Dave Ramsey Budget Percentages: Budgeting rules

dave ramsey budget rules

Dave Ramsey budget percentages are one of the famous budgeting percentages on money management and expense tracking. He is renowned for his financial baby steps, debt payment snowball, and wealth-building. If you’re an avid saver and personal finance enthusiast, you’ve come across a lot of budgeting percentages. While these are just guidelines, it serves as an example for budget management in each expense category.

Dave Ramsey Budget Percentages

Budgeting is not an exciting task. Most people struggle with this, but it is a significant financial goal for cost-cutting and money management. For anyone who is looking for a guideline, Dave Ramsey’s budget percentages are an excellent example.

Dave Ramsey divides expenses into 11 different budget categories. He suggested a practical household budget percentage to each category from your after-tax take-home pay, as shown in the table below:

  • Giving – 10%
  • Saving – 10% -15%
  • Food – 10%
  • Utilities – 5% to 10%
  • Housing – 25%
  • Transportation – 5%-10%
  • Health – 5% to 10%
  • Insurance – 10 to 25%
  • Recreation – 5%
  • Personal Spending – 5%
  • Miscellaneous – 5% to 10%

What are the percentages for Dave Ramsey’s budget?

Dave Ramsey’s budget percentages are just a guideline for anyone struggling to budget. These are go-bys that anyone can use to get started with budgeting. Most of the expense categories are hard percent rule, but some have several other affecting factors that a fixed budget percentage may not work.

What is Dave Ramsey’s 25 rule?

Dave Ramsey’s 25 rule is also called the 25 House rule. According to the 25% mortgage rule, you should not buy a house that exceeds the monthly house payment by 25%. The 25% mortgage payment is a conservative amount of how much house you can afford. It ensures you’re not buying a house without busting your budget.

People can easily qualify for a mortgage for 30% of their income, if not 50%. That does not mean they should buy a house up to their qualifications. We assume our income will stay the same or improve over time. While it should, anything can happen. I’m sure the pandemic has taught us many things. People can lose their job or investments. Things can change more drastically than we have ever dreamt of. Therefore, it is better to stay conservative when it comes to money.

The 25% house rule gives you enough wiggle room for unforeseen expenses. Your house will not take up all of your income. It’s better to stay cautious than regret that you’ve bought too much house.

What is the 30 rule?

Dave Ramsey’s 25 rule takes a conservative approach to the 30 rule. The 30 rule states that one should not spend more than 30% of the after-tax dollar on housing. The 30 rule is a cap to how much house you should be buying to live comfortably. We all want to buy a house so big that everyone would envy it, but we also must make sure we have enough money left over.

The 1% rule

The 1 % rule, also called the 1 rule in real estate, is a rule of thumb real estate investors use to evaluate investment property quickly. Based on the 1% rule, the monthly rent collection from an investment property should be equal to or greater than the 1% of the total investment to make a profitable purchase.

1percent rule

The 1% rule also applies to analyze the house for a primary residence. You can use it to buy your first house and check to see if it is affordable by using the 1% rule. Based on this rule, if you can afford to spend (easily without changing your lifestyle) 1% of the total house cost every month, you can afford the house.

Let’s clarify this with an example. Say you are trying to buy a house that costs $300,000. For a $300,000 house, you should expect a monthly expense of $3,000 (1% of the house price).

How much of a house can I afford if I make 70000?

If your pre-tax income is $70,000, the estimated after-tax yearly income is approximately $54,000 ($4,500 per month). Following Dave Ramsey’s 25 percent rule, your monthly mortgage should not exceed $1,125 on a 15-year loan. By using a 3 percent interest rate, 20 percent down payment, and 15-year fixed term, you can only afford a house that costs $170,000.

Now let’s use the 30 rule to calculate the house one can afford with $70,000. For $4,500 a month, 30% of the monthly income is $1,350. By keeping the same 3% interest rate, 20% down, and a 15-year term, you can afford $205,000 houses.

What are Dave Ramsey’s four walls?

Dave Ramsey’s four walls of budgeting are Food, Utilities, Shelter, and Transportation. These are the four items everyone must include in the budgeting plan. You should take care of these four living expenses during financial hardship before thinking about anything else.

Food is essential for energy to get going. If you don’t eat, you can’t work, and if you don’t work, you will not have any income to support the cash problem. Therefore, food always comes first. After food, next is utilities. You need to have water and electricity. A shelter where you can stay and spend the night and a means of transportation to get to the places is the next necessary wall of personal finance.

Only if all these four walls of money are covered can a person focus on other vital aspects of personal finance.

Dave Ramsey 4 walls

What is the 70 20 10 budget rule?

Also known as the 70 20 10 money rule, the budgeting concept indicates one should spend 70 percent of after-tax income on expenses, 20 percent goes to saving, and 10 percent loan repayment and charity.

The 70/20/10 budgeting rule is so simple that anyone can implement it. It only requires you to limit your total expenses within 70 percent; therefore, the budgeting technique is also called the 70 percent rule.

What is the 50 30 20 budget rule?

The 50/30/20 budget rule is a simple budgeting plan that separates needs, wants, and savings into a three percentage pool. Based on the rule, 50% of after-tax income goes for necessities that you must have for survival. These are house, car, insurance, and utilities.

Once the basic needs are covered, one must save 20% of income for the future. The savings are essential to make your money grow once invested in tax advantage accounts, individual accounts, or businesses. The emergency funds also fall into the 20% category.

The third pot of money is the remaining 30% of the income that goes towards non-essential items like a gym membership, cable subscriptions, expensive purchases that you’d want to have. You’ve worked hard; therefore, the 30% goes towards enjoying the fruits of your labor.

What is the 80/20 rule in savings?

The 80/20 rule in savings is nothing but a consolidated version of the 50 30 20 rule. Based on the rule, 20% of the after-tax income should go to savings and 80% into needs and wants. The main focus of this rule is the 20% saving.

You must save a portion of your earnings before spending money on non-essential items. It is famous as “paying yourself first,” as referred to in the book, The Richest Man in Babylon. The rule is so straightforward that you almost don’t have to do any math. It lays down a foundation to save money first before Spending.

How much should I spend on a car if I make $60000?

Anyone making $60,000 annually probably gets approximately $50,000 after taxes. The monthly after-tax income is around $4,000. Dave Ramsey recommends not to exceed 10% on the transportation. This amount equals $400 a month on a car payment. You can probably pay more than $400 per month but should try to remain within the recommended percentage if you have other liabilities.


All the budgeting percentages are just a guideline for us to plan for the future. They help us limit our expenses and prevent us from financial burden. Our inclination to use anything premium and expensive is good, but you have to make sure you can afford it.

Most of the time, we spend money on “wants” that we regret down the line. Sticking with a budgeting plan that works best for you is always a wise decision. The simple budgeting percentage can help you get started immediately.