By Priya

March 1, 2021


Show notes

🎙 In part 2 of my 3-part deep dive series, we’re taking a close look at the percentage based budget method, particularly the one recommended by Dave Ramsey. It’s a super popular method of budgeting household income because it’s quick and simple, and Ramsey himself is really popular. But it isn’t perfect, in fact it has some pretty big holes. So are your dreams worth gambling on this method? 🤔

This episode discusses topics like:

  • Why Dave Ramsey’s percentage based budget won’t make sense for you (and why he isn't always right);
  • How to create a percentage based budget that actually works for your unique circumstances; and
  • Which 5 types of people who should avoid percentage based budgets altogether. 


Hello and welcome back to the Girl on FIRE podcast!

My name is Priya, I’m a Chartered Accountant, an analyst and the creator of Paper Money Co. 

I’m also the host of this podcast and I believe that a financially empowered woman is an unstoppable force of change in her own life and in the world.

This episode is part 2 of our 3 part series where I take a deep dive into the 3 most common budgeting methods. 

Last week we talked about the 50 / 30 / 20 budget so I recommend you go check that out. 

And if I still haven’t convinced you that you need a budget if you want any kind of financial independence, then go check out episode 7 as well.

But this week we’re talking about the percentage based budget.

It’s going to be another long one, so get comfy — get a pillow or a blanky and a notebook.

We’re going to go through a lot today and humans aren’t great at remembering. Or maybe that’s just me, I have the brain of a fish.

So, bookmark this episode to return to it when you’re working on your budget. You can also access the transcript which is up on my website

What is the percentage based budget method?

So, the percentage based budget — what is it?

It’s a popular method of budgeting where you’re allocating a percentage of your income to each of your budget categories, so you might allocate 25% to housing, 10% to saving and 5% to utilities.

All of your percentages should add up to 100% because you need to be allocating 100% of your income. 

You’re creating a zero based budget, which means every dollar has a job somewhere in your overall financial plan.

It’s a popular method because it’s quite easy to understand and it naturally gives you a benchmark that you can use to compare your spending with someone else’s.

It’s the method that Dave Ramsey recommends and his version is super popular, so a lot of the times, people are using his recommended percentages as their benchmark.

And we know that people love benchmarks because it shows them whether they’re doing it ‘right' but I disagree with most benchmarks including the percentages Dave Ramsey recommends but you’ll see why throughout this episode.

Dave Ramsey’s recommended budget percentages

So, before we go any further, I just want to stop for a second and address something. Dave Ramsey’s name is going to pop up a lot in this episode because his recommended budget is a percentage based budget. 

He recommends the method and he recommends a benchmark for the percentages you should be using. You can check it out on his website if you like, it’ll be linked in the show notes.

And the reason he’ll keep popping up is because his method is the most popular version of the percentage based budget. It’s the standard benchmark that a lot of people like to measure their budgets against.

Now, there’s a big elephant in this room, so let’s poke at it a little. Dave Ramsey has recently come under fire for essentially saying that if you have financial problems, then there’s something wrong with you.

If you haven’t heard about it then I want you to put your arms up, lift up that giant rock that’s on top of you and throw it away!

He made a quote regarding the stimulus check in the US, he said: “I don’t believe in a stimulus check because if $600 or $1,400 changes your life, you were pretty much screwed already. You got other issues going on”.

And apparently those other issues include debt, relationship problems and mental health. 

So, naturally, when you come out saying crap like that, you’re going to get quite a bit of media backlash. You can almost feel the narcissistic judgement dripping off his words. 

Now, if you’ve been listening to me for a while or reading my blog posts, then you know I am not a fan of Dave Ramsey. I never have been. I don’t agree with a lot of his advice. 

I find a lot of it to be wrong and unhelpful and some of it, honestly, is just pure garbage. I don’t endorse anything that he says.

But that doesn’t change the fact that the budget percentages he recommends are very popular. A lot of people follow his advice. 

So, when I talk about standard percentages in this episode, I’m talking about the percentages he recommends. 

Now, you know how I feel about standard anything, and benchmarks or rules of thumb so I’m not going to get all feisty about it now. 

If you want to hear feisty Priya, then go back to episode 6 because that’s where it all happens.

But what I want you to do is understand what his percentages are. And then I want you to calculate the actual percentages in your budget.

By calculating your own percentages, not only will your budget be more accurate and realistic. But by understanding his method, I want you to learn to start questioning what you hear financial experts tell you.

And that includes me! I absolutely invite you to email me and say: “hey Priya, I’m not sure I agree with XYZ”. 

A lot of people are going to tell you a lot of things when it comes to your finances and honestly so much of it is just their own bias.

So, it’s really important that you take a second to think critically about what people are telling you. 

You know, I first started budgeting when I was in university. It was the first time I was doing any spending. 

And I wasn’t taught how to budget, so I was figuring it out on my own. I tried Googling around to see what I could learn.

And I kept stumbling upon one expert after another telling me to do something their way.

But I’m just naturally someone who does not like to be told what to do. So, I questioned a lot of the advice I was seeing. A lot of it didn’t make sense to me.

And there was a lot that I just didn’t agree with. They were telling me how to live my life according to their values and their perception of financial success.

But I’ve never been interested in living my life according to someone else’s values and rules. 

That’s why I spent years creating my own system. One that was flexible enough to change as I grew up and would serve me as my life and my goals changed. 

So, I urge you not to just take advice blindly — understand it, question it, challenge it. And then decide what’s best for you.

Okay, so that’s the end of story time. But all that is to say that if you choose to try a percentage based budget, I strongly encourage you to try it with your own percentages.

And I’m not just giving you homework for the sake of it. I’m also going to be doing that for my own budget in this episode and I want you to see the difference. 

But for now, let’s go through Dave Ramsey’s percentage based budget. So, according to him you should be allocating:

  • 10% to giving (he mentions tithing because his organisations and his financial teachings are very much rooted in his faith);
  • 10% to saving;
  • 10-15% to food;
  • 5-10% to utilities;
  • 25% to housing;
  • 10% to transportation;
  • 5-10% to health;
  • 10-25% to insurance;
  • 5-10% to recreation;
  • 5-10% to personal spending; and
  • 5-10% on miscellaneous spending

Now, some of those percentages have a range, but at the end of the day, when you add up all your percentages, you should come to 100%. 

And that’s the same regardless of what percentages you’re using. When they add up to 100% that means all your income is being allocated somewhere. 

It means you’re using a zero based budget so that all your dollars have a job. That was something we talked about in episode 7 as well, so if you missed that one, go back and check it out.

You can see what he values by looking at the way he recommends you allocate your money. 

I find it shocking that there’s no category for debt payments considering that’s probably the biggest selling point of his company.

But it’s not there. Seeing as it’s presented in this order on his website, I’m going to assume that this is in order of priority.

So, you can see he values tithing  or giving above all else. I actually never recommend giving in that way because it’s a super personal thing.

And everyone has certain causes and beliefs that they support and it might not be with money — it might be through giving your time.

I also don’t think it’s helpful to make people feel unworthy when they’re not financially able to make donations.

Next, he has savings, so I’m assuming that’s the next most important thing. But 10% is a pretty low percentage, especially when he recommends 25% be allocated to insurance.

To me, that seems a bit out of touch with modern times. But it’s clearly something he values.

So, those are Dave Ramsey’s recommended budget percentages and I’m going to apply them to my own life a little bit later on in this episode.

How to set your budget percentages

But if you’re considering using the percentage based budget method, I highly recommend you calculate your own budget percentages. 

If you’re using Dave Ramsey’s percentages, you’re basically trying to live your life according to what he deems is acceptable. 

And I don’t know about you, but I’m not interested in living that way.

But a lot of the advice I found online when I tried to get help just didn’t work for me. 

So much of it felt like someone (usually a white man or a mum of 4) was telling me how to live my life. 

And I really resented that. Especially when I realised that the ‘experts’ weren’t always right and that I didn’t agree with a lot of what they were saying.

So, there’s nothing wrong with using a percentage based budget if that’s what works for you, and we’ll get into the pros and cons of it later in this episode. 

But you need to determine your own budget percentages. Take the time to look over your spending for at least the past month.

Categorise your spending and calculate what portion of your income is going to each of these categories.

Do it for at least a month, but if you have the patience to do it for longer, then that’s fantastic. The more historical data you have the more accurate it’ll be. 

So, let’s say you did this exercise for the last two months. And you found that you spent a total of $400 on food last month, and $500 the month before. 

That means you’re spending an average of $450 per month, right? $400 plus $500 equals $900, which divided by 2 is $450.

And now let’s say your monthly income is $4,000. That means your food expenses are about 11% of your income.

Do this and see what happens. What do your percentages look like? How do they compare with Dave Ramsey’s standard percentages. 

And most importantly, do they reflect your unique circumstances? Do they align with your life, your goals and your values? That’s super important.

Things to consider when setting your budget

So, when you’re working with a percentage based budget, there are a few extra things you need to consider. 

What percentage should I budget for financial goals / savings?

First, what percentage of your income should you set for your financial goals?

Now, you know that I want you to set your own percentages instead of using the standard benchmarks. 

But even then, it can be hard to know whether you’re allocating enough for your goals.

And the super complicated answer to that question is that it depends. Ask yourself this: how important are your goals to you?

How much of a priority are they? If you’ve taken the time to set goals, then I’m going to guess they’re pretty important to you and the life you want to live.

So it’s in your best interest to allocate as much as possible to your goals, whether, that’s paying off debt, building your emergency fund, saving for any other goal or retirement.

If you really want to prioritise your goals, then I highly recommend the concept of paying yourself first. 

That means that you take care of your goals and your future first, before allocating money to your expenses.

This is something I’ve practiced in my own life for years which is why, if you remember from last weeks’ episode, the percentage of my income that I allocate to my goals is so high.

I make it a priority and not just an afterthought.

What if I have debt?

If you have debt that you’re trying to pay off then you should absolutely include that in the percentage you allocate for your goals, too. 

It’s one of the things that’s missing from Dave Ramsey’s recommended percentages. 

Keep in mind that you need to budget for debt in two parts:

  • First, you need to make sure that you’re allocating some money to make your minimum debt payments. 
  • Second, you also need to allocate money to making extra debt payments. 

It’s those extra debt payments that are really going to move the needle when it comes to becoming debt free. 

Your creditors need to be aware that your extra payments are to be applied to your principal balance and not your interest.

This means that these extra payments will actually be paying back the amount you owe and not just servicing your debt. 

So, if you have debt that you’re trying to pay off you really need to consider that in your budget. It’s not included in Dave Ramsey’s recommended method.

But paying off debt doesn’t mean you need to neglect your other goals. We’ll get into this chicken and egg type topic in future episodes. 

But for now, you need to know that your emergency fund is the one goal that doesn’t get put on hold. You need that fully funded safety net as soon as possible.

Benefits of the percentage based budget

Okay, so now that we know how the percentage based budget works, I want to spend the next part of the episode going over the pros and cons of this method. 

And we’re also going to cover who this method is good for and who should keep shopping for a different method.

Let’s get started with the pros.

Quick and easy / simple to understand

So, the biggest benefit of a percentage based budget is that it’s pretty simple to understand.

And that also means that you can easily put one together — it doesn’t really take a lot of time, especially if you’re using a spreadsheet. 

Not only that but the maths isn’t super complicated either. 

Consistency without being strict

It also creates a budget that is consistent without being too strict, because in most cases you’re applying the same percentages to each category and only really adjusting it if it doesn’t suit your needs. 

Unless your income or your percentages change really dramatically, your budget is going to look pretty much the same month after month.

Good for beginners

A percentage based budget is also a good place for beginners to start budgeting. It’s simple to understand and easy to put together 

Also, a lot of beginners prefer benchmarks to see how they’re going. I will always recommend you calculate your own percentages and set your own benchmarks. 

But when you’re overwhelmed, it’s hard to know where to start so sometimes you just don’t.

And I would much rather you start with something and allow yourself to improve and get better at it over time than just not start.

Disadvantages of the percentage based budget

Okay, so that’s about it for the pros. Now let’s get into the cons.

Doesn’t include organising your bills

One of the biggest disadvantages I see with a percentage based budget is that it doesn’t give you a way to organise and manage your bills. 

It only sets a total amount as a percentage of your income, that you’re budgeting for each category.

You can’t see that you have, for example, rent due on the 1st or that your credit card bill is due on the 18th. You can’t see any of that. 

You’ll need to have a separate system to keep all your bills organised and make sure that you’re paying them all on time. 

It’s just not something that’s inherent to a percentage based budget because you don’t budget by adding up your bills, you budget by assigning a percentage.

It only really works for variable expenses. 

Lifestyle inflation is built into your budget

Following on from that, it means that lifestyle inflation is built into your budget. We talked a little bit about lifestyle inflation in last weeks’ episode.

It’s the idea that when you earn more, you naturally tend to spend more. And I say that with absolutely no judgement — we’ve all been there, it’s human nature.

But when you budget by percentages and your income increases, guess what happens? Your budgeted amount also increases!

So, if you used to earn $4,000 a month and you budgeted 10% of your income to food, that means you’re planning to spend $400.

And let’s say your work your booty off and earn an increase of $500 per month, so now your monthly income is $4,500.

First of all, congratulations! You deserve to be paid what you’re worth. But that also means that when you allocate 10% of your income to food, you’ll be planning to spend $450. 

That’s an extra $50, just because you earned more money. Now, of course you can adjust your percentages.

But you actually have to intentionally go in there and change it. It’s not a set-it-and-forget-it type deal where you can just leave it at 10%. 

And a lot of people don’t do that when they use a percentage based budget because they want it to be on auto-pilot.

But if you don’t adjust your percentages, you’ll end up spending more in every category. 

On the flip side of that though, it’s actually dangerous when your income decreases because your allocated budget also decreases unless you intentionally adjust your percentages. 

So, let’s say you were unable to work for a couple of days this month and your income came in at $3,800 instead of $4,000 — so your income has dropped by $200. 

In this example, it means that when you allocate 10% of your income to food, you’ll only be budgeting $380 instead of $400.

And this is especially problematic for your bills — your landlord won’t charge you less rent because your income was lower. That kind of generosity and compassion is pretty rare.

Your budget has decreased. And yes, you should adjust your budget if your income changes, but is that change realistic for you and your circumstances?

The point is that you aren’t making the choice to change it, these changes are being made for you.

They’re just happening because of the nature of the percentage budget.

So, it could be problematic for you if those changes don’t make sense for you and your life.

Harder to identify problems or expenses to cut

Another con is that it’s harder to identify problem areas or opportunities to cut back and save more money.

Your budget is just a percentage of your income, it’s not built up by understanding the nature of all the transactions you incur.

And while you can look at your budget and think: “I’m spending too much here”, it’s going to be really hard to identify which specific costs you can cut. 

You know you need to make some changes but knowing that doesn’t make a difference. 

You actually need to be able identify your specific problem areas and how you can make those changes — what behavioural changes do you need to make?

I’m not saying it’s impossible, but it’s going to be a lot harder to do that with a percentage budget because you just don’t have that visibility.

Can’t get intentional about your spending

Following on from that, it also means that you can’t get intentional about how you spend your money. 

I know the phrase “intentional spending” can sound a bit like woo-woo crystals-in-my-water kind of stuff. 

But what it means is that you’re taking the time to understand what matters to you, what’s important to you. 

And that’s then reflected in how you spend your money. You’re not just spending your money all over the place on things that don’t serve you, bring your joy or bring you closer to your goals.

When you budget by percentages, it’s a lot harder to see those specific expenses that you may want to cut.

You just don’t have as much control over your budget because you don’t have a lot of visibility.

Don’t get me wrong — you definitely have more visibility and control over your finances with a percentage based budget than you do with a 50 / 30 / 20 budget which is what we talked about last week. 

But it’s not the ultimate level of control. You only get that super high level of transparency and control when you’re budgeting with dollars and not percentages.

Only works for average income

The next con is that budgeting by percentages only works when you earn an average income, especially if you’re using standard percentages as a benchmark, like the ones Dave Ramsey recommends. 

We talked about this a bit last week as well, but those percentages aren’t designed to work if your income is lower than average or higher than average.

When your income is lower, every expense takes up a larger proportion of your income. 

This is especially the case with bills, because those are a fixed amount. But it also happens with variable costs. There’s only so much you can cut. 

And society will rarely, if ever, charge you less for your fuel or food because you earn a lower income. 

Think of it like this — your income is a cookie and every expense is a bite, and the bite is always the same size.

The lower your income is, the faster those bites are going to gobble up your entire cookie. 

And the flip side is also true that the higher your income is, the more irresponsible your spending becomes when you use standard benchmark percentages. 

And please remember, I’m not trying to judge you by saying you’re spending your money irresponsibly. You do you.

I’m just saying that you could be spending it in a way that doesn’t align with what you want.

Because, like we talked about before, the more we have, the more we tend to spend.

Hard to consider weekly / bi-weekly income

And following on from that, the next con is that a percentage based budget doesn’t work very well if you get paid weekly or bi-weekly. 

Your budget should always match the frequency of your income. So, if you earn 1 paycheck per month, you should have one budget per month. 

If you earn 3 paychecks per month, you should have 3 budgets per month. Regardless of how many income sources you have, every paycheck should have its’ own budget.

Now, why is this so important? Because this is how you ensure that you’re only ever budgeting with money that you’ve already been paid. 

You’re budgeting with money that’s sitting in your bank account and not with a future paycheck that you haven’t received yet.

That’s super important and it’s something we’ll talk about a lot more in next week’s episode when we deep dive into the paycheck budget.

But as an example, let’s say that rent is due on the 15th every month and it’s $1,500. You earn $2,000 on the 1st and $2,000 on the 18th. 

So, your total income for the month is $4,000 and your rent is $1,500. Straight away you can see that budgeting housing at 25% is garbage here. It’s not going to work.

Your actual housing costs are about 38% of your income, not 25%. And sure, that might not be your specific situation.

But I guarantee you that there are many people out there whose housing takes up 38% of their income or even more.

But, going back to the example — your rent of $1,500 is due on the 15th and you get paid $2,000 on the 1st. 

You could cover your entire rent payment with that first paycheck. But then you only have $500 to pay for everything else until the 18th. 

And that’s food, transport, utilities, medical costs. And what about all your other bills? When are they due?

You’ve set a budget of 38% for your housing for the month, but your spending patterns change throughout the month. 

Especially when you earn more than one paycheck each month. And a percentage budget doesn’t consider that.

Doesn’t prioritise your goals (DR’s version)

Another con, and a big one for me, actually, is that the percentage budget doesn’t prioritise your goals — at least not Dave Ramsey’s version.

Saving 10% of my income will not get me anywhere fast with my goals. There is no way I could make all of my personal goals work with only saving 10% of my income. 

Not only that, but his version of the percentage budget doesn’t account for making extra debt payments. It just has savings. What if you have debt?

What do you do then? Do you split it with your 10% savings? That means you’re saving even less. 

Do you find the money elsewhere in your budget, perhaps? But then that brings me back to the other point that I wouldn’t shut up about. 

There’s not enough transparency to have that level of control with a percentage based budget. 

So, if your goals are a huge priority for you, then this is not the right budget for you.

Limited customisation

We made it to the last con on our list! This is a long episode, right? I hope you got yourself a snack. 

Maybe I should include a little intermission in these long episodes so we can get a refill on our coffees.

But the last con I wanted to talk about today is the fact that a percentage based budget has limited opportunities for customisation. 

You can change up your budget categories and change up your percentages but that’s really about all. 

In fact, the most customisation you’re going to get is to use percentages like 4.697%. And if that’s what you’re doing, then I sure hope you’re using a spreadsheet and not doing it old school on pen and paper!

Because your budget isn’t built up by allocating dollars to where you need them, you’re only going to get so far with your customisation. 

You also need to rework the entire thing when you want to shift expenses between categories or add new goals. 

It’s not as easy to just take it out of one category because you don’t know exactly what that covers and whether it’s still realistic.

And you don’t know, because you just applied a percentage to it instead of building it up with your bills and variable expenses. 

So, if you’re like me and you want a lot of control and the ability to customise the crap out of your budget, then this isn’t the best option for you.

Who it’s good for

So, given all those pros and cons, let’s actually dive into who the percentage based budget is good for and who it isn’t good for.

#1 Beginners

If you’re new to budgeting, or you’ve tried different things in the past but nothing worked, then the percentage based budget isn’t a bad place to start.

It gives you a little bit of control and visibility when you’re getting started. I know that for a lot of people, the whole idea of getting your finances under control and everything that entails is overwhelming. 

It’s so overwhelming and you don’t know where to start, so you just don’t. So, if that sounds like you then a percentage based budget is a good place to start.

The first time you try it, just use the standard percentages. You’ll be able to tell whether those percentages were too restrictive or too roomy or just right. 

And then you can start to ask yourself why — what’s different and unique about you and your life. You can make changes the next time around.

And keep doing that until you either fall in love with this style of budgeting and you know that it’s exactly what you want, or you’re ready to graduate onto another method.

#2 Those who earn a fixed monthly income

But there’s one caveat. That only applies if you earn a regular monthly paycheck for an amount that doesn’t change. 

If your income is irregular or you earn multiple paychecks per month, then the only method I’d recommend to you is a paycheck budget.

That’s what I personally use as well and we’re going to take a deep dive into the paycheck method next week.

#3 People on average income with simple goals

Now, assuming that you earn an average, regular monthly income, the percentage based budget is also good for you if your goals are pretty simple. 

And there’s no judgement here — calling your goals simple doesn’t mean that I’m belittling them in any way.

It just means that your goals are easy to navigate and not super complex. So, for example, maybe your only goal at the moment is to save $10,000 for a new car. 

That’s a straightforward goal, and it’s also simple because you’re only working towards one goal. 

Goals become more complex when you have multiple competing priorities that all require different things. 

So, for me personally, I have goals like growing my travel fund because I love to travel and making sure all short term savings goals are met.

My emergency fund is complete, so I don’t have to worry about that. 

If you want to learn more about emergency funds and how much you need to save, we covered that in depth in episode 6.

So, I have goals to continue travelling, but I’m also trying to invest in my business and invest for retirement. 

And with any luck, like I said I think in episode 5 — I want to retire by 45.

So, having multiple goals, especially big, long term goals makes your finances more complex. 

And the more complex they are, the more control you need to really be able to align your finances and your decisions to the life you’re trying to build.

So, if your goals are complex, I don’t recommend a percentage based budget. It doesn’t provide enough control and transparency to really make the most of the income you earn.

But if you think a percentage based budget is right for you and you’re ready to give it a try, I do have a spreadsheet available in my shop, so you can check that out at

Who it’s not good for

Okay, so moving on — who isn’t the percentage based budget good for?

#1 People who want more control over their finances

The truth is that percentages don’t really give you a whole lot of control. Unless you want to budget using percentages like 13.4589%, you’re not going to have a lot of control. 

And that kind of complexity defeats the purpose of a budget that’s meant to be simple and straightforward like this one. 

When you budget with percentages, for example, 10% for food, you don’t have a lot of visibility over what that looks like in terms of real dollars. 

So, how much you actually spend at the grocery store?

Or how many times can you eat out per week? You just don’t have that level of transparency.

And in turn, that means it’s a lot harder to make cuts and adjustments in your budget because you’re working with percentages instead of actual dollar amounts.

Yes, you can say you want to cut your food spending by 2% but what does that mean when you’re actually at the grocery store? 

It’s a lot harder to translate that into changes in your behaviour.

#2 Low and high income earners

As I mentioned earlier, the percentage based budget is really only designed to work with an average income level. 

If you earn above or below that, then applying the standard percentages to your income is either going to give you a budget that’s way too tight and restrictive, or one that has too much room for irresponsible behaviour.

#3 Those living paycheck to paycheck

The percentage budget is absolutely not going to help you if you want to break the paycheck to paycheck cycle. 

These percentages are designed to be how you allocate your monthly income and a huge danger of budgets like this is that you’re allocating income you haven’t received yet. 

When you’re living paycheck to paycheck, that’s really dangerous. Because you’re planning to spend money before you have it.

And that just perpetuates the problem.

So, if you’re trying to break a paycheck to paycheck cycle, there’s only one method I recommend and that’s budgeting by paycheck. 

We’re going to be taking a deep dive into that method in next week’s episode. It’s also the method that I personally use.

#4 People who want to prioritise their goals

If your goals are important to you then I don’t recommend the percentage based budget.

Whether you’re trying to save more money, pay off debt, plan for retirement or invest for long term goals — this budget just isn’t enough.

All it has is 10% of your income to be allocated to savings. It doesn’t say anything about minimum debt payments, let alone a full debt payoff plan. 

It also doesn’t have anything for retirement or long term investing. That 10% of savings according to Dave Ramsey’s Every Dollar website seems to include only your emergency fund and sinking funds for large purchases. 

And, of course, those are important, I have that in my budget too. But those are very generic goals that apply to everyone. 

It doesn’t have anything about the unique goals that you have for your life.

#5 Anyone who doesn’t earn a fixed monthly income

If your income is irregular or if you earn a weekly or bi-weekly paycheck then a percentage budget isn’t going to work. It’s too dangerous. 

You don’t spend money the same way at every single point during the month. And this could be as simple as fuelling up your car this week and getting 2 weeks of mileage on it. 

Your spending habits change throughout the month. But these percentages are an overall average of what you should be spending.

So, you would need to be coming up with new percentages every single time you get paid, which would make it hard to really see any trends or consistency.

Experimenting with the Dave Ramsey percentage based budget in my real life

So, I mentioned in last weeks’ episode that in preparation for this series, I was going to test out all three budgeting methods on my life in the same month. 

I have used a percentage based budget before, or at least tried to, but it didn’t take me long to figure out that I didn’t like it. 

I didn’t like the restrictions that it put on me according to the standard benchmarks that I should be spending. 

That’s not how I live my life. And I really resented being told what my life should look like. 

And I felt those same feelings again when I tried it his month. I didn’t hate it as much as the 50 / 30 / 20 method, I’ll give you that. But it’s not the one for me.

I also felt like I had no real control over what I was spending or where my money was going because my budget was really just arbitrary numbers.

It didn’t make sense to me. I felt like I had no control because I didn’t really know what was going on. 

And if you’ve been listening to me for a while you know that having control over every dollar of my income is super important to me. 

So, let’s take a look at what my actual budget percentages were and compare that to what Dave Ramsey says my life should be like. So, I spent:

  • 1% on giving — I don’t belong to any church so I’m not doing any tithing. There are a few causes that I donate to on a regular basis and some that I donate to a few times per year. Those causes are really important to me, you can read about them on my website at, but my support is about more than just monetary donations;
  • 17% on savings — which is a lot higher than the 10% he recommends and this doesn’t include compulsory contributions into my retirement account. This is only for sinking funds. My emergency fund is fully funded, so I don’t need to worry about that;
  • 6% on food — we’re a family of 2, so we don’t have as high a cost as larger families would or people with stringent dietary requirements. We do eat out more than we’d like to, but we’ve been working on that over the past few months;
  • 4% on utilities — we have a 2 bedroom apartment, it’s not very big. We also live in Australia, so it gets super hot here but not very cold. We don’t have the air-con on all day, we just turn it on and off as needed. Some of our appliances are energy efficient but the fridge not so much. For us, utilities also includes internet and mobile data;
  • 23% on housing — that’s just a little bit lower than Dave Ramsey’s recommended 25%, however, it’s not actually normal in Australia, especially in Sydney. It’s often quite a bit higher. Property prices here are insane and have been growing much faster than wages. In our area, about 30% of households experience housing stress which means that those households are spending at least 30% of their weekly earnings on housing. We do live in a lower cost of living area, but our income is also a bit higher than average, so the percentage is lower;
  • 4% on transportation — we both own our cars and don’t use public transport very much which can be pretty expensive in Sydney. But with working from home and being locked down, we haven’t really been going anywhere;
  • 2% on health — I’ve mentioned this in I think episode 6 but we’re lucky to have Medicare in Australia which is our universal healthcare system. You can get private health insurance, but that’s not something we need for our family right now. I do spend a couple hundred bucks per month on prescription medicines, and that includes medicine for my heart condition, depression, anxiety and birth control. Other than that, we don’t really need anything unless we get sick.
  • Insurance is a bit of a hard one — we only have insurance for our cars, so that’s actually included with transportation costs for us. So, it’s less than 4%. But we definitely don’t spend 10-25% of our income on insurance. That’s insane to me! We’re a family of 2, so we don’t have kids and don’t need life insurance or anything like that. We’re also choosing to rent, so we don’t have home insurance. We also have a large emergency fund that covers at least 12 months of expenses so we don’t need income protection or anything like that;
  • We also haven’t spent anything on recreation lately. For us, recreation is things like going to the movies, or going to a show, going out. And, yes, no one has been going anywhere lately, but we’re also homebodies. So we only really have Netflix but it’s such a small amount that it comes to 0%;
  • 5% on personal spending but that includes fun spending, clothes (and I mean basic clothing like undies, you know, stuff to not be naked as opposed to dazzling on a runway show). And it also includes beauty and personal care so things like my skincare, pads and tampons, deodorant and what not. I could put those things in health, but I prefer to keep health as medicines, vitamins, medical visits like cardiology and therapy.
  • Okay - we made it to the last one! Miscellaneous spending is only about 1% of my income. That’s all the random stuff that doesn’t belong anywhere else. I can’t imaging spending 5-10% of my income on miscellaneous expenses, it would be hundreds of dollars and that’s just too high for random expenses. 

So, that’s what my actual budget looks like compared to Dave Ramsey’s recommended percentages.

Now, there are some things that aren’t included at all, based on Dave Ramsey’s budget. I spend 11% of my income on investing in my business. 

My business isn’t fully self sustaining right now, and I don’t want to wait until it is to invest in it, so I allocate some of my personal income into growing my business. 

The other thing is that I put 28% of my income into my brokerage account. I invest 28% of my income. 

Dave’s budget doesn’t have anything like that at all. All he has is savings. So, that’s another reason why it really doesn’t work for me. 

It doesn’t give me any way to really prioritise my goals and the life I’m trying to build.

Similar to last week, knowing these percentages is good information for me. But that’s about all. It’s interesting to know at a high level where my money is going. 

But it’s not enough for me to be able to budget with because I just don’t feel that it gives me the degree of control that I want.

I feel lost — less lost than I was last week, so remember to check out that episode — but it’s still not enough for me.

Next weeks’ episode

And that’s all I have for you Girls on FIRE today!

My challenge for you this week is to take the time to go through all your spending and calculate your budget percentages for yourself.

How much of your income are you spending in different areas of your life? Is it what you expected? Or does it surprise you?

On next weeks’ episode we’re wrapping up this 3 part deep dive series with the paycheck budget method.

It’s the one that I personally use, so I’m really excited to take you all through it.

If you get paid more than once a month, or have irregular income, or you’re trying to break the paycheck to paycheck cycle, then that episode is for you.

Or if you’re like me and you just want to have the highest level of control over your finances, then make sure you tune in when that episode drops.

It’s going to be super interesting so you’re definitely not going to want to miss it.


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The advice shared on Girl on FIRE is general in nature and does not constitute financial advice. The information shared does not consider your individual circumstances. Girl on FIRE exists purely for educational purposes and should not be relied upon to make an investment or financial decision.

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