Analyzing Spending by Percentages

I’m not one to believe that a person “should” spend X or Y percent of their budget on specific categories, but sometimes taking a look at your spending by percentages can be eye-opening. You may discover that your spending is not in alignment with the things that are important to you, or that there’s a reason why you never seem to have as much money as you would like.

For example, many years ago I was car-poor, but didn’t even know it. It wasn’t until I took a trip down memory lane that I figured out the cause of my problem. It turned out that my then-husband and I had been spending 35% of our gross income each week to maintain, pay for, and use our cars. That amounted to almost 43% of our take home pay. And we wondered why we never had any money…

Well, actually, we didn’t wonder — but we should have. Instead, we thought that we “didn’t make enough money” or that it was because of “emergencies” (you know, things like having our shoes wear out) that we couldn’t get ahead. In reality, we made enough money to not only get by but to get ahead, IF we hadn’t been allocating such big a percentage of what we brought home to transportation. Transportation is important to me, but it’s not that important to me.

But you know what is? Travel. I’ll happily spend 10% or so of my gross income on travel and enjoy every minute of it. That’s a pretty big percentage for something that’s technically a luxury. In fact, it’s the biggest discretionary portion of my budget by far. The only things I spend more on are paying off our mortgage, retirement, taxes, and business expenses.

Do you know what percent of your take-home pay you spend on various categories? Are the percentages in line with what’s important to you, and do they allow you to reach your SMART goals? If not, it might be time to make some adjustments.