Dave Ramsey recommended household budget percentages

Dave Ramsey and his budget percentages have been a big hit with a lot of families, including mine. Dave’s seven baby steps have helped numerous people pay off debt and start saving money.

When you’re building your families budget, it can be hard to determine how much money goes where. That’s why Dave created his recommended household budget percentages.

These recommended budget percentages are a great guideline and starting point for your own budget. You should start with these percentages and adjust your budget as necessary.

I’ve had a great experience using the guidelines listed below, including paying off 40% of my mortgage in only two years. I know that these budget percentages will work for your family because they’ve worked for mine!

Dave Ramsey has been a big hit with a lot of families, including mine. Dave’s seven baby steps have helped numerous people pay off debt and start saving money. When you’re building your families budget, it can be hard to determine how much money goes where. Dave created his recommended household budget percentages...

This post may contain affiliate links which provide a commision and supports this blog. Thank you for your support!

Dave Ramsey recommended household budget percentages, also, zombies?

Dave Ramsey’s recommended household budget percentages

Here are the recommended budget percentages (Also with a friendly pie chart!):

Dave Ramsey Recommended Budget Percentages

Charitable Gifts 10-15% – Donating/Tithe

Saving 10-15% – investing, 401k, retirement planning, cash savings

Housing 25-35% – rent/mortgage

Utilities 5-10% – water, power, sewer, gas, etc.

Food 5-15% – Restaurants and groceries

Transportation 10-15% – Gas, bus, Uber

Clothing 2-7% – clothes,

Medical/Health 5-10% – Doctors visits, prescriptions, well-being

Insurance 10-25% – Car and house

Personal 5-10% – free spending and hobbies

Recreation 5-10% – entertainment

Debts 5-10% – Paying off your debt

It’s important to remember that these are only recommended percentages. You do not have to follow them if they do not make sense for your family. You wouldn’t need much of a transportation budget if you lived in Portland Oregon and biked to work every day.

Let’s take a little in depth look into each category.


Dave Ramsey recommends giving away 10-15 percent of your income every month. For some people this looks like Tithing to your church, donating money or supplies to animal shelters, or any other worthy charity or causes you support.

However, if giving away 10-15% of your income is going to put you further into debt, don’t do it! The goal isn’t to cripple your families finances. You should be aiming to increase your happiness and others through the power of giving.


Dave Ramsey recommends setting aside 10-15 percent of your income into savings and investing. So how do you start saving and investing your money?

According to the first “Dave Ramsey Baby Step,” you should set aside $1,000 for emergencies. $1,000 is the beginning of your emergency fund and should be able to cover most emergencies. You should keep the money somewhere accessible, such as a savings or money market account.

The next baby step is to pay off all debt. Once your debt is paid off, it’s time to build a fully funded emergency fund of 3-6 months expenses. Again, keep your money somewhere accessible!

The fourth step is to invest 15 percent of your income into a pre-tax savings account. If your company has a 401k with a company match, take the match! Free money is always a win.

Personally, I invest in my companies 401k and I have a Vanguard account. Dave Ramsey is a big fan of mutual funds, but I prefer ETFs or exchange trade funds. If you’re feeling a little lost, that’s ok! I’m a fan of keeping my money in Vanguards VTI fund.


Dave recommends 25-35 percent of your income be dedicated to your housing. Your mortgage, home insurance, PMI (Private Mortgage Insurance), property taxes, or rent should fall within this category.

I’ll go into further detail later, but try and have a modest first home. One of your biggest purchases will be your house and it’s best to keep this expense at a minimum.

Ideally, you can save yourself the added cost of PMI by saving money for a down payment. Most banks will not require PMI if you have a 20 percent down payment on your house.

Remember, most individuals sell their house in 7-10 years. Try buying a modest house first and then upgrade later so you don’t pay more interest than you need. Why pay interest on a $300k home when you could save money paying interest on a $150k home first?


Utilities, for the most part, stay fairly constant. Ideally, your monthly spending on trash, electricity, water, and natural gas should be 5-10 percent of your income. You should also take into consideration your location. Someone living next to a power plant may have cheap electricity, but in California, electricity and water can be an expensive utility.

Food and Groceries

I’ll admit, food is my one weakness. Nothing sounds better than going down to Taco Bell and grabbing some cheap burritos! Dave Ramsey suggests that we spend between 5 and 15 percent of our income on food.

I’m not the only one that struggles with my food spending. Most of America is too busy with their jobs to cook a decent meal. If you’re struggling financially (or health wise), you need to create a meal plan. Meal planning will help you reduce your spending, but it takes discipline!

Keep an eye on your restaurants, grocery, and fast food spending. Track your spending in your budget and be careful not to overspend!


Dave recommends transportation receive 10-15 percent of your household budget. You need to be budget for gas, auto maintenance, licensing and car tabs, bus fare, and all your transportation needs. If you live in a major city, you might consider investing in a bike or segway to help you get around.

Transportation can be one of your most expensive expenses. See what you can do to reduce transportation expenses if you need money elsewhere in your budget.

Medical and Health

Dave Ramsey suggests that you save 5 to 10 percent of your income for health related expenses. We all get sick eventually, need to go to the Doctor’s office, or fill a prescription. Your medical and health budget should also cover over the counter medication, bandaids, etc.

Plan for medical events even if you don’t ever fall ill. This fund can help cover copays, insurance bills, medical emergencies that are unexpected!

Insurance costs

Dave recommends that you save 10-25 percent of your income on insurance costs. This can include your homeowners, rental, car, and medical insurances. Unfortunately, insurance isn’t something you can avoid unless you happen to be sitting on millions of dollars!

You might also want to consider getting term life insurance to cover your 10-12 times your yearly income. Dave strongly recommends against whole life insurance.

Entertainment and Recreation

Life is boring unless you can have some fun. Never spending any money can be down right depressing. Dave recommends spending 5-10 percent of your income on experiences and entertainment.

Maybe you want to take a mini-vacation or see a movie. Go have fun and get out of the house, but don’t overspend!

Dave also suggests that you spend 5-10 percent of your income on free spending. Again, the purpose is to make sure you enjoy life’s luxuries. I typically spend mine on soda or Taco Bell!

Are you still spending too much on entertainment? Check out this list of free and cheap entertainment options.

Debt repayment

You should set aside 5-10 percent of your income to repay any debt, such as student loans or credit cards. In my opinion, you should aim to pay off your debt as soon as possible.

It’s hard to get ahead in life when you have debt. Your budget is going to be one of your most valuable assets for paying off debt quickly. Budgeting allows you to see where your money is going, so that you can plan how long it will take you to pay debt off.

Dave recommends paying off your debt using the debt snowball method. This method tells you to pay off your debts from lowest amount owed to highest amount owed. You pay as much as you can on the smallest debt and continue to make minimum payments on the rest.

The debt snowball is perfect for someone needing motivation to pay off debt. Motivation happens because it’s easier to pay off low amounts of debt than higher balances. However, the debt snowball is not the fastest way to pay off debt.

Paying your debt off from highest interest rate to lowest is the fastest way to pay off your debt. Pay as much as you can on the highest interest rate while making the minimum payments on the rest.

Dave recommends the cash envelope system

Dave Ramsey suggests that you pay for everything in cash, specifically using the cash envelope system. He recommends putting your budgeted money in a series of envelopes. So if you budget $400 for groceries, you would have one envelope labeled “groceries” and you would place $400 in the envelope at the beginning of each month.

Paying for items in cash is a physical limit for spending your money. It’s easy to swipe a credit card and not know how much is in your grocery budget. However, it’s hard to not know how much is in your budget when you try paying for groceries if you only have $50 left in your envelope.

Paying with cash also registers as pain in your brain. Credit cards make it easy to overspend since there is no pain associated with swiping. The mental pain associated with paying with cash will help you limit how much you spend.


You may like the hybrid budgeting zombie system better

One of my favorite bloggers, J. Money from BudgetsAreSexy, wrote a post about the hybrid-budgeting zombie system. The philosophy is simple. How do you access your money in a zombie apocalypse when the bank system is down?

It’s an interesting dilemma. No power and no computers? How could you pay for your survival gear? Vending machines won’t take an IOU.

The hybrid system involves direct depositing your “adult responsibility” money into a bank account. You then have your bills auto-pay through your bank. The rest of your money can be used in the cash envelope system.

With your money in the cash envelopes, you now have an abundance of money during a bank computer power outage. You’ll now be able to survive any zombie apocalypse!

Share this article on TwitterClick To Tweet

I’ve got a few “bones” to pick about the Dave Ramsey recommended budget percentages

Dave Ramsey provided the recommended household budget percentages as a recommendation. That doesn’t mean you have to follow those percentages exactly. However, there are a few areas where I have some opinions:


I do respect those of you that want to give away your money to a charitable cause. There are some people that wish to give away 10% of their income to the church every month. These are all great things to do with your money, but I would argue that you need to stop!

Your money is your leverage for retirement, getting out of debt, and building wealth. I recommend giving your money away once you’re out of debt, including paying off your house.

Let’s say your family brings home $4,000 a month and you tithe 10% of your income or $400. It isn’t uncommon to have a 15 year mortgage on a $220,000 house. Over the course of 15 years, you’ll give away $72,000. That’s a good chunk (32.7%) of your house value!

The time to give is when everything is paid for and you’re doing well for yourself.


25-35% is A LOT of your paycheck to put into something every month. Every time you struggle to pay bills or your budget seems too tight, it’s probably because of your house.

Always look to buy a modest first home and pay it off quickly! Don’t be afraid to pay a lower percentage so that you don’t hurt financially on a month to month basis. It’s hard to look at smaller houses, but it will help you out financially if you buy small.

My wife and I fell into this trap when we were looking for our first home. We had a price range, but none of the houses looked all that fantastic. We started looking at a little bit more expensive houses, partly encouraged by our realtor.

Before we knew it, we were way out of our price range! The houses were no longer anywhere near what we set out to pay. The bank wasn’t much help either. For some reason, the bank approved us for enough money to finance a small private island.


Food is the number one struggle most of us face with our finances. We are literally eating away our paychecks!

Try and evaluate your food choices and eat more frugally. If you’re spending over $500 on food every month can you reduce your food expenses?

Try to create a menu plan and prep your meals before the start of each week. Cooking in batches is another great way to save money.


Recommendations going forward

Using the recommended budget percents is a good thing to do, but it’s only part of your finances. Here are a few other tips to boost your finances:

Live a minimalistic lifestyle

People who live a minimalistic lifestyle don’t waste their money on useless stuff. This world is designed to take away your money by offering you junk you think you want.

Have you ever had a yard sale? Most of that stuff was something you probably thought you wanted at one point. Then your yard sale profits are spent on more useless junk that ends up in the next sale.

Minimalist just buy the bare necessities and maybe a few quality items that they use day after day. You’ll have more money to save and invest if you stop wasting your money on useless junk.

Increase your income through whatever means possible

The more money you earn, save, and invest, the sooner you can escape working your 9-5 and become financially independent. At the very least, earning more money is a way to reduce your financial stress every month.

For some of us, earning more money means working overtime or finding a new part-time job. For others, you might be ambitious enough to start your own business.

Related:  Work from home jobs that actually earn you money!

Take the free budgeting and save money course

I offer a free budgeting and save money course that is designed to help you save more money. You’ll learn critical mistakes that are preventing you from saving money. The course is perfect for any family looking to save more money and budget better.

You should take this course if:

  • You don’t have a budget.
  • Budgeting isn’t your strong suit or you want to be better.
  • Your family needs or wants more money each month.
  • You want to retire at some point.
  • You want to stop fighting about money and finally become organized!

Maximize 401k contributions

As part of Dave Ramsey’s baby steps, he recommends investing 15% of your income into pre-tax retirement options. Other people, like J. Money, shoot for maximizing their 401k contributions every year.

The secret to building wealth slowly is through your 401k. The idea is that the more you feed your 401k the sooner you’ll build wealth. You should do alright no matter if you follow Dave Ramsey’s or J. Money’s footsteps.

At the very least, always take advantage of company matches, it’s free money! If you can only invest 6% of your income then do so. Every time you get a raise, consider investing the difference.

Go read other awesome posts by J. Money

J. Money is one of my favorite personal finance bloggers who tracks his net worth every month. If you haven’t seen his blog, go check it out and read some of his awesome posts!

John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.