How much of your income should go to expenses?

You should spend no more than 80% of your income on your expenses, with 50% going to your needs (like housing, food, and utilities) and 30% going to discretionary spending. If you allocate the remaining 20% to savings, you'll be following the popular 50/30/20 rule. Even if you use different budget percentages or categories, keeping your expenses below 80% of your income can allow you to save for the future and help prevent you from overextending yourself financially.

Household Spending Over the Years

Source: U.S. Bureau of Labor Statistics

Over the past five years, consumers have spent about 76% of their pre-tax household income, according to the U.S. Bureau of Labor Statistics. However, the percentage in your case will vary based on how much you make and how frugal you are. For example, someone with a low income may spend more than 80% of their income on their expenses, while someone with a very high salary may spend much less.

To get a sense of how much of your income should go to expenses, it’s a good idea to look at some recommended rules to follow for major spending categories.

How Much Income to Spend on Common Expenses

How to Save on Your Expenses

Cut any unnecessary spending. Go through your discretionary spending and see where you can cut back. You can save money by doing things like cooking at home instead of dining out or canceling any subscriptions you do not need.

Negotiate your bills. Check for any promotional offers with companies like your internet provider that can lower your monthly bill. They may be willing to give you a promotional offer to keep you as a customer if you mention you may switch to a different provider. You can also try getting quotes from other competing companies to see if your provider will be willing to do a price match.

In addition, contact creditors to see if they can give you a lower interest rate. According to a WalletHub survey, 77% of people who’ve asked a creditor to improve their account terms have been successful.

Shop around for the best deals. Compare prices for goods and services to find what you need at the lowest price. For example, one clothing store may sell the same brand of jeans for 20% less than another clothing store.

Use a budgeting app. Budget apps, like the WalletHub app, allow you to make a budget that you can access anywhere from your phone. This lets you easily track your purchases and see when you are overspending. Plus, if you sign up for a Premium account, you can sync your financial accounts and have your transactions automatically update to your budget.

For more information, check out WalletHub’s guide on how to save.