Using Percentages To Make Your Spending Plan

Having a plan for spending your money is always a good thing.  It doesn’t have to be fancy or complicated.  At the most basic level, just write down how much money you expect to receive in this week’s pay deposit, and then list where you want it to be spent.  It might look something like this:

spending plan snip

Once you’ve mastered simple planning of your spending, you might want to get a little fancier.  One popular guidelines is to allocate your spending based upon percentage of your income.  It isn’t perfect, but it is a good place to start.

An internet search on “spending based on percentage of income” gives a ton of results, including:

Each source has slightly different recommendations.  This is frustrating for some people, but it reflects the fact that every person or family has a different situation.  The important part isn’t hitting the exact targets suggested by any certain person or organization, but rather to use the percentages to think about your spending.

There are two different ways to use these recommended percentages.  If you don’t currently have a spending plan, using recommended percentages is a great way to start figuring out how much you should be spending on each category.  If you already have a good record of what you are spending, looking at percentages can show you where your spending is significantly more or less than the recommended amounts.

Another useful application for the percentage recommendations is making sure that your spending reflects your values.  For example, my husband and I don’t place a lot of value on our cars.  Since that is true, we should make sure that our transportation spending is at the low end, or even below, the recommended percentages.  On the other hand, we place high value on traveling with our family.  Therefore, we need to make sure that our spending plan has a larger portion of our income allocated towards travel expenses.

There is no single right way to plan your spending, and that’s also true of using percentages of income.  However, this method is another useful tool in looking at and thinking about your spending plan.



About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Bethany

    This made me curious, so I checked our current percentages. Just for background, we are a single income family of 3. My husband is an E-5.

    6% Taxes
    32% Housing (including utilities and insurance)
    6% Food (including restaurants)
    8% Transportation (including insurance)
    1% Clothing
    10% Charitable Giving
    5% Recreation (including travel)
    1% Pet
    1% Baby Stuff
    2% Other (Gifts, postage, etc.)
    28% Retirement

    I feel like we spending a lot on rent, but we live in a high cost area, so there aren’t a lot of options. We do spend under BAH as it is. We could cut our monthly transportation expense in half by paying off our newer vehicle, but we haven’t because our interest rate is so low. Travel is also one of the things we like to do, so that ends up being a larger chunk. Retirement is our only savings/investment category at the moment because our emergency account is fully funded. We should probably consider a college fund for our new baby!

  • Guest

    where is retirement savings in the budget ????