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If you’re new to the concept of money management and budgeting, one of the first things you’ll usually find yourself advised to do is track your spending. For a month or more you’ll log all of your expenses and then review that information.
Initially, you’ll want to know if you’re spending more than you’re making, which is easy enough to tell. If you’re spending too much, though, the obvious follow-up question should be “Where am I spending too much?” That’s a little trickier. Tracking your expenses gives you a broad view of your spending, but doesn’t really give you a comparison point. Did you spend too much on dining out during the month? How would you know?

Ideally, we’d be able to affix firm limits to every budget category. Every category would get an ideal percentage and the whole thing would add up to 100 percent. The trouble with that is that reality doesn’t really allow for it. Housing is going to cost a larger percentage of your budget in New York City than it would in Ames, Iowa. If you have certain dietary restrictions, you will likely spend more on food than someone without dietary restrictions.

That being said, there’s still a lot of value in looking at your percentages and seeing where they fall in comparison to national averages.

What’s everyone else spending?

The Bureau of Labor Statistics tracks national trends in spending and costs. The 2013 Consumer Expenditures survey found that the average American family spent $51,100 for the year. Here’s where the average family’s money went:

• Food – 12.9 percent
• Housing – 33.6 percent
• Apparel and services – 3.1 percent
• Transportation – 17.6 percent
• Healthcare – 7.1 percent
• Entertainment – 4.9 percent
• Cash contributions (charity) – 3.6 percent
• Personal insurance and pensions – 10.8 percent
• Other – 6.4 percent

What should you be spending?

The most important point is that everything winds up at 100 percent in the end. Honestly, if you’re covering all of your needs, making progress on your goals, and not violating any laws, the percentages can be whatever you want them to be. As a student, your percentages may vary depending on your lifestyle. Most students will not have personal insurance or pension plans. However, as a student, you should consider building a savings plan into your budget. These savings can be used towards your long-terms goals and your short-term emergency savings.

The ideal scenario

If you’ve got debt goals and savings goals and you’re working on both simultaneously, aim for a 70/20/10 spending plan. That means 70 percent of your net income is dedicated to living expenses – housing, food, clothing, etc. Twenty percent then goes to debt, specifically credit card balances, car loans, and any other unsecured debt (not your mortgage). The final 10 percent is for savings – you use this amount to build your investments, both long-term savings and short-term emergency savings.
It can be difficult to set aside that 30 percent for debt and savings, but if you’re serious about creating a comfortable financial situation for yourself and your family, it’s a great, accelerated way to get where you want to be.