How To Create a Frugal Spending Plan

In this article: What does a typical frugal budget look like? These guidelines can help you set up a frugal spending plan that hopefully keeps you out of financial hot water.

by Andrea Norris-McKnight

How to Create a Spending Plan for Frugal Living photo

Dear Dollar Stretcher,
I am trying to put together a percentage-based spending plan for my frugal lifestyle to help ensure I can avoid financial trouble while still saving for the future. I know there are a number of budgeting plans recommended by financial experts, such as the 50/30/20 or 70/20/10 plans. However, I would like to get more specific with how much I can spend on various budget categories, like housing, auto, and food, so I know if I am overspending in the categories compared to my income.

What percentage of my take-home pay should I spend for various needs, and how much should I save for the future?

How Percentage-Based Budgeting Guidelines Work

With rare exceptions, everyone has to deal with having just so much money to cover all their expenses. And, if you spend more than you take in for very long, you get into trouble. That’s why you should have a spending plan (a budget) that outlines how much you can spend on various expenses based on your income.

Percentage-based spending plans are excellent for providing general budget guidelines to help ensure you keep a financially healthy and realistic balance between saving, essential spending, and discretionary spending. But these types of budgeting rules might be too general for those new to budgeting or wanting to fine-tune their budget to spot spending leaks or potential cost-cutting opportunities.

Consider the popular 50/30/20 budgeting rule. With this rule, 50% of your take-home (net) pay goes toward essential bills and expenses, 30% to discretionary spending and 20% is saved for financial goals. Some people, including some financial experts, consider the 50/30/20 unrealistic. Many of us can’t get by on only 50% of our net income, even living frugally.

The 70/20/10 is more doable for some people — 70% on essentials, 20% on ‘wants’ and 10% on financial goals. The problem with this budgeting rule is that it can be too broad. By allocating 70% of your budget to essential expenditures, you might not notice if you’re overspending on essentials, or you may overlook some simple cost-cutting opportunities that can free up money for other things. This is where detailed percentage-based budget guidelines can come in handy.

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A Typical Spending Plan

Now, consider what a typical detailed spending plan might look like. You can find several different spending plan guidelines online. You likely won’t find one that works perfectly for your budget, but you can use one as a starting point for coming up with a spending plan tailored to your financial situation, which will vary based on where you live, the size of your family, whether you rely on a car or public transportation, etc.

Here is a common spending plan based on recommendations by Dave Ramsey:

Housing 25–35%
Food 5–15%
Transportation 10–15%
Utilities 5–10%
Insurance 10–25%
Health 5–10%
Clothing 2–7%
Miscellaneous Essential Spending 5%
Savings 10–15%
Charitable Contributions 10–15%
Personal Spending 5–10%
Debt Repayment 5–10%

If you struggle with a tight budget that leaves little money for savings or discretionary spending, comparing it to the above guidelines can help you determine where you should look for some relief. For example, suppose your current rent or mortgage payment is closer to 45% of your overall budget. You’ll know that you should probably look for a cheaper apartment when your lease is up, refinance your mortgage if interest rates drop or move to a smaller home with a smaller mortgage. Or find some way to increase your monthly income by about 10%.

As you compare your current budget to these percentages, remember that these are guidelines, not a straightjacket. The truth is that very few people will fit into any recommended framework. The above guidelines merely give you a starting point for creating your own percentages. If you live in a big city and don’t own a car, perhaps you can afford to increase your housing budget a bit beyond the recommended 35%. If you don’t carry any consumer debt, perhaps you can afford a slightly higher car payment. The idea is to tailor your spending plan to your needs and adjust it as you go through life and your needs change. Just make sure your tailored budget isn’t setting you up for a financial mess.

One thing to notice about the spending plan is that housing, food and auto make up the lion’s share of budgetary expenses. That’s true for almost everyone. It’s in those three areas that most families get into trouble. Food costs are easier to trim. However, once you buy a home or vehicle you can’t afford, it can be very hard to undo. So consider your budget carefully before taking on a big mortgage or car payment.

How To Categorize Expenses in Your Spending Plan

Categorizing a detailed budget can take more work and organization than tracking the 50/30/20 or 70/20/10 budget because you have to juggle multiple budget categories and figure out how to categorize various expenses.

Consider household cleaning supplies. Many people buy them at the grocery store. So, are they housing or food expenses? The answer is that it doesn’t much matter. Put them wherever it seems best to you. The key is always putting them in the same place so you can compare results from month to month. You could even create a budget category just for cleaning supplies if you prefer.

The goal with your frugal spending plan is to set up something that isn’t too tedious to track yet detailed enough to make it easy to spot spending leaks and saving opportunities.

Note that if your spending plan has a debt category, it is for consumer debt, such as credit cards, personal loans and student loans. Your mortgage and auto loan should be included under the Housing and Transportation categories, respectively.

How Much You Should Be Saving?

Even on a tight budget, you should save something, even if it is only 3% or 5% rather than the recommended 10–15%. This will allow you to develop a savings habit and ensure you work toward establishing an emergency fund and reaching other financial goals. Then, gradually increase your savings percentage over time.

How To Make a Spending Plan for Frugal Living

1. Track your expenses.

If you don’t have a budget, start by tracking your spending for at least a month to understand your spending habits. Use a spreadsheet, app, or pen and paper to record every transaction, including bills, groceries, dining out, and miscellaneous expenses.

2. Categorize your expenses.

Organize your expenses into categories. You can try one of the general percentage-based budgeting rules, but a detailed spending plan will help you identify areas where you can potentially cut costs.

Don’t forget to include a category for savings, even though it isn’t an expense. A spending plan tracks where all of your income goes, not just what you spend.

3. Set financial goals.

Establish clear financial goals, both short-term and long-term. These can include paying off debt, building an emergency fund, saving for a vacation, or investing for retirement.

4. Set your budgetary percentages.

Create your frugal spending plan by allocating funds to each category based on your tracked expenses and financial goals. Ensure that your total expenses and savings do not exceed your income. If they do, start looking for ways to lower some categories, hopefully without lowering the percentage you save monthly.

5. Implement frugal habits.

Adopt cost-saving habits such as meal planning, shopping with a list, comparing prices, buying in bulk, and repurposing or repairing items instead of replacing them.

6. Monitor and adjust your frugal spending plan.

Regularly review your spending and compare it to your budget. Pay close attention to how your frugal efforts improve specific budget categories. Hopefully, you’re able to reduce the percentage of your income allocated to some categories so you can increase the savings category. However, if you continually overspend in some category, you may need to increase the amount allocated to it by lowering how much you spend in another.

The Benefit of a Spending Plan for Frugal Living

Most families that follow budgetary guidelines can avoid many common financial problems, such as buying too much house or car or carrying more consumer debt (credit card debt) than their budgets can support. Coupled with a frugal lifestyle, you should be able to live comfortably today while saving for a comfortable future.

Reviewed March 2024

About the Author

Andrea Norris-McKnight took over as the editor of The Dollar Stretcher and After 50 Finances after working under the site founder and previous editor for almost 15 years. She has also written for,, and The Sacramento Bee.

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