Recently in a personal finance class, some of the students asked me how much they should be spending in the different budget categories, such as housing, groceries, and so on. I’ve always seen these categories as somewhat flexible, with the amount you spend on one thing versus another being entirely personal and dependent on your priorities, income, family make-up and so on. However, in the second session of the class the question came up again, and I realized that I needed to address it more specifically.

So I went to find some information and came up with two very interesting articles on how much we should spend, and how much we do spend in the United States, across various budget categories. Here are the results of those two articles.


In his column called “The New Frugal You,” Gary Foreman suggests the following breakdown for expenses [[1]]. He gives percentage amounts based on after-tax income and then converts the percentages into dollars, for the example of someone earning $25,800 per year after tax.

Foreman does not specify what is included in each category (for example, is car insurance included in “auto” or “insurance”?), beyond mentioning that utilities are included in housing.


The next study was compiled by Trent Hamm [[2]] and relays a 2009 chart from   There is more recent data available, but none of them is presented quite this beautifully.

Based on Department of Labor data, the chart shows “U.S. Consumer Unit Expenditures” in dollars and in percentages. The average “U.S. consumer unit” turns out to be a household of 2.5 people with an average age of 48.8. The “unit” includes 1.3 earners, earning a total of $63,091 before taxes, with average annual expenditures of $49,638.

The graphic is beautiful, but a little hard to see so here is the breakdown in a table.


In this survey, the Bureau of Labor Statistics (BLS) records the full cost of each purchase made during the record-keeping period, even if full payment was not made at the date of purchase [[3]]. “Cash contributions” refers to money given to people or organizations outside the household, including donations, child support and alimony, and care of students away from home.

Insights into Spending & Saving

Clearly Foreman’s categories shown in Budget 1 (or any definition of how much we “should” spend) are only a rough guideline. Especially in the savings category, I would allocate much more than the 5% that he suggests. In addition to retirement savings, younger people will need to be setting aside money for a possible house or car purchase in the future. Older people will need savings for maintenance of the house they have acquired. There are also savings for special events such as travel or weddings, or college savings for the youngsters. It is notable that Foreman allocated more to entertainment than to savings!

However, our actual savings are even lower. In the BLS data, savings are only referenced as “pensions, social security”, at a relatively high 10.1%. But since 7.5% or more of that would be for Social Security, that only leaves approximately 2.6% going into pensions and personal savings.

In the major categories – housing, food, and transportation – the percentages are roughly similar for the suggested and actual budgets. Foreman suggests 32% for housing, and 15% each for food and transportation. Actual average spending is 34% for housing, 12.4% for food, and 17.6% for transportation.

I agree with Foreman that a spending plan – any spending plan – is always a good idea. It allows us to see realistically how far our finances can go, to set goals, and then to keep track of whether we are on target. There is no better way to avoid debt or to create a joint plan for couples that will get both partners pulling in the same direction.

In my class, the people who wanted these numbers were all new to tracking their finances, and all felt better with some kind of guidance to help them get started. What I have found is that people are often uncomfortable with things that are loosely defined, such as forward-looking projections or, in this case, unspecified categories. In this case, providing the numbers as a place-holder to get the discussion started was helpful. Once they had that, they could get unstuck, and move on to the discussion of what each number should be for their personal situation.

[1] Gary Foreman, “A Generic Budget: Guidelines for Spending Categories”, , 6 September 2012.

[2] Trent Hamm, “How the Average American Family Spends Their Income – and How to Trim It”,, 27 August 2014.

[3] “Consumer Expenditure Survey, Glossary”, U.S. Bureau of Labor Statistics,, referenced June 2015. 

What have you found to be helpful when supporting students or clients in creating their first budget? 


If you are starting to create your own budget, what would help you get started?

Guest Contributor: Linda Matthew, MoneyMindful Personal Finance Coaching,

July 08, 2015

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