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Dave Ramsey’s Tips for Setting Budget Percentages in 10 Different Categories

Budgeting is essential for everyone who wants to have a healthy financial life, but it can be strangely difficult to do if you’re not sure how the math behind it works. Leveraging wisdom from personal finance expert Dave Ramsey, Ramsey Solutions has provided a blueprint for budgeting. The Ramsey team explains how to organize guidelines for setting a budget in precise detail, using percentages (when available) of your income.

In this article, GOBankingRates examines the Ramsey approach to percentage budgeting and pulls insights from fellow personal finance expert, Ohan Kayikchyan, CFP, founder of Ohan The Money Doctor. Read on for a clearer sense of how this budgeting strategy works and what alternatives there may be.


Nobody can deny the power of savings, and yet so few Americans have enough in this department. According to a recent GOBankingRates survey, nearly half have less than $500 in savings. Ramsey’s article recommends starting out with baby steps, and putting aside $1,000 in a savings account ASAP. But can $1,000 cut it? 

“I suggest doubling the starter emergency fund amount to $2,000,” Kayikchyan said. “When debt is paid off, having a fully funded emergency fund is important, which is 3 to 6 months of expenses to protect you against bigger emergencies.”

Another reason to save money is, as the article discusses, for necessary big purchases. But that’s not all. 

“One surprising data article points out that the average American saves around 9% of income and it should not be the set number for everyone,” Kayikchyan said. “Once the debt is paid off and a fully funded emergency fund is saved, building wealth is the next saving goal and the article suggests to invest 15% of gross income. Dave Ramsey’s investment philosophy is all about investing in good growth stock mutual funds. He offers that good growth stock mutual funds are proven ways to build wealth and retire a millionaire the right way. I suggest considering low-cost and well-diversified index funds as an alternative. In many cases the actively managed mutual funds come with high and unnecessary fees.”


Charity is an important part of the human experience, and many people want to allot for it in their budgets. 

“While this can sound a little controversial and opposed to the ‘pay yourself first’ budgeting method, the [Ramsey Solutions] article emphasizes giving as a great act and being good for everyone, and recommends giving 10% of income,” Kayikchyan said.


The next budget category discussed in the Ramsey Solutions article is food, and surely we all need that! But food prices have risen at the highest rate we’ve seen in decades.

“While there are no set percentages offered here, the article gives some national averages of what Americans spend on groceries each month: singles age 19-50 spend $314 to $337, couples age 19-50 spend around $685 and families of four spend around $971,” Kayikchyan said. “Food, along with housing and transportation, is considered the largest item in the household budget. For the food category, buying in bulk, couponing and chasing deals is one way to save. But in reality, preparing meals at home versus eating out will save you some good money. This will be a good strategy for someone who is using food or grocery delivery services.”


According to the math offered in the Ramsey Solutions blog, Americans spend the following on utilities:

  • $447 a year (about $37 a month) on natural gas
  • $1,551 a year (about $129 a month) on electricity
  • $695 a year (about $58 a month) on water and other public services

Given that utility costs are so hugely dependent on your location, it’s hard to know exactly how much of your budget to set aside for this cost.

“The utilities category discussed gives some averages and not percentages, but the real cost for utilities as we know depends on where you live in the nation,” Kayikchyan said.


Housing is another large budget category, and according to the Ramsey Solutions article, you should not allot more than 25% of post-tax income on it.

“Dave Ramsey’s [article] suggests paying off the mortgage early, which is understandable for saving on interest payments,” Kayikchyan said. “But many experts will suggest not to pay it off early, especially if you got your mortgage during the low-interest era. The counter argument is about the possibility of making higher than the mortgage interest rate returns and taking advantage of possible tax deduction for the mortgage interest. I will suggest paying close attention and consider the overall financial picture and goals prior to making the suggested strategy to pay off the mortgage early. And if you are a renter, don’t feel guilty, as long as your place brings you happiness and the rent falls below 25% of your income, you are in a great situation.”


The next category is the third largest expense: transportation. Again, the article provides national averages and not percentages. It highlights the importance of considering what you are driving and whether public transport is an available option in your areas. 

“Car payments are at their highest level post pandemic and once again reliable used but paid-off cars are the winners for a long term saving strategy,” Kayikchyan said.


Next is health, which is again very difficult to break down with percentages, as it depends on your individual situation and health. Still, seeking and obtaining affordable health insurance is crucial.  

“While the article is not addressing HSA accounts, I believe this a good spot to mention high deductible health insurance plans as an option and consider HSA accounts to get a so-called triple tax advantage,” Kayikchyan said. 

Child Care 

Child care is discussed next and this is another important category and in many instances, astronomically expensive. According to Census Bureau data, the average family with children spent $7,131 of their income to pay for child care in 202.

“According to the [Ramsey] article, the average cost of child care ranges from $10,700 to $29,800 a year per child and it varies based on where you live, the type of child care and how many kids we are taking into consideration,” Kayikchyan said. “No average percentages are available for child care either. Besides child care, many families nowadays choose homeschooling for their kids to save and spend quality time with their kids, instead of working 9 to 5 and paying expensive schooling costs.” 

Lifestyle or Entertainment, Personal Spending and Miscellaneous 

Lifestyle or entertainment, personal spending money and miscellaneous are the next categories discussed. Here’s where you can (like it or not) look to cut back. The blog highlights that the average American household spends $3,568 a year here, or about $297 a month.

“For miscellaneous categories about 5% of your take-home pay is recommended,” Kayikchyan said. “These categories are places to prioritize cutting your budget, especially on your way to building financial security and stability.”


Debt is a burden for almost all of us, so it’s critical to make ample room in your budget to tackle it.

“The article ends with the debt category, and suggests allocating the money you are able to save on your spending and from boosted income toward paying off your debt,” Kayikchyan said. “While, again, no percentage is suggested, [the article] suggests to throw everything you can at this super important money goal. Dave Ramsey is suggesting using a debt snowball method in all cases, but I will offer to consider the debt avalanche method as well. There is no right or wrong answer here, just pick the method that fits your particular debt situation. Sometimes even a combination of both methods can be a reasonable and right choice.”

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