How to Use Dave Ramsey Budget Percentages to Make the Best Budget Ever!


Are Dave Ramsey’s percentages right for your budget? Find out the good, the bad, and the ugly!

Author: Kari Lorz, Certified Financial Education Instructor

Author: Kari Lorz – Certified Financial Education Instructor

If your budget percentages are off, it can wreak havoc with your money, and that’s not a good thing. So what do you do? Where do you even start with this?

The best thing to do is find a guru (the people known for this stuff). What do they suggest? Luckily, the personal finance space has quite a few finance gurus, and Dave Ramsey is the people’s go-to leader on all things money & debt!

Dave Ramsey budget percentages are easy to follow! Let’s dig in and see how they can revamp your family budget for the better!

how to use dave ramsey budget percentages to make your best budget ever!

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What are the Dave Ramsey budget percentages?

dave ramsey budget percentages

Dave Ramsey has quite a few books available so that you can read in-depth about all his recommendations. In a nutshell, he recommends a percentage-based budget, so no matter your income level, you are in line with your regular expenses and spending.

You can see Dave Ramsey’s percentages live and in action if you use his budgeting app EveryDollar. But let’s break each budget category down right here for you.

Please note this is based on net income, not on gross income. (Yet, if you want to be a budgeting badass, then base your “savings goal budget category” off of gross income!)

  • Giving: 10%  to the church, non-profits, schools, etc. Dave is big on supporting the church. He feels that he is just a steward of the money in his account. So he gives generously to help further the word and practice.

  • Saving: 10%  get your $1,000 emergency fund set, then pay off your debt, then start to build a 3-6 month emergency fund, and then invest 10-15% of pay into tax-advantaged retirement accounts. Don’t forget to set aside money for your big financial goals, the dream vacation, the backyard upgrade, etc. These can be cash envelopes or more permanent separate bank accounts to be used as sinking funds.

  • Food: 10-15% – your food budget includes groceries and eating out, coffee shops, etc. For this category, you need to prioritize your basic food items. Think meals, pantry staples, fresh produce, dairy, and meats. If snacks and Starbucks don’t fit within your budget, then consider moving those items to your personal splurge spending.

  • Utilities: 5-10% – water, cable, gas, trash, etc.

  • Housing: 25% – this covers principal payments on loans, interest, taxes, HOA, etc.  

  • Transportation: 10% – car payments, gas, oil changes, etc. Or this includes public transportation methods as well.

  • Health: 5-10% – prescriptions, co-pays, deductibles, dental coverage, vision coverage, etc. Don’t scrimp here!

  • Insurance: 10-25% – health, auto, renters & mortgage, life, etc. Yes! If you have a family, then you need life insurance! Pro Tip – don’t go through your workplace; if you leave that job, there goes your insurance. And the older you are the more expensive it becomes. So find an independent insurance company and buy a term policy.

  • Entertainment: 5-10% – going out & having fun. This is such an interesting category, as what one person feels is a necessity, another may feel it’s an “extra.” Be willing to have an open mind about what truly is a negotiable expense. Hint – most items are negotiable.

  • Personal Spending: 5-10% – the little things, i.e., haircuts, clothes, subscription boxes, etc.

  • Miscellaneous: 5-10% – everything else that doesn’t fit in the other categories.
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Have you ever met someone that’s taken a normal “thing” and done something weird with it? Imagine Ariel, when she combed her hair with a fork. She didn’t know the “norm” for that item. She thought she did (which is even more dangerous than not knowing), as Scuttle told her it was to comb hair.

When you don’t know what is normal for something, there’s a good chance you will get it completely wrong. When we’re talking about money and your budget, that’s a very bad thing.

For example, let’s say you’re buying a new home (yay you!), and if someone told you that you should be spending 73% of your income on your housing, and you believed them and went with that, you’d have a problem, a real big problem.

Yes, the norms can be tweaked, shifted slightly, but it’s best (especially when you’re a budgeting beginner) that you follow the guidance of those that know. It’s a safer bet.

All this info is assuming you want to have a great working household budget, and I hope you do. Without nailing this essential step, you won’t be able to work toward your big financial goals.

Everything with your finances falls back to this building block, and without it, your finances will crumble. So grab a budget worksheet, learn the recommended household budget percentages and start taking your first step toward financial freedom!

If you want more hands-on help in how to use these budget percentage recommendations within a budget then check out Dave Ramsey’s How to Budget for Financial Peace Guide.

I mentioned that Dave Ramsey is the money guru, but what makes him great for budgeting beginners? He tells it to you straight. No BS, no sugarcoating it. His podcast, The Dave Ramsey Show, has more than 14 million listeners each week on over 600 stations! He’s been doing it for 25+ years, so it’s obvious that he has a passion for this work.

His signature course, Financial Peace University, has had more than 5 million students all across America, all working his Baby Steps program, and it’s growing every day! Not too shabby, huh!

But he didn’t start out this way. He started in real estate, amassing a $4 million portfolio, and then he lost it all by age 30. Ouch! But he dug himself out of the hole he was in. Slowly but surely, a little bit day by day. He wanted to tell others how he did it and how they can change their lives by better managing their finances.

The people listened, and they followed him, taking his money tips of focusing on debt repayment and crushing their savings goals, and now they’re telling others about him. He’s written a lot of books about finance, so if you want to know more about his style, check out which is the best Dave Ramsey book for you.

Now Investopedia has estimated his net worth to be $55 million!

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The Good: Why I like Dave Ramsey percentages…

There are a couple of things that I really like about Dave Ramsey recommended percentages.

  1. They have some flexibility when they give a range! On his site, they say it’s not a hard rule to stick to these percentages. It is just a monthly expenses guideline. For example, if you have debt payments, they recommend taking down entertainment & personal spending and using that money for debt payoff. Makes sense.
  2. It sets aside money for insurance! Most household budget percentage guides don’t even mention insurance, which is one of the most important line items on your budget! Please don’t skip this and cross your fingers that nothing happens; that is a recipe for disaster.
  3. These recommendations cover almost all things a person would spend money on (nothing is 100%, let’s just be real here). The key to using budget category percentages is that you be consistent with them.

    You need to build patterns and habits with budgeting to succeed while still being flexible if you need to scramble at the end of the month.
Dave Ramsey quote on money

The Bad: Why I don’t like Dave Ramsey’s budget percentages…

Now, you can’t love every aspect of a system 100%; there will always be something that doesn’t sit well. In this case, it’s his housing recommendation. Depending on where in the country you live, there might be no way that you could drop your housing costs down to 25%.

If you live in a high-cost-of-living area (HCOL), you will need to shift some funds to increase that area or look at house hacking. Things like sharing a home with others or buying a duplex to rent out the other half, etc

Inflation is running rampant these days, and many cannot get by with a 10-15% food budget. Groceries are sky high, and it doesn’t look like pricing is getting better anytime soon.

You can also do your budget on Dave Ramsey’s EveryDollar app! It’s simple, straightforward, and free! Here’s what you have to know about the EveryDollar budget app.

The Ugly: Why I cringe at Dave Ramsey’s percentages…

I also don’t like telling people that they “should” give part of their paycheck away. I feel that if people are forced or guilted into giving, then it’s not really a gift. If you’re going to do it, you should do it with your whole heart, and not out of obligation.

Maybe you don’t have any idea who you’d donate to, that’s fine. I bet throughout the year, a few opportunities will land in your lap, and if it lights you up and fits into your monthly budget, then great!

A good practice is to check out the organization to see how they use the donated money. Charity Navigator does a fantastic job of rating non-profits and letting you know how they use donations.

For example, my husband and I like to donate to Give Kids the World Village in Florida. It’s a cause close to our hearts (as our own little one is disabled), and the charity is run exceptionally well. 92% of all funds raised go directly to the programming of the individuals they help, and minimal goes to overhead expenses, marketing, etc. You can learn more here about Give Kids the World & Charity Navigator.

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Fair question. If you are a great executor and can run with a plan then absolutely use DR’s recommendations!

If you’re the type of person that doesn’t do well with fairly detailed rules, then using these monthly budget percentages isn’t for you. Why start something that you know you won’t follow? Even if he is a guru, he’s not for everyone (and that’s totally okay). You need to work with your strengths & weakness if you want to succeed.

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If you want to get started with Dave Ramsey percentages, then here are the steps to take…

  1. Total the take-home portion of your paycheck
  2. Take that income and multiply it by the suggested percent. That’s how much you “should” be spending in that category.  
  3. Split your current spending into the 11 categories above. If possible, use an average of three months of spending to determine what your normal spending is.
  4. Compare the suggested amount to your averages.
  5. Don’t cry; let’s hug it out 🙂
  6. Look at where you’re overspending & underspending, and analyze how & why.  
  7. Brainstorm as many ways as possible as to how you can cut your own personal spending in each category.  
  8. Pick the top 3 ways to cut spending in each category, focusing on those changes over the next three months.

For example:

  1. If you bring home (net pay) $3,000 a month, then for “food,” you should be spending…  
  2. 10% –> $3,000 x .10 = $300
  3. 15% –> $3,000 x .15 = $450
  4. So you should be spending $300 – $450 a month on food.
  5. After totaling up your spending, you find you spend on average $600.
  6. You find that you spend most of the money on pizza, especially on certain days of the week, usually when you work your closing shifts at work. You’re too tired to make dinner for the family, so pizza is a good option.
  7. You decide that your financial goal for your food category is the $450 mark, ideally dropping it another $50 the next month.
  8. You plan to dig out your old recipe book that has your favorite crockpot recipes. Or hey, you got an instapot for Christmas; maybe you’ll take it out of the box and see how it works (#noshame). You’ll plan to use that when you work late and splurge on pizza only one night a month.

Now grab your budget binder (a must-have!) and pull out your printable budget worksheet and plot out where you want your money to go! If you don’t have an ideal household budget form, then no worries, you can snag a  printable budget planner and have it in your hands in less than 5 minutes!

If you’re not quite sure which budget form to get, be sure to check out the Budget Sampler Pack, which gives you a sample budget form for each of the top 5 budgeting methods so you can see which works best for you!

For example, Dave recommends using a zero based budget method (which is the budgeting method); the budgeting percentages can go into any “method” you choose.

Are there alternatives to Dave Ramsey’s budget percentages?

If you want some more flexibility, then consider using the 50/30/20 budgeting method. 50% goes to cover needs, 30% goes to cover wants, and 20% should go to cover savings. And within those three buckets, you do what you want! You can check out the 50/30/20 budgeting method (and other popular methods right here.

Or you can try the budget-by-paycheck method. This is best for those that get paid twice a month. It’s where you split your bills up equally in the month and pay only half at a time.

This is a perfect budgeting method for those that run out of money partway through the month. (Even though this is a different budgeting method, you can still use comparable household budget percentages).

Jean Chatzky’s Recommendations

If you like Dave’s format, but it’s just “too much,” then Jean Chatzky’s method of percentage based budgeting might suit you better (as it’s more streamlined). She is another finance guru, and she always gives good advice! Her budget percentage breakdown goes…

  • Housing – 35%
  • Savings – 10%
  • Transportation – 15%
  • Debt – 15%
  • Other Living Expenses – 25% (this is your vacation, eating out, clothing, etc.

You can see how this is much simpler, yet when you leave room for interpretation, you can easily get off track without realizing it. The only thing I want to add about her’s is her 10% savings goal. It’s a good place to start, but don’t stay there for too long. You should really be aiming for 15%. I know Dave recommends 10% as well, but I’d rather you save more if you have the capacity to.

The 50/30/20 budget method

This budgeting method says that you should…

  • Use 50% of your take home pay for necessities
  • Use 30% of your take home pay for wants
  • Save 20% of your take home pay – retirement, long term financial goals, etc

This method is great because it gives you flexibility with general guidelines (great for people who don’t do well with “rules”.

Non percentage-based budgeting methods

If you don’t like using percentages for budgeting, there are still lots of other budgeting methods you can go with. Remember, the best budget for you is the one that you will actually use. So tailor it to your needs!

At the end of the day

When you compare your percentages to Dave Ramsey’s budget percentages, don’t freak out if they are totally different. Just breathe; you can adjust things slowly and make lots of small changes that can add up to a significant impact.

Remember, nothing is set in stone, and you can always go back and change it if it doesn’t work. Just know that budgets always need to be tweaked; there’s no set it & forget type of scenario. As long as you keep trying, you are #winning!

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Do you think Dave Ramsey percentages are a good guide for a beginning budgeter?

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  1. Wow! This was such a comprehensive summary of Dave Ramsay’s budgeting strategies. But, I also love that you give modifications to help personalize depending on individual situations. I agree with you, it can vary and cost of living was a great example of that! Pinning! Such a great resource…thank you! ๐Ÿ™‚

  2. I like Dave Ramsey for beginning budgeters and those trying to pay down their debt. I think his attack plan for debt is a good one and works. I don’t know what I’d do without my budget binder ๐Ÿ™‚ Very well written; enjoyable read. ๐Ÿ™‚

  3. I had no idea that budget percentages existed. It certainly improves your planning! I am a fan of Dave Ramsay as well, but I havenโ€™t read his book in a while. Iโ€™ll have to revisit some chapters!

  4. Super helpful exercise for me to do a quick calculation to see where we fit in with the Dave Ramsey method. Very interesting. Cost of living for housing, and utilities is crazy where we live and definitely more than the recommended percentages, even with decent income. The ranges are helpful, and the system a good tool to get budgeting started with.

  5. Love the way you wrote this out. I have a girlfriend who could really benefit from this little breakdown, sent her a screenshot of the graph already ?
    Thanks for putting this together. Budgeting is so important.

  6. This is really good to know. I only knew 25% for housing and wasnt sure where the rest really should go. I just know that I needed to save, save, save!

  7. I just started “Total Money Makeover” yesterday. I am on fire about getting out of debt and financial freedom. I’ve been headed this way for a while and now it’s in action. This post was so helpful and timely! Thank you!