowing it to end up where it will. Odds are, this exercise will be helpful, regardless of which of the different budgeting methods you use.

To start, determine all the categories that need to be accounted for — a list of everything you spend money on each and every month. This will include both necessary costs, like housing and food, as well as wants like entertainment costs, and important financial goals, like retirement savings and debt repayment.

Each and every expense must be represented for your budget percentages to truly add up to 100%.

Then you can start with fixed expenses (like your rent or mortgage payment, insurance payments, etc.) and determine what percentage of your overall monthly income they represent. That way, you’ll know how much you can allot for more flexible expenses, like groceries and gas.

This exercise will also reveal if you’re regularly overspending on a fixed expense. For instance, if you determine that your housing cost is closer to 50% of your budget than 30%, it might be time to consider getting a roommate or taking up a side hustle.

You may want to start by determining your budget percentages with your spending as is, and then create an aspirational pie chart to set your goals.

Maybe you want to spend less on streaming services and save more for travel or devote more of your income to repaying your student loans. It’s all possible with percentages.

Recommended: How to Make a Monthly Budget

The Takeaway

Slicing the pie into budget percentages makes it easier to meet financial goals and can be a major stress reducer. When you know where your money is going, you don’t have to worry about where it all went. Allocating percentages to your spending and saving categories can help you better manage your money.

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..

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.

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.

SOBK0723003