Household budget percentages: the ideal breakdown

Household Budget Percentage

Many financial experts agree that the ideal household budget breakdown is 50/30/20, as known as the 50/30/20 rule. With this breakdown, 50% of your income should go towards essentials, 30% towards discretionary spending, and 20% towards savings. 

Household budgets should consist of all recurring bills and expenses it takes to run a household. These bills and expenses may include but are not limited to, rent or mortgage payments, utilities, groceries/dining out, clothing, and personal care items. 

A household budget is an essential part of taking control of your personal finances. Your ideal household budget percentage will help you allocate income to necessities, recreation, and, finally, savings. According to CNBC, 53% of Americans say that learning how to budget their money and track their expenses is the most valuable financial lesson they have learned!1 

Suppose you have never worked with a budget before or are adjusting your budget for specific money goals. In that case, you may be curious about how to break down a budget into percentages.

There is an ideal breakdown that can work for many households! 

Most experts will recommend a budget breakdown with the 50/30/20 rule.

This rule should be applied to taxed income and essentially split your total household income into three spending categories.

This is how the 50/30/20 breakdown will work:

Allocation PercentageSpending CategoryDescription
50%Essentials Necessities like housing, utilities, food, bills, pet expenses, insurance, and transportation.
30%Personal SpendingRecreational activities and wants.
20%SavingsAllocated for financial goals.

Below is more information on each:

50 Percent of Income Goes to Essentials

Use fifty percent of your take-home pay for essentials. This necessary spending includes things like:

  • Housing costs (rent or mortgage payment, property taxes, etc.)
  • Living costs such as utilities
  • Food costs
  • Bills (car payments, minimum debt payments, student loans, credit card payments, etc.)
  • Pet costs
  • Insurance premiums, for example, life insurance, health insurance, car insurance, home insurance, etc.)
  • Transportation

Consider a debt calculator if you need help figuring out your payments for existing loans!

30 Percent of Income on Personal Spending

Thirty percent of your take-home pay should be under the category of recreational activities/ wants. This spending category includes things like:

  • Eating out
  • Shopping
  • Travel
  • Subscription services
  • Entertainment

The Final 20 Percent Should Go to Savings

And finally, allocate twenty percent of your take-home household income to saving for your money goals. Here are a few examples of what those goals may look like:

Keep in mind that this rule considers that you have an ongoing income and three to six months of your living expenses in a savings account.

If you have a minimal amount saved, cut down on recreation and increase your money towards your money goals.

How To Get Started With a Percentage Budget

The 50/30/20 rule can give you an idea of where your income should be going in a larger sense. However, to be successful with these budget percentages, you will have to create specifics based on your personal spending habits. For example, because fifty percent of your income with this rule will go to essentials like housing costs, you must know precisely how much those actual payments are. 

The Basics of Creating a Budget and Budget Categories

If you have never made a budget before, it isn’t too tricky. There are budgeting apps and spreadsheets that can help.

The first part of creating a budget involves tracking all of your income and setting goals for spending. Although most people start a budget from month to month, others find that budgeting in between pay periods makes the most sense.

With a budget set up, you can know exactly how much you are spending and on what. Staying within budget might be difficult at first, but it can get easier once you get into the swing of things.

It is vital to make sure your budget is realistic for your lifestyle. And that you are also taking the initiative to stay within it every month.

Why Should I Be Budgeting My Household Income?

You may be wondering why budgeting is helpful. Budgeting can be an incredible tool when trying to find financial stability. Being financially stable can come with several benefits:

Preparedness for an Emergency

Budgeting will help you establish a savings fund. And in case of an emergency or unexpected expense, you can be ready to take care of it.

Also, allocating enough for essentials can be a great way to prevent financial emergencies in the first place.

Financial Freedom and an Improved Quality of Life

Being financially stable and having financial freedom can impact the quality of your life for the better—your health, comfort, experiences, and goals are all largely dependent on finances.

Prevent Debt

A huge reason to budget and save is to prevent debt. When you have an accessible savings account, you won’t have to look to credit cards or other forms of debt.

Keep Your Goals on Track

With a proper savings account and a household budget, your money goals will be more likely to stay on track.

What if the Ideal Household Budget Percentage Breakdown Doesn’t Work Well For Me?

Recommended budget percentages aren’t always easy to find. Although the 50/30/20 Rule is a highly recommended budget percentage breakdown, it may not be ideal for everyone.

For example, suppose your goal is to pay off debt or save as much as you can. In that case, you may want to add a higher percentage of your monthly income to that last budget category of goals.

Below are some other budgeting methods. Determine what is right for you based on your income, budget categories that you may have, housing costs, and personal spending habits:

The Envelope Budget — Save Cash for Each Budget Category

The envelope budgeting method involves creating budget categories and putting away cash into an envelope. From here, you only use the money that is in each envelope for each expense.

The Zero-Sum Budget — Spending All Your Income

The Zero-Sum budget involves calculating your entire income per month and allocating it to where you have a zero balance. The zero-sum budget can help make sure that you are being mindful of your spending.

The Pay-Yourself-First Budget — The Ultimate Way To Save

The pay-yourself-first budget involves allocating income towards financial goals before taking care of living expenses and paying off debt. This budgeting method can help prioritize long-term and short-term goals with your money.

Adapting the Ideal Budget for Your Lifestyle

When it comes to budget percentages, experts recommend the 50/30/20 method. Although this percentage budget can work well for various households, it may not be the right option for you.

The ideal budget for your lifestyle will be a balance between spending and saving. And with all the different budgeting methods available, you can rest assured you will find a template to make a budget that works well for you.

And if you’re currently having a difficult time making your budget stretch to your next payday, there are options. Consider online quick cash loans to help make ends meet!


How can I adjust the 50/30/20 budget rule if my fixed expenses exceed 50% of my monthly after-tax income?

If your fixed costs are more than 50% of your net income, try to reduce discretionary spending in the budget category for personal spending. You might also need to temporarily decrease savings until you can either reduce expenses or increase your income.

Is the 50/30/20 rule suitable for people with irregular or fluctuating income?

For those with irregular income, the 50/30/20 rule can be adapted by using an average or the lowest predictable monthly income as a base. Adjust the budget categories flexibly to accommodate income changes, ensuring essential expenses and savings are prioritized.

Should debt repayment be included in the savings budget category of the 50/30/20 budget?

Yes, monthly debt payments can be part of the 20% savings category, especially if reducing debt is a priority. This budgeting category should balance debt repayment with building an emergency account and saving for future goals like retirement savings.

How do I manage unexpected expenses within the 50/30/20 budget framework?

For unexpected expenses, utilize your emergency fund, which is part of the 20% savings budget category. If your emergency fund is insufficient, you may need to adjust your budget temporarily to cover these expenses.

In the budgeting process, how should I prioritize between paying off high-interest debt and building an emergency fund?

Start by creating a small emergency fund as part of your savings budget category. Then focus on paying off high-interest debt. Once this is managed, you can allocate more towards saving money in your emergency fund.

How often should I update my budget spreadsheet to ensure effective budgeting?

Update your budget spreadsheet regularly, ideally every month or whenever there’s a significant change in your gross income or expenses. This is a crucial part of the budgeting process to keep your financial plan on track.

What strategies can I use to reduce my essential expenses if they are too high in my budget spreadsheet?

To save money on essential expenses, consider refinancing high-interest personal loans, reducing utility costs, shopping for more affordable insurance, and evaluating other fixed expenses. Adjusting these budget categories can free up more income for debt repayment and savings.

How should I allocate my net income in the budgeting categories for optimal financial health?

Allocate your net income across essential expenses (50%), personal spending (30%), and savings (20%), which includes emergency fund contributions and retirement savings. Adjust these budgeting categories based on your specific goals and needs.

A Word From CreditNinja on Household Budgets 

CreditNinja encourages everyone to set a budget to better stay on top of their finances. You may find that creating a simple budget can be a huge help in managing debt repayment, handling unexpected expenses, contributing towards an emergency fund, and maintaining a sustainable lifestyle. 

Looking for more information about creating a budget for your home, managing personal installment loans, bad credit loans, and more? Check out the CreditNinja blog dojo for tons of free financial resources! 


  1. Most Americans learn their No. 1 most valuable money lesson by age 22, survey finds | CNBC

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