Why I Loathe Percentage-Based Budgets

By Karen Whaley

October 5, 2018


Budgets come in many shapes and forms. And no one budget type is right for everyone. However, I loathe percentage-based budgets. Absolutely. Unequivocally. They upset me and, if you have an ounce of individuality, they should upset you too!

When first starting on my personal finance journey, one of the largest challenges I faced was determining how much I should be spending in each expense category. To answer this question, I turned to percentage-based budgets. After all, I had no clue what was “normal” or what I “should” be spending, but I had a mountain of debt that I needed gone ASAP.

Percentage-based budgets seemed like the perfect answer to my dilemma and a great way to set my finances on track.

Crash Course in Percentage-Based Budgets

Percentage-based budgets determine how much money to spend in each expense category as a percentage of your income.

There are two main approaches I have seen for deciding the income percentages.

1) The first approach is to provide individual percentages for each expense category. An example of this approach is any time you hear, “you should spend between 25-35% of your income on housing.” Many a famous financial guru provide percentage amounts for expense categories ranging from housing to food to fun. Heck, even I used to teach classrooms of high schools students that they shouldn’t spend more than 20% of their income on transportation costs. (My bad, sorry all you young minds I filled with BS!)

2) The second approach requires a little more internal emotional digging and uses the broader categories of wants, needs, and savings. You review and determine what percentage of income to spend based on the emotional type (need vs want) of the expense. The 50 30 20 budget is probably the most commonly known broad scale percentage-based budget type. The idea was made popular by Elizabeth Warren in the book All Your Worth. When using the 50 30 20 budget, you are to spend 50% of your income on needs, 30% on wants, and 20% on savings.

Check out this article if you want more information on various types of budgets. They refer to percentage-based budgets as traditional and proportional, respectively, but the general concepts are the same as I just described.

Why I Loathe Percentage-Based Budgets

Just because many people use percentage-based budgets does not make it a good budget practice. As a matter of fact, anything the masses do in general should probably be questioned by the individual. Groupthink, anyone?

However, I have three very specific reasons I loathe percentage-based budgets.

Reason 1 – Varying Amounts

While the percentage of income remains consistent, the amount can vary greatly! This is especially an issue in cases where the income is extremely low or high.

Sure, 10% on food seems reasonable if you bring home $4,000/mo ($400/mo on food). Yet, if your takehome pay is $1,000/mo or $10,000/mo ($100 or $1,000 on food, respectively) neither of these amounts makes a whole lot of sense! If you are spending $1,000/mo on basic food, odds are high you are missing out on some serious spending satisfaction.

Reason 2 – The Rat Race Continues

A percentage-based budget firmly cements your feet in the rat race of life. As your income climbs so do your expenses. This is also known as lifestyle inflation. And yes, I am all about a satisfying lifestyle, but very rarely do I encounter a person that reaps $1,000 (or more) satisfaction out of their basic food expenses even when they can “afford” to spend that much.

When you use a percentage-based budget, you are becoming like all the other rats in the race! You are letting someone else determine your dreams and priorities for life. Month after month you are feeding the consumerism lifestyle that may or may not be what YOU want.


You were born an original, don’t die a copy. ~ John Mason


Using a percentage-based budget method, you become a copy. And being a copy is no way to live!

Reason 3 – Missing Categories

Pardon me while I briefly step on to my soapbox. One of my biggest pet peeves with individual category percentage-based budgets is I’ve never found one that provides a percentage on how much to spend for childcare! This is a huge (and very critical) expense for many families in our society. And yet no percentage-based budget I’ve seen gives a guideline for how much to spend in this area. Many a guidance I’ve seen completely ignores the issue of childcare or tell you “it depends.” However when you factor in childcare expenses, none of the other percentage guidelines provided for shelter, food, clothing, etc. work!

Further, determining a percentage to spend on one’s hobbies – separate from fun or entertainment expenses – is hardly considered. Even the 50 30 20 budget skims over the idea of hobbies and lumps it in with “wants”. But hobbies are often where we find flow and reach the highest level of psychological human needs. Flow is the self-actualization that Maslow’s Hierarchy of Needs says is the pinnacle of our human existence.

The highest level of spending satisfaction is realized when we spend our money to create flow.

Creating a Budget that Reflects You!

Now that you understand the three main reasons I loathe percentage-based budgets, you may be wondering, “What do I do instead?”

First, I would like to be clear, if you are new to budgets, percentage-based budgets can be a great place to start. (However, just tracking your spending will make the most impact on your spending life.) Percentage-based budgets allow you to gain a general idea of where your spending may be way out-of-whack and why you are unsatisfied with your spending or struggling to pay bills. They provide general insight into the relationship between spending areas.

However, percentage-based budgets are only a starting point, not an ending point in your satisfied spending journey.


Instead, review your top spending areas and understand how they do or don’t support your time and value-based goals.


Once you have grasped which spending areas most align with your satisfying goals, focus on widening the gap between goal-based spending and basic survival spending. Keeping in mind spending on wants is where we gain the most satisfied spending!

I lovingly refer to spending on wants as “dark side” spending and spending on survival basics as “light side” spending. It is the difference between the dark side and light side spending that we feel in our daily lives.

Bottomline, the percentage of your income you are spending in various areas doesn’t matter. It is through focusing on spreading the gap between goal-based spending and non-goal-based spending where we achieve the greatest satisfaction!

Karen Whaley

About the author

Karen Whaley

Financial Lifestyle Coach
Certified Financial Instructor


I help clients use money to live - not live for money. If that sounds appealing, you are in the right place my friend!

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