A Strategy to Make Your Budget Better

A Strategy to Make Your Budget Better

This is part 2 of the “Do you have a budget?” series.  See part 1 here.

So you have a budget.  Great!  

But we aren’t done yet. 

It’s time to level up.  

A budget by itself doesn’t mean much.  It’s like driving your car at 40 mph.  That fact alone doesn’t really tell you anything.  But when you look at it in context, you get a story.  
For example, you could be going 40 in a 25 or you could be 40 in a 75.  Two totally different situations depending on the speed limit.  The same concept can be applied to budgets.  

It’s about your context and your end goal for your finances.

Let’s dig deeper into what I consider essential budget line items.  I will be using data from a recent survey called Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics.  See this article for an infographic depicting the average American spending in the categories I am about to discuss.  

The strategy here is to consider comparing your budget percentages with a benchmark.

Lets dive in, looking at how I stack up.


I would say food is the most important category.  It is absolutely essential.  You got to eat.  In 2015, Americans, on average, spent around 10% of their pre-tax income on food.

There are usually 3 variables that impact one’s monthly food budget:

  • Family size
  • Location
  • Eating out vs. cooking at home

Look at USDA

My food percentage13%

Why?  For three reasons: we have baby #2 on the way, we enjoy eating out, and NYC food prices are astronomical.


Housing is the next important category.  The national average is 26%.  People are paying on average $1500 for housing. However, as real estate agents would say, it’s about “location, location, location!”

I live in New York City, and it is expensive.  For New Yorkers the percentage is probably way higher than 26%.

Again depending on where you live, you will have to tweak your housing budget to make it realistic and attainable considering the market rate for housing in your region.

What is mine 13%

Why?  Because we live with family.  A huge blessing.  It allows us to take care of  If you can’t find a reasonable rent/mortgage that will fit into the budget, then I would suggest living with family, or housemates. It is not worth it to spend more than half your income, as some New Yorkers do, to say you live in a desirable city or neighborhood.


Thirdly, I would list transportation as the next necessity.  Americans spend nearly 14% of pre-tax income on transportation.  Again, depending on where you live, this amount can vary greatly.  This category includes gas, public transportation, and car insurance.  This can also be highly variable depending on where you live and how your daily commute looks like.

What is mine5%

Why? I lived in the DC Metro area for 3 years, and I commuted to work every day by car.  Now I live in Brooklyn, and I take the subway.  I barely drive.  As a result, my percentage shifted downward.


I would rank healthcare fourth on my list of essential expenses.  People try to cut corners here (mainly guys).  They put off regular doctor’s visits.  When they get sick they run to Urgent Care or the Emergency Room.  I realize, after doing this for a couple of years, it would be wise to budget some healthcare expenses (guys I am talking to you).  As long as you are breathing, there is always a potential for a serious medical incident to occur.  Americans spent around 6% or around on health care in 2015.  Note, that I would include personal care items in here as well.

What is mine8%

Why? We have been spending a little more recently due to baby #2 on the way.


Now that popularity of smartphones have exploded, the cost of plans have exploded as well.

Back in 2001, according to BLS, Americans spent on average $20 a month on cellphone plans.  That’s crazy!  Compare that to what we pay now.  I pay over $30 just for data!

Unfortunately, the BLS did not break out the average spend on cell phones so I would estimate that is accounts for %2.

Whistleout.com has a great chart on assessing your current phone plan, to see if it is currently the best price for your family.

What is mine2%


What I consider essential totals up to 58%. Meaning American’s approximately spend 58% of an average pre-tax income on essential items.  BLS calculated the national average annual income to be around $69K. Obviously, there is a wide spectrum of incomes, but this, at the very least, gives us a starting point to develop percentage benchmarks.  My spending profile totals up to 40%, with the variance being mostly in the area of rent and transportation.

What About The Other Budget Lines? Like My Weekly Brunch with a Mimosa and Avocado Toast?

In a recent post, I discuss about the personal aspect of budgeting. There are guidelines to budgeting, but no guideline can inform your values and priorities. Rather, your values and priorities inform your guidelines.  What I am referring to here is what I call “personals” or the spending related to the non-essentials.  

An example of a “personal” for my family is eating organic when possible. So our food budget is going to be way above the USDA family food budget. 

Recently, a millionaire said to millennials that “if you to stop eating food like $14 avocado toast, you all could afford a house.” 

What is your avocado toast? 

A $14 avocado toast once a month won’t break your budget. But you can’t have your cake and eat it too. 

Something has to give. 

Read more here

Have you tried comparing your budget to averages? What is essential in your budget?  What is personal?