How to budget for living expenses

What are living expenses?

Living expenses provide you with a basic standard of living, including food, water, clothing, electricity and healthcare. Here are some common types of living expenses:

Home expenses

1. Home expenses. These costs include mortgages, property taxes, rent and home insurance.
2. Costs that make your home "liveable". Consider utility bills and appliances.
3. Home maintenance fees. For example the costs to repair your roof, maintain your lawn or fix your heating system.

Basic necessities

1. Food expenses. Factor in the amount you spend on groceries rather than eating out (eating out is more of a 'want' rather than a 'need').
2. Living necessities. Think vitamins, toiletries, cleaning tools and first aid supplies.
3. Basic clothing expenses. Consider what you spend on work attire, pyjamas, daily wear and gym clothes. This doesn't include branded goods, jewellery or statement pieces.

Transport expenses

• Transport and maintenance costs. This includes car rental bills, car loan repayments, car service costs, petrol money, public transport fares and bike maintenance fees.

Healthcare

• Long-term medication. Factor in the cost of long-term medication or necessary treatments.
• One-time illness fees. Think of the cost of over-the-counter medication and the cost of visiting the doctor.
• Emergency costs. Accident-related injuries, broken bones or conditions specific to your medical situation.

Finder survey: How do Australians of different ages track their monthly expenses?

What is NOT a living expense?

Some things might feel like a necessary living expense, but actually fall into the discretionary spending category instead. These are things you tend to want, rather than need.

• Branded clothing - while clothing is a living expense, it doesn't need to be a designer brand.
• The latest technology - you need a phone, but it doesn't need to be the latest (and most expensive) model.
• A Netflix subscription - this may feel like another household bill, but is actually a 'want' instead.

Living expenses offer a big opportunity to save

"Just because living expenses are essnetial, it doesn't mean there isn't any opportunity to cut these down. In fact, your living expenses offer some of the biggest opportunities to save money.

By refinancing your home loan to a better rate, switching health insurance policies and comparing your energy plan for a better deal you could save thousands of dollars a year. Look at these big wins first before you tackle the harder expenses like groceries, where there is often less room to save."

Alison Banney

Editorial Manager, Money

Free Budget planner

How much of my salary should cover living expenses?

One option to consider is the 50/30/20 budgeting rule, where you allocate 50% of your income to living expenses, 30% to non-essential spending and 20% to savings.

Alternatively, if you feel too restricted by this allocation, you could always tweak the allocation to one that you're more comfortable with. For example, the 80% spending and 20% savings model is another popular strategy where your living expenses and non-essential spending should take up no more than 80% of your monthly income. The sub-division can be done to your fancy, as long as you allocate enough to your living expenses.

Expert insight: You can use more than one budget approach

"There are many different budgeting methods available, so it's really up to you on which ones resonate well with you. My personal favourites are the 50/30/20 budget and the Pay Yourself First budget, but I use a bit of a combination of both at the same time.

Don't be afraid to use a mix of different budget methods or create your own. It's important to find a budgeting method that works for you and aligns with your current financial situation."

Queenie Tan

Founder, Invest With Queenie

5 tips to save on living expenses

1. Look at your current spending

Take some time to list out all your current living expenses. This will help you get a clear idea of where exactly your money is going, and where you have room to cut back and save.

You often spend more on things like groceries than you think - so by looking at your past spending you'll be able to see an accurate picture.

2. Switch to cheaper alternatives

You can save a lot of money by switching to cheaper options for things like your phone plan, energy provider and health insurance. It's a good idea to do this regularly - at least once or twice a year - to ensure you're always getting the best deal available.

3. Directly reduce your spending

Set yourself a weekly budget for things like groceries to make sure you're not spending too much. Being prepared with a shopping list and a list of meals for the week can really help reduce the amount you spend at the checkout on impulse buys. Take advantage of discounts on petrol, coupons and store-specific membership discounts.

4. Always plan for an emergency

Living expenses could get out of hand when an emergency occurs. If you're not prepared to cover unexpected costs, you may end up making expensive choices on a whim or even sacrifice certain basic comforts. For peace of mind, allocate a set portion of your salary to an emergency fund, which should only be touched during urgent times.

5. Use a budget tracker or app

You can get an app that helps you track your spending and stick to your budget. Your own bank's mobile app may also offer budget and spend tracking tools.

Frequently asked questions

• What are living expenses?

  Living expenses provide you with a basic standard of living, including food, water, clothing, electricity and healthcare. Living expenses are the costs you need to spend for your day-to-day life, which can't be easily removed from your budget.

• What is classed as a living expense?

  Living expenses include rent, home loan repayments, utility bills, food, water, basic clothing and medicines.

• Can I lower my living expenses?

  While you can't remove your living expenses, you can find ways to reduce them. For example, you can move to a house with cheaper rent or switch energy providers to save on your bill.

Written by

Trisha Bhullar

Writer

Trisha Bhullar is Finder’s Singapore-based personal finance writer. After working in digital marketing with multiple fintech startups, she acquired a strong love for everything related to finance. Trisha is currently pursuing higher education in economics and computer science, using her knowledge to provide a millennial perspective on modern finance. See full bio