Why I feel boxed in with spending pie chart guidelines

You might be familiar with what a spending pie chart guideline also known as a life pie chart or money pie chart or whatever you might call it. It’s when you convert your budget into a pie chart representing the proportion of what you spend from your take home pay into 5 category.

Finance gurus have come up with a ‘standard’ spending pie chart that people should follow to have a good financial balance. The percentages are something like this:

35% housing costs (mortgage payment, rent, condo fees, property tax, utilities, mortgage insurance, maintenance & repairs etc.)

15% Transportation costs (fuel, public transit, car payments, auto insurance etc.)           

10% Savings (long term savings)

15% Debt Repayment costs (consumer debt payments including student loans, credit cards, personal loans etc.)

25% Life/ Living costs (everything else that doesn’t fit those 4 categories, from groceries to entertainment, child care, medical expenses etc.)

The chart would look something like this:

Standard pie chart

I got curious and decided to see how my own personal life of pie chart would turn out…let’s just say it was not bad, but it was not what I expected. Just a note, these percentages are based on joint expenses as my husband and I have our accounts joint so all of our income comes into one account and all of our spending and saving is based on this joint income. This how it looks like:

my life pie chart

As you can see, my “life expenses” are way out of whack and much higher than the standard of 25%. However, if you use the 15% from the debt repayment category into my living expenses that would bring us under 40% (25% + 15%) with 2% to spare (38%).

Housing in this chart includes our rent, renters insurances and electricity costs (heat & water is included in our suite). Our electricity costs range from $55-$75 at any given month for a one bedroom suite, but that’s because the square footage is not bad and we have a washer, dryer and dishwasher in-suite. Its kind a convenience I am not really wanting to give up right now….we will see.

Transportation is not bad. We bought our car at a car auction for $2,500+ tax (2003 Mazda Protégé) and it’s been given us no problems. We only have one vehicle for now. The 7% represents fuel, auto insurance and maintenance and repairs and monthly transit pass.

Debt repayment. We don’t have any debt…but it wasn’t always that way. So some of that 15% (not all) for debt repayment has been used to increase our groceries spending, date night/recreational activities and other purchases (life expenses). After going so hard to pay off $120,000 of debt in 2.5 years, it’s nice to have that room now…not gonna to lie.

Savings of 30% does not include our RRSP contributions and company matching because those values comes from before tax dollars and the pie chart is after tax dollars. I don’t like mixing apples and oranges as they say. I guess if you did include RRSP contributions & company matching it would be closer to 35-%40%…I think, although I did not do the math (see apples and orange comment). The percentage up top is for our TFSA retirement planning, DRIPS and such.

At first I was not impressed with the results of my life of pie chart because the “life expense” category was way out of whack (38% versus the 25%). I don’t like the way the pie chart generalizes your life into one category. Am I supposed to feel bad now that my life expenses are way out of whack? I don’t think so. I like details and this chart doesn’t cut it for me. This is the main reason I am not a big on ‘life pie charts’. Our lives don’t fit in 5 neat categories. But that’s just me.

So I decided to make my own chart, with my own categories. Here goes:

detailed life pie chart

Once I broke my monthly expenses into greater detail on the pie, it made me feel a lot better. I now have a better understanding of where my “life” expenses are coming from and I am perfectly ok with it for now. It might change, but that’s life I guess.

The 4% education fund is money set aside for my husband and myself to further our careers by taking some courses part time. I have been jaded by getting into lots of debt for the purposes of furthering my education that this fund is critical to us. If we are able to cover some of the costs through work that is great, if not…life goes on.

Insurance is for our all of our insurances: auto, renters and life and critical illness insurance purchased separately outside of our work…because you know, life happens and most coverages through work don’t provide sufficient income during a catastrophic event like a critical illness or death. It’s morbid to think about, but I think it’s important so I am ok with this increasing my life expenses.

Entertainment & miscellaneous can pretty much go together as our “fun money” at 8% (7% + 1%). That 8% has been a huge bonus after sacrificing for almost 3 years to get out of debt. The rest of the categories are pretty much self-explanatory.

I understand that the standard pie chart is a guideline to see if you are in line with your spending. However, the problem arises when people perceive these guidelines as requirements they need to follow. Plus, guidelines help you feel like you are following the “norm” and on the right track. I guess the conclusion might be that I don’t care much for the “norm” when it comes to personal finance. It’s called “personal” finance for a reason.

What are your views on spending pie chart guidelines? Do you personally use them to see if you are in line with your spending? Would you change any of the percentages?

Categories: Credit, Debt, Savings

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3 replies

  1. Put bluntly, I regard these “Life Pie Charts” as utter garbage. I would stop listening to any “Adviser” who suggested they were useful. The Pie Chart for a single man on $25,000 will be, and should be, very different from the Pie Chart for a single man on $60,000 and that is just for starters. And different again for those supporting a family.
    Everyone has different circumstances therefore the Pie Chart should be unique to each individual, and prepared after thorough examination of the unique circumstances of that individual.
    Umh. I guess that was a bit of a rant.
    I am not at all surprised you feel “boxed in” and don’t like them either.
    + Please keep up the good work on your blog.

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  2. like yourself, I do not use them and honestly I am kind of against them (for everyone these expense categories are different; do they mean that I must spend 15% of my income on transportation for example? i do not have a car and my transportation costs me around 1% of my income as I take the bus or walk the majority of the time). I think they must label them as “ballpark” or “maximum recommended” or something. Taking the face value of gurus can be very wrong in this case. my two cents 🙂

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