We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. Housing expenses frequently consume the largest portion of monthly budgets, typically representing 25-30% of your income. This category includes monthly mortgage or rent payments, depending on whether you own or rent your home. There’s more to creating an effective budget than analyzing your basic living expenses.

Review past months’ spending on categories like groceries, utilities, and entertainment. Calculate average monthly amounts to create realistic budget targets. Estimate maintenance costs by setting aside 1-2% of your home’s value annually. Americans spend an average of $2,041 annually on apparel and services—nearly 3% of their total expenses.

The most common makeup for these households is to have two income-earners and three children under 18. The first step in mastering your finances is to create a comprehensive list of all your monthly expenses. Insurance protects against financial catastrophe and should be a budget priority. Health insurance premiums are often partially covered by employers, so budget only for your portion. Additionally, set aside money monthly for copays and deductibles to prepare for medical expenses. Your future self will thank you for the effort living expenses you’re putting in today.

Budget 101: 15 categories to include in your personal budgeting plan (+ template)

We may receive compensation when you click on links that help fund our operations. Choose a method that works best for you, whether using a budgeting app, spreadsheet, or pen and paper. Record every expenditure, no matter how small, and categorize them accurately. Start with your after-tax income from all sources, including salary, freelance work, investment income, and any other regular income streams. Utilities are necessities that typically represent a significant portion of your budget. The important thing is to stay consistent with the method you choose, keep trying, and adjust until you find what works for you.

They generally include housing expenses, transportation costs, utilities, food and groceries, and healthcare expenses. Basic living expenses ensure that you can maintain a stable and secure lifestyle. Understanding what impacts your cost of living is essential for making informed financial decisions. Your lifestyle choices, from the size of your home to how often you dine out, directly affect your monthly expenses. Economic factors like inflation and local tax rates silently influence your purchasing power, while life changes such as having children or retiring can dramatically shift your financial needs. By recognizing these key factors, you can better anticipate expenses, plan your budget accordingly, and potentially make adjustments that align with your financial goals and priorities.

Add Other Categories

Your average spending will be impacted by the different stages of life you go through. For households of three, annual expenses jump up to $89,189, which comes out to $7,432 a month. Your expenses are influenced by the specific details of your family makeup, including size, where you live, the ages of your dependents and more. The standardized performance presented herein has been calculated by CaculatedSelf based on data obtained from the third-party platform hosting the investment and is subject to change. No representation or warranty is made as to the reasonableness of the methodology used to calculate such performance.

• This category can include religious offerings, philanthropic causes, volunteer work and contributions, and political donations.
• With all inputs complete you’ll be able to see data around how the two cities compare across the major categories of taxes, housing and food.
• Or if you already have a plan and your deductions aren’t working with your budget, you might consider your options and whether your deductions are at the right levels.
• Can you trust someone else with your money if you don’t understand what they’re doing?
• Even basics like a pound of pasta or a bag of apples can vary in cost from place to place.

Dining out might be a variable expense where you could save money. Everyone has transportation costs, whether you drive a car, ride the bus or your bike, or take and Uber to your destination. If you own a car, your transportation costs will likely be higher than if you take public transportation.

• Keeping track of all living expenses ensures your spending doesn’t exceed your monthly income, allowing you to pay bills comfortably and determine how much money to set aside for savings.
• What people spend on housing can vary significantly depending on where they live.
• That’s precisely why over half of Americans have considered moving abroad, according to a Harris Poll survey of over 6,358 adults between August 2024 and February 2025.
• Review past months’ spending on categories like groceries, utilities, and entertainment.

This guarantees that everything we publish is objective, accurate, and trustworthy. It’s a good idea to find out how much you will need to save for retirement. Take control today by learning how to safely grow and protect your wealth and make financial freedom a reality. The content on thesmilemoney.com is for general informational purposes only and does not constitute or replace professional advice.

For the average family, moving from the western United States to the South could mean reducing your average annual spending by over $15,000 a year. And the savings could be even higher if you move from a high-cost city like San Francisco to a rural southern area. Eating at home is a great money-saving alternative to dining out. Additionally, weekly meal-planning and shopping in bulk can help alleviate some of the pain at checkout. People in this age group spend far more money than other groups on education, as well as on clothes and transportation.

If you’re single, you may be able to cut down on some of these costs quite a bit. For instance, if you rent an apartment, you won’t have to pay for maintenance costs. You’ll also only have to spend on what you personally need for food and health care rather than for multiple people. Healthcare premiums go from the affordable to the astronomical. The same medical procedure can be several times more expensive in some locations than in others. If you have employer-sponsored healthcare you might not have to pay anything for medical insurance.

Wondering if you can afford to move to a new city or how your current expenses stack up against other locations? A cost of living calculator is an essential tool for making informed financial decisions about where to live and work. These practical resources help you compare expenses between different areas, factoring in housing costs, groceries, transportation, healthcare, and other everyday necessities. Creating a flexible budget is less about strict rules and more about developing a system that suits your unique circumstances.