Recommended Personal Budget Ratios

When creating a budget, many consumers do not know where to begin dividing up their income into categories of spending. Budget ratios can consist of living expenses, housing and transportation costs and funds used for savings. There are specific personal budget ratios that are recommended both by financial advisers and financial institutions. These ratios may also come into play when applying for a credit product such as a mortgage or personal loan.

Household Expenses

When determining a budget, one of the largest factors will typically be the ratio devoted to housing costs. Housing costs will include mortgage or rent payments, taxes and insurance costs, as well as funds needed for necessary repairs or home improvements. Also included in the housing ratio are utilities such as electricity, gas, water and sewer and telephone services. Cable and Internet can also be included, however many consider these a luxury instead of a necessity. It is recommended that the housing portion of the ratio be at or below 35 percent.


After housing, transportation can be the most costly portion of a consumer's budget ratio. Transportation costs include any payments on an auto loan or lease, funds for gas, auto insurance, routine maintenance and savings for repairs. Transportation costs can also include funds used for parking fees as well as public transportation. Some consumers also choose to include savings toward the purchase of a future car if there is not a monthly payment involved. It is recommended that transportation costs be 20 percent of the budget.

Living Expenses

Consumers typically spend a good portion of their income on regular living expenses. This category will include a budget for groceries, dining out, entertainment such as movies or vacations, medical bills and prescription medication costs. Living expenses can also include clothing and personal items, as well as gifts or subscription services such as movie rentals or magazines. Some consumers will also include cable television or Internet as a living expense instead of a household expense. Living expenses should be 20 percent of a budget.

Debt and Savings

After considering housing, transportation and living expenses, debt repayment and savings will come into play. Debt repayment will include expenses such as credit card bills, personal unsecured loans, student loans and any other debt obligations that are not tied to a secured loan such as a mortgage or car loan. Debt repayment should total 15 percent of a budget.

Although savings is the smallest percent of a budget ratio, it can help consumers prepare for the future. Savings will consist of an emergency fund, as well as retirement savings and any investments such as stocks, bonds and real estate investment property. Savings should take up the remaining 10 percent of a budget.