Dave Ramsey’s Budget Percentages: how to Get the Most From Your Budget

Dave Ramsey’s Budget Percentages are constantly in the top 10 most essential finance tips. 

Dave Ramsey is a well known name within the personal financial circles. As a celebrated finance guru, Ramsey’s work involves teaching people how to effectively manage their finances using methods such as the “7 baby steps” to help you retake your budgeting goals. 

If you feel overwhelmed with your own personal finances and the idea of budgeting, don’t feel alone. Everyone feels the same , especially when starting out. 

Questions that normally come up are:

  • What is the best method to start tackling my debts?
  • How much should my food expenses budget be?
  • How much should I be saving a month?
  • How should I break down my budgeting goals?

Thankfully, Dave Ramsey’s recommended percentages gives you a practical and manageable way to start budgeting. With clear budget categories it helps you shape your overall budgeting process. 

If you are currently struggling with financial management, incorporating Dave Ramsey’s budget percentages can set you on the path to financial freedom. 

Businesswoman Calculating Finances. Over The Shoulder View — Photo

What is the Dave Ramsey Budget Percentages?

Dave Ramsey’s budget percentages are a set of recommended guidelines for distributing your monthly paycheck into categories. They are an easy guide to follow and helps single people and families effectively manage their finances and reach there goals, like paying of debt, build an emergency fund and work towards being financially independent. The percentages themselves are based on Ramsey’s beliefs in personal finance, which all surround the idea of being frugal, living within your means, getting out of debt and saving for the future. 

Summary of the Budget Percentages

While there is some flexibility in these numbers since it takes into account your monthly income, how many people are living in the same horse, etc. typically the split is as follows:

Giving: 10% of take-home pay

Housing: 25% of take-home pay

Transportation: 10% of take-home pay

Childcare: 12% of take-home pay

Food: 10-15% of take-home pay

Utilities: 5-10% of take-home pay

Health: 5-10% of take-home pay

Insurance and Taxes: 10-25% of take-home pay

Saving: 10-15% of take-home pay

Debt Repayment: Seperate any extra funds towards paying off debt, such as credit cards, student loans, or personal loans, beyond the minimum payments. 

Miscellaneous: 5-10% of take-home pay

It’s important to know that these percentages are not one-size-fits-all and might need to be changed based on individual circumstances. For example, if you have a lot of debt, you might need to set a higher percentage towards debt repayment until it is fully paid off. The key is to prioritize important expenses, save for the future, and avoid unnecessary debt..

pie graph and bar graph showing upwards trend

How To Use Dave Ramsey’s Budget Percentages

Below is a further breakdown into using the percentages and what each category includes:

Giving (10%)

This category is purely for people who feel that they can include this in their budget. By doing this you can feel good in giving back to your community and remember to stay grateful for the things you do have. 

Anything helps, nothing is too small! 

Housing (25%)

Housing cost takes the largest chunk of your budget since this includes rent/mortgage payments, property tax, HOA fees, and homeowners insurance. 

Your house should be something that brings you peace so make sure you are living within your means and living in a place that fits your budget. 

Spending above makes the rest of your budget tighter and you start looking at your house as a burden rather than your safe haven. 

He actually has a Mortgage Calculator to help you see if your going over this 25%

Transportation (10%)

This covers your public transport passes, car payments, fuel, repairs/maintenance and insurance. 

On average, Americans spent around $151 per month on transportation costs, but this number doesn’t show the full truth since it doesn’t include car payments. Ramsey suggests tackling car payments by using the debt snowball method to finish paying this loan. 

A good way to reduce cost is to try and take public transport. While this is not possible for everyone, for those that can it will save you a lot, avoiding any car costs.  

Childcare (12%)

This is for working parents, we all know how expensive childcare can be. 

This category specifically is for expenses involving childcare when parents are working not to cover babysitters on date night (that goes into entertainment category). 

On average child care can cost anywhere between $800 to $2,500 a month per child. This all depends on where you live and the type of childcare you choose. 

Food (10-15%)

This category is one of the harder ones to set a percentage for since it really depends on you. 

You should take into account how many people you are feeding a month, what are your dietary habits, and lifestyle habits.

Since this includes your groceries and dining out, start by seeing how much you usually spend a month and how much of your monthly paycheck this accounts for. Try to reset that amount to fit within (10-15%).

Utilities (5-10%)

This category includes gas, electricity, heater, and water bills, as well as any subscription services, internet, phone bills, and cable. 

If you see that you are spending more on utilities then the recommended 5-10% look for ways to cut down such as getting a cheaper phone or internet plan, and closing any subscription that you really don’t need. 

Health (5-10%)

This is a really important planning step in your budget since everyone gets sick and it’s better to be prepared for it. 

This one is a good example of a flexible category since some months will be higher than others, for example if you break your arm, this month’s health bill will be higher but next month should correct itself. 

Insurance and Taxes (10-25%)

While boring, insurance costs can really pile up. 

This category includes health insurance, car insurance, and life insurance. 

Also should be thinking of any additional taxes that might not have been covered in the other category. 

Saving: 10-15%

The overall goal for you in savings is to save 15% of your income and put that towards retirement. But depending on where you are at with your savings your goal might be working towards setting up your emergency fund or your debt snowball. 

Breaking it down your savings should start like this:

  1. Build your emergency fund: will protect you from unexpected life events 
  2. Work towards paying off all debt (non mortgage related) 
  3. Build you retirement savings 

Read more on Savings: 7 Typical Budgeting Challenges To Overcome This Year

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Debt Repayment 

Going off on your savings you should be actively prioritizing paying off any debt, that is why their is not a specific amount given for this section. 

It varies from person to person, debt could be your student loans, personal loans, credit card debt etc. 

Miscellaneous (5-10%)

Even if we are focused on our budgets we are still human and want to have fun. This category covers any entertainment things like going out for date night to the movies etc. Basically any personal spending that isn’t a necessity. 

This is the area where people tend to overspend so it’s really important to stay dedicated to staying within these lines. 

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How To Use Dave Ramsey’s Budget Percentages Right 

These above numbers are exactly as he said, recommendations to help you. No two houses will be the same, and so the actual percentages will change based on your household and what your goals are. 

Make sure to actually look at your needs and what you can realistically put as your guides for your budget, so that you can stick to it for the long run. 

A good way to make realistic goals is to look at your expenses and then compare them to the national average. This way you can compare with an unbiased look at your finances. 

You could add these numbers into a budgeting template or budgeting app to make it easier to follow. 

Once you see your monthly spending habits you should start asking yourself these questions:

  • Which categories are you currently following?
  • Which categories are you overspending in?
  • How can you fix the overspending to fit into your set percentage? Like can you cut down on eating out of you are spending too much on food
  • Will you need to increase the percentage in any of the categories anytime soon?
  • Do you want to lower the costs in any category?
  • Do you want to increase the costs in any category?

Other Budgeting Methods

If you think this is too complicated and you can’t see yourself sticking to this system, check out my articles on other budgeting systems

I really recommend looking at the cash envelope system for beginners since its a really easy way to start budgeting. 

Related Reading: 5 Helpful Budgeting Tips To Bear In Mind

The Best Cash Envelope Wallet To Help You Love Budgeting

Money Saving Starter Guide

Final Thoughts

Personal budgeting can be hard but in the end, it’s really rewarding. To help improve your financial situation, stay dedicated to focusing on your budget. 

Budgets help take the stress away from money, since you already know exactly where your money needs to go, and you are in control deciding how important each category is. 

Stay dedicated and you’ll see how following a budgeting system (that works for you) can help you achieve all your short and long term goals.

Last Updated on 4th August 2023 by Emma

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