A Guideline Budget – How Do You Compare?

By glblguy

Budget Balance

I am currently reading The World’s Easiest Guide To Finances. So far, it’s a good read especially for those that really have no idea where to start. But there is also some great ideas and perspectives for the more “seasoned” personal finance gurus. One of the more interesting items in the book is a guideline budget that is proposed by the authors. I’ll first present the guideline budget and then provide my perspective on it.

The Guideline Budget

The guideline budget basically breaks your expenses into 12 categories and provides a suggested percentage of your income to be allocated to the category. Here is the guideline budget from the book:

Housing 25-38%
Food 10-15%
Auto(s) 12-15%
Insurance 5%
Debts 5%
Entertainment 5-7%
Clothing 5-6%
Savings 5%
Medical 4-5%
Miscellaneous 5-8%
Investments 8-13%
School/Child Care 5-10%

My Perspective on the Guideline Budget

While I agree with what Mr. Burkett is doing here (providing a baseline starting point), I don’t agree with the percentage guidelines. If you have debt, a much larger percentage needs to be allocated. I would say somewhere in the 15-50% range. If you have debt, savings (except a $1000-$2000 emergency fund) should be stopped. Investments, including retirement should also be stopped. All other expenses should be reduced to the bare minimums.

If you aren’t in debt, than investments should be 15% and saving should be maxed out until you have a 3-6 month emergency fund.

The guideline budget shows that housing should be 25-38%. Don’t be confused by this. Housing includes your house payment, insurance, property taxes, utilities, and maintenance. Your mortgage payment, taxes, and insurance should be 20-25% of your income, the remaining percentage should account for utilities and maintenance. If your mortgage payment, taxes, and insurance are more than 25%-30% of your income, you really need to take a hard look at your home, as you have too much house.

The guideline budget also recommends that Auto(s) should be 12-15%. This number is pretty accurate. I always recommend you pay cash for a car and not finance, but if you can’t these are good rule of thumb percentages to use. Remember though, this isn’t just your car payment(s). The Auto(s) category includes insurance, gas, and maintenance.

Comparing my budget to the guideline budget

I wanted to see how by budget stacked up so I pulled up my budget and determined my percentages:

Category Guideline % Our %
Housing 25-38 26
Food 10-15 23
Auto(s) 12-15% 12
Insurance 5% 2
Debts 5% 18
Entertainment 5-7 0
Clothing 5-6 5
Savings 5 4
Medical 4-5 5
Miscellaneous 5-8 5
Investments 8-13 0
School/Child Care 5-10% 0

Housing Budget – My housing is well within the low range. We live in a home where the mortgage is well below 20% and our utility costs, while not as low as I would like them, really aren’t high at all.

Food Budget – We are 8% above what is recommended. There are two reasons for this: 1) We eat out too much, and with 6-kids it’s expensive. This is a focus area for us to cut back in. 2) We have 6 kids and they eat like there is no tomorrow. With 6 kids, we expect this percentage to be higher than normal.

Auto Budget – While I wish this category could be 0%, at 12% we are at the bottom of the guideline range. This is due to us both driving used vehicles. One has a low monthly payment, the other is paid for. Our low percentage also reflects the area of the country we live in, as insurance rates are very low in the Southeastern US.

Insurance Budget – Again, well below the budget guideline here. This is due to having most of my life insurance with the company I work for, and having the remainder with an insurance company I’ve been with a long time. My insurance company plan is a 30-year fixed rate term plan that can be adjusted if needed. I have 10x my annual salary in life insurance.

Debt Budget – The 18% is for one month. This percentage varies greatly as we snowball our debt payments along with snowflaking them as well. This number is seldom less than 15%, and frequently 25% or more.

Clothing Budget – We actually spend very little here. We shop pretty frugally for clothes and try to keep our costs down. This % varies month to month as we see we’ll need clothes or not.

Saving Budget – Since we are working hard to get out of debt, we aren’t really saving. We have a $2000.00 emergency fund. The remainder of our savings is money put aside monthly for Christmas and our year-end property taxes. This money is automatically pulled out of our account monthly.

Medical Budget – I was surprised to see our medical expenses come in so low, as I require monthly medication and one of my son’s is diabetic. Our monthly prescription costs are fairly high, even though we’ve switch to generics for the most part. I did not factor in the cost of my health insurance, which might account for this. I did however remove this from my income.

Miscellaneous Budget – This is a category we manage very closely as it can be easily abused. This category is for expenses that are difficult to plan in advance. Not emergencies, but everyday kinds of items or maybe even small luxuries that come up. we manage this well, and are in the low number of the guideline.

Entertainment/Investing/Day Care -We don’t allocate any money to these categories. We really don’t do a great deal of entertainment that costs money and when we do it comes out of the Misc. category. Investing is on-hold while we get out of debt. Day Care isn’t required as my wife is a full-time stay at home mom.


In upcoming articles, I’ll dive into more detail on each of these 12 categories and discuss in more detail what should go where and how to use these categories more effectively.

How do you measure up? Any thoughts on the guideline percentages provided? Add your thoughts and perspective by commenting below!

34 Responses (including trackbacks) to “A Guideline Budget – How Do You Compare?”

  1. Pinyo Says:

    I have to try this out. But that’s a lot of money on food my friend. :-O

  2. glblguy Says:

    I know! Our monthly grocery bill is $1,100. We shop at the discount grocery stores, use Sam’s club, make most our foods from scratch, etc, etc. With 8 of us total, it’s just expensive. Oh well, they are worth it :-)

  3. Mrs. Micah Says:

    I’m not seeing a space for tithing or charitable donations, which surprises me from what I know of Burkett. Or am I missing it?

  4. Lynnae @ Being Frugal Says:

    Mrs. Micah – I think Larry Burkett takes taxes and tithes off the top of the gross income, and the percentages are based on net income. At least that’s how I’ve always calculated in the past.

    How do my percentages measure up? Well, being as we have no income, they’re all way out of whack! LOL

    Honestly, when you don’t have a huge income and you live in an expensive area, it’s hard to keep the different budget categories in line with what Burkett suggests. I know unless you’re a two-income family around here, you’re going to have to up the housing budget by quite a bit. Even the most inexpensive places around here will be more than 38% if a $50,000 income, especially when you have to consider property tax, utilities, etc.

  5. justin Says:

    I always thought it was best to not even include work paid for insurance when calculating how much insurance you have, as employment is not necessarily a given at any point in time.

  6. Mrs. Micah Says:

    That makes sense, Lynnae. I don’t listen to him anymore, but my parents did when I was a kid and I could see him saying that.

  7. glblguy Says:

    Mrs. Micah and Lynnae – Lynnae is right on, tithe is pulled out and not considered as part of the income used to calculate above. Thanks for catching that. I’ll update the article tomorrow to clarify!

  8. Justin Says:

    Im sorry, but you’re not frual at all. How about eating out less, paying for cars in cash, and saving at least 30% of your income.

  9. glblguy Says:

    Justin, I don’t think I’ve ever claimed to be frugal. I’m on a journey to be more frugal, but definitely not there yet. I have 2 cars, one we paid cash for, the other we already had financed. We don’t owe much more on it, so doesn’t make sense to sell it and buy something else. We did buy it used about 3 years ago…but that was before I learned all of the things I’ve learned over the past year or so.

    I said we were working on eating out less, to quote me I said “We eat out too much, and with 6-kids itÂ’s expensive. This is a focus area for us to cut back in.”

    I don’t save that much (30%) because I am putting that towards debt repayment.

    I’m not perfect, and never claimed to be. Just an average Joe, trying to practice what I preach and do a little better each day. Do you have kids? If so, I am sure you can appreciate the difficulties involved with managing expenses…this is particularly true with 6.

    I do appreciate you calling me out a little though as it makes me take a hard look at one I am doing…

  10. Melissa Says:

    This is a great little exercise! I’m also surprised at how little is allocated towards debt. I think I’ll see where my current budget stands against this model, too.

    So I’m guessing I can’t count any contributions to 401K or ESPP since that is before take home, right? :-)

  11. glblguy Says:

    Hi Melissa, I was surprised too. Honestly, we’re working really hard to get ours to like 45-50%.

    401 and ESPP would be under savings I would assume. With their formula, th percentages are based on net spendable income.

    Net Spendable Income = Gross Salary – taxes – tithe
    Tithe = Gross Salary * 10%

  12. Fabulously Broke Says:

    To Justin’s point: Saving 30% of your income is a great goal.. but only if you can afford it.

    Why is it such a big deal to compete against one another to see who can live on the least amount of money possible?

    That isn’t frugality. That’s being cheap and miserly.

    I’m not talking about people who HAVE to live on as little as possible. That’s out of necessity, not out of choice and I wholeheartedly applaud them because I simply couldn’t do what they do (right now)….

    Frugality to me, is making the right choices, such as waiting 2 years to buy a Playstation 3 or an iPhone used or new instead of having to buy it the day it comes out and/or saving enough money to buy it in cash instead of on a credit card. Or, waiting for a sale that makes sense.

    Those are all frugal measures because it’s getting your bang for the buck, and glblguy, I think you’re quite frugal by my standards.

    Maybe not by Justin’s, but there has to be an end goal in sight to be saving so much money, not to see who has the most cash when they die. And you also put most of the cash you have towards debt, not to savings, which to me, makes more sense, but I digress.

    Life really isn’t a competition, fancy toys and money it’s about interacting with your family and friends, and creating memories that you cannot buy even if you have all the money in the world.

  13. justin Says:

    I think the impostor needs to choose a new name!

  14. Lynnae @ Being Frugal Says:

    I’m with Fabulously Broke on this one. Being Frugal isn’t necessarily spending as little as you can and saving as much as you can. It’s making the best financial decisions for living out your priorities. And I think it’s a process, not an end in itself.

    Frugality is going to look different from person to person, because each of us have different priorities.

  15. Fabulously Broke Says:

    Lynnae: Hear hear….. :) Unique family situations = Unique frugality…

  16. glblguy Says:

    @Justin – Ha, didn’t even notice there was no link to your website…impostor indeed!

    @Lynnae/Fabulously Broke – Thanks for your perspectives!

  17. Make Friends, Earn Money Says:

    It’s interesting what larry says about the percentage of “debts” in your budget, as i think that for many it would be closer to 20-30%. It is only now as the credit crunch has hit the global economy that people are being to feel the squeeze of taking on excessive debts. Really good summary, thanks posting

  18. Key Lime Says:

    I must’ve been under a rock all this time! I had no idea these personal finance blogs existed until today. My own personal finance story is one of mess, disaster, ignorance – you name it. It’s taken me a while but I finally have a clue and it’s taking me all I’ve got to implement the financial plans I need to implement in order to be able to stay off the streets. Maybe I’ll join forces with the rest of you and go “public” :)

  19. glblguy Says:

    Hi Key Lime! Welcome! I was in your shoes a little over a year ago. Very glad you found me and the rest of the PF community. I’d highly recommend you visit my m-network buddies who run awesome PF Blogs as well!.

    Best wishes, and keep me posted on your progress!

  20. Bettsi McComb Says:

    Thank you so much for sharing this! I have three kids and I find my expenses lining up percentage-wise more with you than with Larry. Unfortunately, my debt percent is at 15% currently and that is just with making minimum payments! Savings is at 0%, except for the IRA taken right out of my paycheck. But we are making changes and it’s posts like this one that are helping me get where I want to go! Thanks again!

  21. Schnoozy Says:

    Wow, the auto expense kills me. How is everyone else handling the 12-15% with gas prices now?

    We have no car payments, and don’t have full-coverage insurance; yet we spend 18% of our income just on gas and the cheapest insurance we can get (our cars aren’t very valuable and my husband is a fixer)

    I can’t imagine how people manage a car payment on top of the gas prices today.

  22. justin Says:

    @Schnoozy: I travel 140 miles a day, 4 days a week, and only spend about $90 a week on gas. Sure, more than it used to be, but it doesn’t break the bank.

  23. April-j Says:

    One of these days I’ll start a blog…

    I’m guessing Larry meant something along the lines of what Bettsi McComb pointed out – your debt load minimum payments should not be more than 5% of your income.

    I’m hoping to know soon what my new budget will be. We just sold our city home to move to the country. My mortgage isn’t due until Oct and I haven’t gotten my first utility bills yet. *I HATE WAITING!* We’ll be paying more mortgage, but less utilities. We’ll be paying more gas, but less insurance. We were able to pay off all unsecured debt from the proceeds of our sale.

    How do you budget during such an uncertain time? I want to put away at least my $1000 cushion during this time of no bills, but am finding it extremely difficult to not put it towards the home & car.

  24. glblguy Says:

    @April – I always recommend budgeting month to month. Each month your expenses will vary and so should your budget. I do my budget at the end of the month for the upcoming month and add in all of the expenses I know I’ll have. While the overall time might be certain, I would suspect you should be able to “forecast” your expenses for the next 30 days. If you are unsure about a few things, than either over allocate money to those categories, or place the extra in your emergency fund so you’ll have it if you need it.

  25. herrae monica Says:

    Have your cake and eat it kind of a dillema. What should today’s grooms do? Have a expensivewedding or save for a home? I would take the second any day

  26. Don Morris Says:

    I’m years behind, so I don’t know if anyone will see this. Larry Burkett suggested that restaurant meals are entertainment, not food1