How Much Should You Spend on Essentials? Here’s What the Experts Say

A family of four shop at a grocery store.
Cheryl Willis, left, Penelope Vanover, 5, Riley Vanover, 8, and Amy Vanover shop at Lucky's Market in St. Petersburg, Fla. Tina Russell/The Penny Hoarder

Unless you treat budgeting like a book club and openly discuss your spending habits with your friends, you may not realize you’re overspending — or underspending — in certain categories.

Budget recommendations can help you better assess how you manage your money.

We turned to government sources and industry leaders for those recommendations in four major categories: housing, food, debt and retirement.

These budget percentages — which you can tweak to fit your situation — can help you determine where your dollars should go.

Don’t Spend More Than 30% on Housing

It might be difficult if you’re in a city with a high cost of living and you don’t have roommates, but try to keep your housing expenses under 30%. Government agencies, including the U.S. Department of Housing and Urban Development, consider households cost burdened if they spend more than that.

If your annual income is around $30,000, you shouldn’t spend more than $750 a month on housing. If you make $50,000 a year, your monthly housing costs shouldn’t exceed $1,250. Individuals and families bringing in $75,000 annually can increase their housing spending threshold to $1,875 a month.

Keeping this threshold in mind isn’t just good for your financial well-being; it can also affect your ability to find housing. Leasing agents and housing lenders compare housing costs to your income to determine whether to approve a rental or mortgage application.

Keep Food Costs Between 10 and 15%

Apples and peaches are set out for customers to buy at a grocery store.
Tina Russell/The Penny Hoarder

Food spending can vary drastically from one household to the next based on family size, dietary needs, food preferences and other factors. 

Still, one way to assess your spending is to turn to the United States Department of Agriculture’s monthly food-cost guide, which is based off government recommendations for a nutritious diet and food prices from the early 2000s that have been updated to reflect current dollars. 

The guide focuses on costs for food prepared at home. (Don’t include your Uber Eats expenses when comparing your spending to the recommendations.)

The USDA’s chart breaks down food costs in dollar amounts based on four spending levels — thrifty, low-cost, moderate and liberal. It’s further broken down in terms of age, gender and family make-up. 

The recommended spending for a moderate-cost plan generally takes up between 10 and 15% of the budget for a middle-income individual or couple.

According to the chart, a woman under 50 should spend $257.20 a month on a moderate-cost food plan. If she made $30,000, that would be about 10% of her monthly budget. A man under 50 on a moderate plan should spend about $302.20, which is 12% of a $30,000 annual salary.

A couple in the same age bracket following the same food plan is recommended to spend $615.30 a month on groceries. If that couple earned a combined $50,000 a year, 15% on their budget would go to food expenses. If they earned $75,000, they’d be spending 10% of their monthly income on food.

Certainly, having kids increases the cost of food. According to the USDA, a moderately-spending family of four should spend $892.40 monthly with children under age 6, or $1,065.20 a month if their kids are between ages 6 and 11. That means a family earning $75,000 a year would spend 14% of their budget on food if they had young kids or 17% if they had older kids.

Debt Payments Shouldn’t Make Up More Than 43%

Ideally, you want none of your income going toward repaying loans. But if you’re like most American adults, you probably owe money in the form of credit card debt, a mortgage, a car note, student loans or medical bills.

The Consumer Financial Protection Bureau says the 43% debt-to-income ratio is the standard most lenders will use to determine whether a borrower can be approved for a qualified mortgage. Borrowers whose monthly debt payments (including their mortgage) make up more than 43% of their monthly gross income would have a harder time qualifying for a loan.

To think of this budget percentage in real dollars, an individual with an annual household income of $30,000 shouldn’t have over $1,075 in total monthly debt payments. Someone with an annual household income of $50,000 shouldn’t exceed $1,792 per month, and those who earn $75,000 a year shouldn’t put more than $2,688 a month toward paying off debt.

If your minimum debt payments exceed 43% of your income, consider asking creditors for a lower interest rate, refinancing or consolidating your loans or opening a balance transfer credit card with a 0% introductory interest rate. Another option is increasing your income with a regular side gig or second job.

Of course, if you have room in your budget to spend more than 43% of your income in order to make extra payments and get rid of your debt quicker — more power to you!

Aim to Save 15% (or More) for Retirement

Saving and investing in your working years allows you to have money to draw from when you no longer have a paycheck coming in. How much you ought to put aside will depend on a few factors, like age, income level and your estimated cost of living once you hit retirement. 

A rule of thumb from investment firm Fidelity is to start saving 15% of your income (including employer contributions) at age 25. If you make $30,000 annually, you should save $4,500 per year or $375 a month. If you have an annual salary of $50,000, try saving $7,500 a year or $625 monthly.

If you’re getting a later start saving for retirement, you’ll need to up that contribution. Fidelity recommends saving 18% if you start at age 30 or 23% if you start at 35.

Our guide to retirement planning outlines what you need to know when it comes to saving for your golden years. And if you’re hoping to retire before the wrinkles set in, check out this article on how to retire early.

Guidance For Your Other Spending

Your monthly spending likely falls into other budget categories as well.

To see what other Americans spend in categories like apparel, transportation, health care, entertainment, personal care, education, insurance and more, check out the U.S. Bureau of Labor Statistics’ annual consumer expenditures survey. Personal finance guru Dave Ramsey also shares popular budget percentage recommendations on his EveryDollar site.

Know that what’s recommended for budgeting — whether it’s from government sources or a trusted personal finance personality — should be seen as a guideline, not as a mandate. A blanket percentage can’t account for everyone’s unique financial situation.

So go ahead and customize your budget as it fits for your life. As long as your budget meets your needs (and allows you to save for the future), you’re doing something right. 

Nicole Dow is a senior writer at The Penny Hoarder.