Having a budget is always a good idea because with a budget you can determine exactly how much money you have and exactly how many expenses need to be paid. Everything will ultimately add up to 100% of you income so why not take control and decide exactly how your money will be spent? Here is a rough guideline of what percentage of your income after taxes to allocate to certain needs:


When it comes to your basic living expenses, you should consider putting in about 40% of your net income into your housing. This includes your entire rent or mortgage payment, house insurance, condo fees, as well as all your utilities including your water, heat, electricity, phone, cable, internet etc. Try not to put in any more than 40% in this category or you may not have enough for the other categories.

Food and Clothing

Expect to spend about 15% of your income on food, including grocery shopping, fast food stops and dining out at restaurants. If you make more money, this percentage may be smaller and if you need to you can skimp on this by going out to dinner less and buying things on sale at the store. Another 5% of your income should go to clothing, although you can always cut this smaller by wearing last season’s styles instead of buying new ones.


Transportation usually takes about 15% of your net income, however, if you are simply taking the bus it could be as small as 2% to 5%. On the other hand, if you have a brand new car and you have to pay for car payments as well as insurance and gas, it may very well be higher than 15%.


In this category, set aside about 20% of your income. About 10% of that should go to any debts (credit card payments, line of credit, school loans, personal loans etc), 5% should go to savings (in case of emergency) and 5% should go to your investments or pension plan. We all want to retire someday (preferably sooner than later) so it’s best to start thinking about this as soon as possible rather than too late in the game. Obviously if you don’t have any debt, you can cut this 10% out and put more into your savings, investments or your other needs such as housing or transportation.

Charity and Miscellaneous

This last section of your budget should take about 5% of your income. It is very important to give back to society so if you have a steady job, give at least 3% back to those in need. The last 2% of your income can go to entertainment or other miscellaneous items such as hair colouring or a night on the town.

In conclusion, it is important to remember that this is a general guideline of a budget and will most likely need to be adjusted to fit your specific needs accordingly. Just remember that if you put more of your money into one category, you will have less to put into another category.


For more information on personal finance and the best way to budget, check out Creating a Personal Budget by Income Ratio