Budgeting is an essential part of your family’s financial planning. Creating and following a budget can help you and your family to live within your means, save money for the future and avoid building debt. While statistics show the average it is helpful to have an idea of household budgeting percentages.
In New Zealand statistics are collated by Statistics New Zealand and in the USA it is the Bureau of Labor Statistics.
In both America and New Zealand the highest percentage of spending is on housing. While the average American family spends almost one-third of their monthly income on housing in NZ the housing and household utilities group made up a quarter of total household spending. There are differences in how this is calculated as the US the figure includes repairs and furnishings.
The next highest percentage in America is 18% for transportation while New Zealand shows 13%. Interestingly the figures for food are reversed as in the US this is 13% and includes dining out. In NZ 18% is spent on food but another 10% can be added for culture and recreation.
Percentages will obviously vary from household to household as the percentage will depend on the income you receive related to the amount you spend. You can be assured however that you are not alone when you think that 25 – 33% of your income is going on housing. Higher percentages are a concern. It certainly is a rough guide as percentages are subjective.
To find your own percentage; add your monthly figures together and multiply by 12 to give your annual spend. You then divide this figure by your income and multiply by 100 to get your percentage spend to compare to the average.
In setting your budget, record all of your spending. List all the essential expenses under broad headings such as housing, transportation, food and groceries. These are all essential to your wellbeing.
Under housing or accommodation use sub headings such as mortgage or rent, repairs and maintenance, property tax (rates) and insurance. Record how much you spend in each area. Under the heading of transportation use sub headings of gas (petrol), licensing, maintenance (including warrant of fitness), insurance and public transport, if applicable.
Listing life and health insurances, food and groceries are other essential spending categories. Then there are expenses that are discretionary such as your entertainment and gift giving.
Household budgeting percentages can only be used as guide. The most important part of the exercise is to create a working budget that fits you and your family’s lifestyle and ensures that you can achieve your financial goals.