Loans By Kathy: Every Household Should Have a Budget - Step 2

Every Household Should Have a Budget - Step 2

Kathy Sheehan


Every Household Should Have a Budget - Step 2.  In the Getting Started blog, you were tasked with tracking all of your expenses for a month.  Now that you have started pulling the information together you know when, where and how much you are spending.  Was it a surprise?  For most it is.


Now that you have an overview of what you are currently spending on a monthly basis, it is time to make some tough decisions and change some habits.  Here are a few rules that will help get you on track:

  • Rule #4.... Follow these guidelines to determine what you should spend
    • Your housing expenses should be no more than 30% of your income
    • Your savings should be 10% of your income
    • Your utilities should be 3-4% of your income
    • Your food 15-20% of your income
    • Medical 5%
    • Clothing 2-4%
    • Transportation 5-20%
    • Debt payments 15-20%
    • Miscellaneous 5-10%

Now keep in mind the more you spend in one category will limit the amount you can spend in another.  


To check out the other blogs in this series, please click below:

 Every Household Should Have a Budget - Getting Started



If you found this blog valuable, please subscribe by clicking the button to the right.  




Kathy Sheehan Senior Loan Officer






Bay Equity LLC

FacebookTwitterLinkedInApply Now

11475 Great Oaks Way, Suite 350, Alpharetta, GA 30002

800.BAY.3703 Bay Equity LLC NMLS ID#76988



What to learn more, Google Me!



The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.


Comment balloon 44 commentsKathy Sheehan • August 14 2013 06:38PM


Kathy, good suggestions for every family and good for kids to learn, too. Thanks.
Posted by Mary Yonkers, Erie/PA Real Estate Instructor (Alan Kells School of Real Estate/Howard Hanna Real Estate) almost 6 years ago

Thank you  Mary.  You are never to old to learn to budget.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

Kathy, I'm very proud to say I no longer have a balance on a Credit Card anywhere - but there were several times when I said "I wish I had listened to my mother" as I plowed thru paying them all off!  Cheers for a GREAT post - I'm trying to figure out how we get our government to see your post - they might learn something too!

Posted by Elise Harron, Rural Vacant Land and Development Specialist (Dirt Road Real Estate) almost 6 years ago

Dave Ramsey is the answer for most American Households. They are simple but powerful steps. Nice to walk around with cash in hand.

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (Real Estate and Beyond, LLC) almost 6 years ago

No budget, no household happens. Living below your means and not being tied to store bought everything, carrying a load of debt that suffocates. Simple is rich. Not owing money is freedom, peace. Teach your children well. That you can not have money in the bank and everything shiny going., out there.

Posted by Andrew Mooers | 207.532.6573, Northern Maine Real Estate-Aroostook County Broker (MOOERS REALTY) almost 6 years ago

Good Morning:  This is a great post and good Info for all,  keep up the good work and good luck with your business,  E

Posted by Ed & Tracy Oliva, The Oliva Team Arizona Agents (West USA Realty - Arizona) almost 6 years ago

Kathy, excellent advice! Making and adhering to a budget is one of the most important things anyone can do to maintain financial security.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA almost 6 years ago

Nice Series Kathy. We often hear about those who are ready to buy but spend more than they earn!

Posted by Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400, Long Island Home and Condo Specialists (The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803) almost 6 years ago

Good advice for consumers. Home bueyers should set a budget and see if they can afford to buy before making a decision to buy.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) almost 6 years ago

thanks Kathy for such a great post...most people think they know their expenses but it's really not til you have it all written down, you realize your true spending

Posted by Goran Utvic, We Buy & Sell Chicago Houses Fast (606 Homes LLC | Chicagoland Brokers Inc, Chicago IL 60656) almost 6 years ago

We started one in 2008 when my husband got laid off. Now we more or less stick rigidly to it. Certainly stopped the unnecessary money wasting.

Posted by Corinne Guest, Barrington Lifestyles (Corinne Guest, Realtor | Barrington Realty Company) almost 6 years ago

Elise, getting rid of credit card debt should be a priority for everyone.

Harry, thanks for your comment.

Andrew, those without a budget live paycheck to paycheck.

Thanks Ed!

Michael, I agree!

I see that more often than I would like.

Gita, it is the first question I ask!

Goran, it is a good way to curtail the impulse spending.

Corine, you did what you needed to do.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

Kathy, I believe your projection of only 2% for medical is far outdated from the current picture and the not too distant future thanks to our illustrious President and his cronies in Congress.

Posted by Sandy Padula and Norm Padula, JD, GRI, Presence, Persistence & Perseverance (HomeSmart Realty West & Geneva Financial, Llc.) almost 6 years ago

Norman, thank you for bringing that to my attention.  It was actually to be 5%.  It was a typo that I didn't catch.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

Your blog is full of good information. I am not the best at budgeting or being conservative with spending so I found this especially interesting. I am going to give your suggestions a try and see if I can improve.


Posted by Team Honeycutt (Allen Tate) almost 6 years ago

Kathy, this is excellent information. Looking at this budget, I am betting that many people need to take a hard look at how they are using their income.  I still have the ledger that I kept when I was firs married and kept track of every single penny I spent.

Posted by Sharon Parisi, Dallas Homes (United Real Estate Dallas ) almost 6 years ago


"Don't spend more than you earn."

"Saving is NOT an option."

Incredible how much you save with just these to two and how little people heed these warnings. Overspending guarantees that the credit cards are always out so the debt is always high so you're stuck in a vicious, never-ending circle. Hopefully, this is the time when people listen. 

Posted by Phil Stevenson, CRMP, "Mortgage Nerd" in Miami, Florida and Texas (PS Mortgage Lending 305-791-4874 or 888-845-6630) almost 6 years ago


This is great information to not only share with any and all clients but information that should be implemented at the personal level as well...thanks for sharing!


Posted by Anthony Rollins, The Adam Butler Team (Keller Williams Realty-Overland Park) almost 6 years ago

Great information! I especially like the percentages because this gives a better way to interpret cash flow. Living outside of ones means has become almost the norm these days. We have to take control of our finances instead of our finances controlling us!

Posted by Marilyn Wier, Your League City & Surrounding Areas REALTOR! (RE/MAX Space Center) almost 6 years ago

Great tips Kathy! We have to be inventional about our household finances so we know what our priorities are and will be in the future. If only more people would heed this advice.

Posted by Fred Sed, Your Orange County Realtor, Why? Because Fred Sed (Fred Sed Group ~ Your Premier Southern California Realtors) almost 6 years ago

With what has happened to healthcare I wish I only paid 5% of my income. I especially like the savings part. It is a necessity.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) almost 6 years ago

What a great resource! I had missed the first part so I'm glad you posted the link to it. This is wonderful!

Posted by Trisha Bush-LeFore, Providing Realtor Services in the Walla Walla Area (Preferred Properties Land & Homes) almost 6 years ago

Re-blogged it.  Thanks.  I think my clients will really have a use for the simplicity of it.

Posted by Jay & Michelle Lieberman, Creating Calm in the Buying and Selling Chaos (Keller Williams World Class) almost 6 years ago

Hi Kathy: I came over from Debbie Reynold's reblog. Thank you for this great advice. You should do a separate one for "independent contractors" who never know what they are making from one month to the next or when it comes in. My advice? Keep at least 3 months worth of expenses in a savings account to smoothe out those highs and lows.

Posted by Hella Mitschke Rothwell, Hawaii & California Real Estate Broker ((831) 626-4000) almost 6 years ago


BRILLIANT!  We are fortunate to work with buyers who are great savers and typically put down quite a bit.  Life is so much easier when you know where you are, work within your budget and are ahead of the curve.

All the best, Michelle

Posted by Michelle Francis, Realtor, Buckhead Atlanta Homes for Sale & Lease (Tim Francis Realty LLC) almost 6 years ago

Kathy - Fantastic post! I cannot believe how many people are clueless about their finances!

Posted by Lisa Friedman, 29 Years of Real Estate Experience! (Great American Dream Realty) almost 6 years ago

Great advice Kathy...Thank you...

Posted by Linda Balades, Broker Associate (Comfort Real Estate Services) almost 6 years ago

Kathy- This is the hard part of budgeting but very important. Controlling spending can be a challenge.

Posted by Donna Foerster, Metro Denver Real Estate Agent (HomeSmart Realty Group) almost 6 years ago

Bett, I hope you find it helpful.

Sharon, this is a conversation I have on a daily basis.

Phil, it is a lesson I learned early on.

Anthony, my pleasure.

Marilyn, of course it should be tailored to each individual, but it is a good guide.

Fred, I am on a mission.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

It never ceases to amaze me some high income earners have little to nothing in the bank? It also never ceases to amaze me some very low income earners follow your guideline of savings is NOT an option and they have a substantial savings.

Its nothing to do with income its everything to do with spending/SAVINGS!

Posted by David Shamansky, Creative, Aggressive & 560 FICO - OK, Colorado Mtg (US Mortgages - David Shamansky) almost 6 years ago

Bill, it all depends on what the individual's needs are.

Thank you Trisha!

Thanks for the re-blog.

Hella, that is a great idea!

Michelle, I appreciate it.

Lisa, thank you!

Linda, I appreciate the comment,

Donna, everyone needs a plan.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

David, have you been talking with some of my clients????  You are right, it is all about the discipline

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

Kathy, just read David's post on real problem for Realtors - it's not the income, it's the expenses.

So, yes, one needs budget and follow one basic fact -- Do NOT spend more than we earn! So simple - but not easy for sure.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) almost 6 years ago

Kathy - So many don't enjoy looking at the realities of their budget, and it's so important.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) almost 6 years ago

Thanks for the "formula". I'm going to sit down & tweak the percentages for my own personal use, but will use this as a guide to young Buyers.

Posted by Travis "the SOLD man" Parker; Associate Broker, email: / cell: 334-494-7846 (Team Linda Simmons, Enterprise, AL 36330) almost 6 years ago

every time that I prepare a budget for a client, I look at my own has never been the same twice in 27 years!!!

Posted by Paddy Deighan JD PhD, Paddy Deighan J.D. Ph.D ( almost 6 years ago

Rule number 5 should say "see rule #1".

Posted by Liane Thomas -Top Listing Agent, Bringing you Home! (BROKER Allison James Estates & Homes BRE 01885684) almost 6 years ago

Medical at 5%????  I would have needed and income of $740,000 last year.  If you are self employed and have any medical issues, your medical costs will far exceed 5% unless your income is huge.  Ours exceeded our mortgage (with taxes and insurance).  I certainly agree with your assesment for savings and housing, but unfortunately today medical costs are out of control.

Posted by Rafi Footerman, Home Inspector, Mold Inspector, Radon and More! (Mid Jersey Inspections) almost 6 years ago

Praful, David and I seem to think alike.

Christine, it is important and so often overlooked.

"Travis, thanks for the compliment.

Paddy, a budget should be tailored to each individual.

Liane, that is a great idea!

Rafi, again, the budget needs to fit the needs of the household.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

The need to know and pay attention to cash flow is more important every day.  Thanks for putting the numbers to it.

Posted by Dwight Puntigan, Dwight Puntigan (DRP Realty, LLC) almost 6 years ago

Kathy, I think I'm going to put this in my Buyer's Book because this is a great simple budget that can be tweaked for a particular family. Thanks!

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) almost 6 years ago

Dwight, I agree with you.  

Sharon, every budget needs to be adjusted for the specific needs of the household, but this is a good starting point.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago

Hi Kathy, we wholeheartedly agree.  We once had to go on an aggressive budget to pay off some debt and have been debt free ever since - over 30 years!

Posted by Bob Miller, The Ocala Dream Team (Keller Williams Cornerstone Realty) almost 6 years ago

Bob, sometimes you have to do what is necessary to get back on track.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 6 years ago