My Expense Categories

My Expense Categories

I try not to obsess too much over my finances (check out Well Heeled Blog’s article about personal finance bloggers. That’s not me, I swear!). However, because I’m paying off debt, trying to save for a house, and live frugally, I do run reports from my Quickbooks program from time to time. Being self-employed / part-time employed, also causes me to be diligent with keeping track of my funds. The Quickbook’s reports show my expenses versus my income in many graphic forms: bar chart, pie chart, and percentage list. After reading many articles about how your rent or mortgage should be somewhere in the ball park of 30 – 35%, I felt relieved when my latest report showed my rent was holding steady at just under 34% (a little on the high side, but hey! I live in Los Angeles!) Then I started obsessing researching my other expenses and what the “norm” was supposed to be. According to a  Yahoo answers poll, the results were a little varied, but not enough to make me throw out their data. Here is where their answers stood on percentage of living expenses:

  • Housing: 24%
  • Utilities: included in housing (this seems a little low to me)
  • Food: 14%
  • Transportation: 17%
  • Medical: 6%
  • Clothing: 6%
  • Invest/Savings: 13%
  • Debt Payments: 13%
  • Misc. (Personal,Recreation,Life Ins.): 5%

Yahoo answers also listed Dave Ramsey’s guidelines, which were similar:

  • Charitable Giving: 10-15%
  • Housing: 25-35%
  • Utilities: 5-10%
  • Food: 5-15%
  • Transportation: 10-15%
  • Medical: 5-10%
  • Clothing: 2-7%
  • Invest/Savings: 5-10%
  • Debt Payments: 5-10%
  • Misc. (Personal,Recreation,Life Ins.): 5-10%

I tend to lean toward Dave Ramsey’s guidelines in a few areas such as utilities not being counted in with housing and Misc. expenses averaging more around the 10 percent range. In comparison, my expenses pretty much match these except in a couple of areas (Green = Savings, Red = Over Consumption):

  • Transportation (which I’ve coded as AUTO in my pie): 4% …whoo hoo! I’m quite a bit lower than average, even with a car payment to boot.
  • Misc. (including meals eaten out, etc.) 18%...Red Flag Alert…this is too high!  I’m including my Starbucks in this overall percentage and that is less than 2% of the 18%, need to talk to my hubby 😉
  • Clothing (I have it coded as Personal which also covers medical co-pays) 4%…this is all good.
  • Food (I’ve coded my category as Groceries) 6%…again, this is lower than the average.
  • Savings (I don’t have a category for this and I should) I’m guessing I’m below 6% on this one…not so good.
  • Debt (Again, I don’t have a specific category for this) After figuring out my monthly debt payments, my percent is close to 10% not counting the car, as that is already being counted in AUTO. I’m breaking even compared to the data above, however I think I need to completely eliminate all of my debt so that I can save more of my income and increase my savings percentage.

Some of my categories are slightly different than the data sets I’ve listed, and because I also co-own a business with my husband I’m not including business expenses here, just personal. I could definitely do better in a few categories like my miscellaneous and savings, one needs to be reduced and the other needs to increase. Yet, researching these facts helps remind me I need to continue down the road towards financial independence.

I need to go socialize now and stop computing!

Do your figures fall within the “norm”? Are you doing better than average, or a little worse? Are their areas you need to improve on? Am I just obsessing too much?