Budgeting and Spending Guidelines

Budgeting is the first step to managing your money. Followed by tracking your expenses and readjusting your budget until it fits your needs and wants. It took about 6 months before I was able to feel comfortable with my budget allocations for each of the line items on my budget.

But how do you know how much to allocate for each budget line item?

The short answer is it’s based on your financial goals, needs and wants. There is no right allocation as much as there is no right way to save and spend your money. There are only suggested guidelines based on statistical data and empirical research.

Although guidelines are just that, it doesn’t hurt to see where you might fall against the average population. Knowing this information may provide you with data on where your spending habits deviate. I found spending guidelines most effective when there was better moderation in our spending, saving and debt repayment allocation. Spending guidelines are not as effective when one is aggressively working towards a specific financial goal. For example, when we were getting out of debt 50%-60% of our income went towards debt repayment. This amount is disproportionately different from the recommended percentage, but it was in line with our current goal of getting out of student loan debt in 3 years.

So what exactly is the recommended spending guidelines when preparing your budget?

I thought you would never ask. Below are the spending guidelines based on income (take home pay):


If you look at the variation between the ranges, the difference should add up to 100%, see below:

Category Spending Guidelines by Percentage of Income Difference
Housing expenses 0%-35% 35
Other Utilities 0%-5% 5
Food expenses 5%-10% 5
Transportation 15% -20% 5
Clothing 0-%-5% 5
Medical 0%-5% 5
Personal expenses 5%-30% 25
Savings 5%-10% 5
Debt Repayment 5%-15% 10
Total   100

In looking at our current budget, I compared our budget line items against the spending guidelines above and this is what I learned:

Category Spending Guidelines by Percentage of Income Our Spending by Percentage of Income
Housing expenses 0%-35% 18%
Other Utilities 0%-5% 3%
Food expenses 5%-10% 10%
Transportation 15% -20% 7%
Clothing 0-%-5% 0%
Medical 0%-5% 2%
Personal expenses 5%-30% 27%
Savings 5%-10% 26%
Debt Repayment 5%-15% 7%
Total   100%

spending guideline.png

Housing expenses:

Housing expenses refer to all expenses regarding your home. This includes but is not limited to: rent/ mortgage payments, condo fees (if applicable), second mortgage, gas for the house, electricity, water, home security, maintenance and repairs, household items like tools, gardening supplies etc. All expenses relating to the living and upkeep of your home would be included in this category.

As renters our housing expense is fairly low at 18% for a 2 bedroom 960 sq. ft. apartment. Included in our rent is gas/heat and electricity. The only additional expense we incur for maintaining our home is renters insurance.

Other utilities:

These expenses would include utilities not needed for the regular upkeep and maintenance of your home. Some examples would include: a home phone, cell phone, internet, cable, subscriptions etc. Some people like to add these expenses as part of their housing expense (above). If this is the case, then you can eliminate this category and your housing expenses would range from 0% -40%.

Our Other utilities category are in line with the average and include the cost of 2 cell phone plans, Netflix and internet. We do not have cable.

Food/Grocery expenses:

Depending on where you live, how many people are in your home and your nutritional diet, this category can vary a bit between households. Food expenses include: grocery items, personal care items (grooming and cosmetics etc.), specialty stores relating to food etc. Food expenses do not include eating out and entertainment.

Our food expenses are right at the higher end of the average at 10%. I believe this is partly because we live in Calgary where grocery items are more expensive than other provinces (i.e. compared to the east). It is also because my husband and I have decided to be more conscious about our eating habits. We enjoy different meats, fruits and vegetables on a daily basis and will sometimes indulge in higher priced foods and beverages when we can.

Transportation expenses:

Transportation costs would account for 15%-20% of spending. This percentage would largely be affected by whether you make lease/financing payments towards your vehicle or own your vehicle outright. Transportation items may include: lease/financing payments, fuel, vehicle insurance, bus fare, taxi/Uber, vehicle maintenance and repair etc.

Our transportation expenses are well below the average primarily because we purchased a used vehicle and have no monthly car payments. We also only have one vehicle and car pool/take the transit when we need to. This lowers our fuel, maintenance and insurance payments from two vehicles to one. We also periodically purchase a booklet of transit tickets which we use when we are unable to carpool because our schedules don’t sink.

Clothing expenses:

Clothing expenses include clothing for all members in the household.

We typically don’t set aside money for clothing but buy clothing in spurts every 6 months or so. Monies for these expenses usually come from our windfall income or personal spending. Because of this, we spend 0% on clothing most months.

Medical expenses:

Medical expenses include health care premiums and out of pocket expenses not covered by the government or your insurance provider.

With a fairly good health care system in Canada and decent health care coverage with our employers, we typically don’t spend a lot of money on medical expenses.  With a 80%-90% coverage for most of our medical expenses through our employer and the rest covered by the provincial or federal government, the 2% of medical expenses is in line with the average.

Personal expenses:

Personal expenses is typically the category that varies the most between one household to another. I like to think of this category as the ‘catch all’ category to place expenses that are too small to have their own category but still need to be captured. Some examples of personal expenses include: entertainment/couples activity, coffee, travel, education expenses (not covered by employer), gifts, tithes and other charitable giving, bank fees, hair care, fitness memberships, alcoholic beverages, hobbies etc. Depending on your needs and wants, personal expenses can range between 5%-30%.

Our personal expense category is in line with the average at 27%.


Every budget should have some money to set aside for a rainy day or for the long term. A savings goal is critical to a strong financial future. The recommended savings rate is 5%-10%. In following the personal finance space, some financial coaches are even suggesting a savings rate of 15% for the coming generations. The argument being that with rising cost of living, stagnating incomes and retiring with debt being the norm, this increase will help to manage these expenses. However, as for now most literature say a savings rate of 5%-10%.

As mentioned above and in previous posts, we strive to keep a fairly high savings rate for as long as we can (minimum 25%). This is in hopes of reaching FIRE (financial independence retiring early) and also just to be able to work jobs that we are passionate about without having to worry about income. On months where we receive windfall income, our savings rate may increase to 40%+ for that month.  Our entire savings rate goes towards long term investing.

Debt repayment:

Debt repayment is the money set aside to pay back your creditors. Examples would include: credit card, line of credit, student loans, income tax instalments, other loans, and most other consumer debt. The recommended debt repayment amount is no more than 15% of take home pay.

You may be wondering why we carry any debt after becoming debt free in 2015. Well, in 2017 we budgeted a good chunk of our money to go towards vacations, 4 in total. Due to the timing of 2 of these vacations we decided to purchase the plan tickets on our line of credit and pay off the debt over the next 3 months. This ran us a balance of $800 or so, which we are comfortable with as this would be our only debt. To ensure that the vacations remain a blessing and not a nightmare, we set ground rules for how much debt we will allow ourselves to carry for this year at any given time and how long we would take to pay it off.  To facilitate our vacation schedule, the maximum amount of debt we are willing to carry is $1,000 combined which must be paid off within 6 months. We also made it a point to ensure we carry no debts into 2018.

Where do you fall in the spending guidelines? Do you think some of the category percentages are too high or too low?




Categories: Budgeting

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4 replies

  1. I think general spending guidelines don’t apply to a lot of people because it completely depends on your situation. Personally I spend 40% on rent, 40% on groceries/every day expenses and 20% on miscellaneous stuff. But this is also because I have my own business, so my “income” doesn’t really reflect how much I make.

    Liked by 1 person

    • That’s a good point. However, I think if your starting out and have no framework to go by, spending guidelines are a good idea. If only to give you a bench mark of what’s “normal”. Having said that though, most people I know who want more for their money don’t want to do what ‘normal’ so they create their own version of normal. Even for myself a savings rate less than 15% wouldn’t cut it for me, even if 10% is the norm. But I understand that everyone is different.


  2. 25% is a great savings rate! We strive to keep ours to 25% or higher as well. Sadly, most don’t even come close to recommended minimums.


    • We know that our savings rate is a lot higher than normal. We took this approach to take into account our late start in investing (we really didn’t start saving for long term until 30) and to account for years in which we may drop to one income due to a lay off or starting a family. We hope that time and compound interest will do the rest.

      Liked by 1 person

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