Certificates of deposit (CDs) have long been a popular savings instrument for individuals seeking a secure and predictable return on their investment. By locking in their funds for a specified term, investors can benefit from higher interest rates compared to traditional savings accounts. The average CD interest rate varies depending on the term length, with shorter-term CDs generally offering lower rates than longer-term CDs.

1. Current Average CD Interest Rates
2. Average 3-Month CD Rates
3. Average 6-Month CD Rates
4. Average 12-Month CD Rates
5. Average 3-Year CD Rates
6. Average 5-Year CD Rates
7. Savings Accounts vs. CD Interest Rates
8. Average CD Interest Rates by Region
9. Average CD Interest Rates by Institution Type

12-month CDs currently offer the highest interest rates, averaging a 1.55% APY. Longer and shorter CDs don’t tend to offer as high of a return.

Interest rates for 3-month CDs has decreased by 12.06% from May 2025 to May 2026.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

The average interest rate on a 6-month CD interest stood at 1.35% in May 2026, reflecting an 14.56% decrease from May 2025 when rates averaged 1.58%.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

The average interest rate on a 12-month CD interest stood at 1.55% in May 2026, reflecting a 11.43% decrease compared to May 2025 when rates averaged 1.75%.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

The average 3-year CD rate in May 2026 is approximately 4.3 times higher than it was in May 2022.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

The average 5-year CD rate in May 2026 is approximately 3.44 times higher than it was in May 2022.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

The average interest rate for CDs has been approximately 3-5 times higher than the average rate for savings accounts since November 2022. Before then, CD rates were around 2-3 times as high as savings account rates.

Source: Federal Deposit Insurance Corporation (FDIC), 2026

CD rates show regional disparities, with people in the Southeast getting the highest average rate (2.89%), while people in the Midwest has the lowest rate (2.37%).

Source: WalletHub Banking Landscape Report, 2026

Credit unions generally offer higher CD rates than other financial institutions. For instance, the highest 1-year CD rate offered by credit unions is 3.37%, over four times the 0.84% rate offered by national banks.

Source: WalletHub Banking Landscape Report, 2026

Around 1 in 5 Americans exceed their monthly budgets, according to a recent WalletHub survey, and loud budgeting can be a good way for people to keep themselves on track and avoid the temptation to purchase luxuries they can’t afford.

Try WalletHub's Free Budgeting Tools!

1. Origin of Loud Budgeting
2. How Does Loud Budgeting Work?
3. Loud Budgeting Tips
4. Loud Budgeting Examples

The term “loud budgeting” was popularized by TikToker Lukas Battle, as the opposite of “quiet luxury.” While the video was made in a joking manner, it’s become a viral trend, with people discussing the idea seriously.

In the TikTok, Battle says “It’s not, ‘I don’t have enough.’ It’s, ‘I don’t wanna spend.’” Then, he gives a humorous example of turning down hanging out with a friend because it’ll cost you too much in gas money just to hear them complain about their ex.

With loud budgeting, you’re reframing a situation where you turn down spending money. Instead of thinking negatively about your own finances, you feel good about sticking to your budget. You’re also honest with others about the reasons why you don’t want to spend money. When they know you simply don’t have room in your budget, they may be less likely to pressure you than if they think you simply don’t want to hang out or are tired, etc.

Other people have since expanded on the idea of loud budgeting, fleshing it out more as a concept. It’s now broadly about being vocal regarding how much money you can spend based on your personal budget, and being open about your finances in general. It’s also about setting boundaries with others and not letting them dictate your spending.

Loud budgeting may be easier for some people than others. It depends on how comfortable you are being open with your friends and family about money. Below, we’ve laid out all the basic steps for how to put this trend into action, from actually creating a budget to resisting pressure from others to overspend.

In order to actually practice loud budgeting, you’ll need to have a budget in the first place. That way, you’ll be able to know what items you plan to spend money on during the month, and which ones you’ll need to turn down.

Making a proper budget involves gathering information about your income and expenses, setting goals for what you want your budget to accomplish, prioritizing your expenses and assigning a certain dollar amount to spend on each of them, and then tracking your spending progress as the month goes by.

You can check out WalletHub’s guide on how to make a budget for an in-depth explanation.

If something is in your budget for the month, then you’re free to spend money on it. If something is not in your budget, then you should avoid spending money on it. Of course, you might not be able to predict every single expense you might have in a month, but you should have a certain amount that you’re willing to spend in general categories, like eating out or buying things for your hobby. You might also have a certain amount of money set aside that can go toward any miscellaneous expenses.

If someone invites you somewhere or tries to get you to spend money on something and it doesn’t fit into your budget, simply say no. Proponents of loud budgeting also encourage you to share why you’re saying no. That way people understand why you’re refusing and you get a self-confidence boost from being responsible.

Talk openly with your friends and family about how much money you’re willing to spend on particular items and events. Not only will this help keep your budget plans fresh in your mind and make it easier to hold yourself accountable, but it will also make other people more familiar with your boundaries. You don’t need to give out any more information than you’re comfortable giving, though.

People who care about you will typically understand when you turn something down because it’s not good for your finances. Some people may be more pushy, though, and try to get you to exceed your budget in the name of having fun. It’s important to stick to your financial goals and continue to say no, even if you’re pressured.

1. Talk about money: In addition to being open about your own budget and refusing expenses that don’t fit into it, loud budgeting also involves having discussions about money within your friend group. Normalizing financial conversations can make it less awkward when you object to something for budgeting reasons.
2. Budget as a group: Within your family and friend groups, collectively discuss budgets for outings and activities. That way, you’re less likely to have people decline to participate, since there’s time to prepare beforehand and everyone has ownership of the plan.
3. Hold each other accountable: Track your expenses while you’re out and point out if your group is in danger of going over budget. Everyone is entitled to make their own choices, of course, but the group should never force individual members to partake in something that will make them spend too much.
4. Learn more about personal finance: The more you learn about money, the more you’ll be able to discuss it thoughtfully. WalletHub has plenty of articles on a wide variety of financial topics to get you started. You can also test your knowledge to see what your own WalletLiteracy score is!
5. Encourage others: Celebrate meeting financial milestones and encourage your friends and family to keep working toward their goals, whether they include paying off debt, saving for a big purchase, building an emergency fund, investing or similar objectives.

Below are a few examples of situations where you might engage in loud budgeting, and how you might want to respond in each scenario. Use these as guidelines when you’re confronted with similar situations in your personal life.

Your friend invites you to go out to dinner at a place that would put you way over budget for eating out during the month.

Tell your friend that eating at that restaurant doesn’t fit into your budget, and politely decline the invitation. You may suggest an alternate place to eat that does fit what you’re willing to spend. Or, if you’re actually interested in going, tell them you’ll set a goal to save up enough money to go with them in the future.

You’re out with a group of people at dinner, and someone suddenly suggests going out to a movie afterward.

If going to the movie would put your budget in danger, decline to go. However, even if you’re willing to spend the money, point out that the original plan was just to go to dinner, and make sure that everyone is financially comfortable with adding on an extra activity.

Your family decides to go on vacation together, and you’re both able and willing to go.

Long before the trip, sit down and have a discussion about everyone’s budgets and expectations for the trip. Plan activities accordingly so that everyone is comfortable with the itinerary and won’t put their wallets in danger.

You come across a great article about personal finance that helps you understand a topic.

Share it with your friends and family! If it helped you, chances are it will help them too.

You see someone pressuring a friend who declined a group activity due to budget reasons.

Tell the peer-pressuring person to stop, and make it clear that you understand and respect the reason why the other person refused. Try to find an alternate way to accommodate them with a different activity, or at least let them know that you won’t think any less of them for not joining this one.

Your friend tells you they don’t have a budget.

Sit down with them and help them create one, if that’s something they’re comfortable with. Alternatively, be open with them about your own budgeting process and give them tips on how to make one and why having a budget is important.

These are just a few of the many situations where loud budgeting may be useful. So in the future when you’re with your family and friends, keep this hot new trend in mind, as it just might help your wallet and your relationships with others.

WalletHub asked a panel of experts to share their thoughts on loud budgeting. You can click “Read More” under each expert’s name and title to see their answers to the following questions.

1. Do you think loud budgeting is an effective strategy?
2. What are some drawbacks to loud budgeting?
3. What are some tips that can help someone balance loud budgeting with their social life?
4. Do you think loud budgeting is just a fad?

< >

• Leora Halpern Lanz ISHC – Associate Professor of the Practice – Boston University School of Hospitality Administration
• Somnath Banerjee Associate Professor of Marketing, North Dakota State University
• Ross Johnson Assistant Professor of Marketing, G. Brint Ryan College of Business - University of North Texas
• Aleksandra Kovacheva Ph.D., Department Chair and Associate Professor of Marketing - Massry School of Business, University at Albany, SUNY
• Camilla W. Nonterah Associate Professor of Health Psychology at the University of Richmond
• Jennifer Riley Ph.D., CPA (Colorado), CIA, William C. Hockett Professor, Director, MAcc Program – School of Accounting – University of Nebraska at Omaha

Try WalletHub's Free Budgeting Tools!

• Basic idea: In a zero-based budget, the amount you earn minus the amount you spend each month must equal $0.
• Budgeting steps: To prepare a zero-based budget, gather information about your income and spending, set broader financial goals (e.g. building an emergency fund), then subtract each expense one by one until every dollar of your income is accounted for.
• Spending guidelines: Try using the 50/30/20 rule. At least 50% should be subtracted for necessities, while 20% should be used for savings, investments and paying off debt. “Wants” should take up no more than 30%.
• Budgeting tools: You can create a zero-based budget with a free WalletHub account. To do this, go to WalletHub, click on “MyHub” and log into your account. Then, select the “Budget” tab and create your budget. When you have a budget set up, you can reference the “Remaining” field in your budget summary to see if your income minus expenses equals zero. Using features such as automatic account sync and automatic categorization, which are available with a WalletHub Premium account, can also make tracking your expenses much easier.

1. How to Create a Zero-Based Budget
2. Zero-Based Budgeting Example
3. Zero-Based Budget Advantages & Disadvantages
4. Zero-Based Budgeting for Businesses
5. Zero-Based Budgeting FAQ

1. Determine your income. Figure out how much money you take in every month, after tax, so you know how much you’re able to assign to your expenses.
2. Figure out your monthly expenses. Based on your usual monthly spending, figure out what expenses you have and how much money you typically need to put toward them.
3. Set goals for your budget. What do you want to do with any money you have left over after paying for your essential expenses? Common goals include building an emergency fund, setting aside a certain amount of money for regular savings, paying down existing debt, or growing your investments.
4. Subtract your essential expenses. Starting with the amount of your monthly income, subtract the amount of money you’ll owe for each essential monthly expense. This includes things like rent/mortgage payments, gas, groceries, utility bills, insurance and other things that you need to take care of no matter what.
5. Subtract money for your financial goals. Designate funds toward the goals you previously set. We recommend dedicating at least 20% of your total budget to paying off debt, saving or investing. You can do all three, but the greatest amount of money should go toward your main goal.
6. Subtract your “wants.” With the money that’s left, you can continue to subtract the cost of non-essential things that you want, such as dining out, expenses related to your hobbies, or monthly subscription services.
7. Stop when you reach zero. You can continue subtracting expenses until the amount left in your budget equals $0. At that point, every dollar is accounted for. Just make sure you’re not spending wastefully in order to reach $0 – you can always allocate extra money to saving and investing.
8. Double check your budget. Go through and make sure that all of your math is correct and that you haven’t left out any important expenses.

Once you’ve made your zero-based budget, you should track your progress every month to make sure you’re actually following the plan you made. At the very least, you should have a spreadsheet where you can mark down the info, but we also recommend trying out WalletHub’s budgeting tools, which allow you to create a zero-based budget and can help you stay organized. Anyone can budget on WalletHub for free, but if you join WalletHub Premium, you’ll also be able to sync your accounts to track your spending automatically and avoid most of the legwork.

To fully understand zero-based budgeting, it helps to have a concrete example. Below is a sample budget for a typical American household, starting with the real median household income of around $5,350 per month. You can see each item in the budget, how much it costs, and how much is left in the budget after allocating the money.

As you can see, after accounting for all the monthly expenses, the amount left in the budget is exactly $0. But that doesn’t mean all the money is gone, as $1,100 went to the budgeter’s emergency fund, savings and investments.

While a zero-based budget can be a great tool for helping you organize your finances, it does have some potential downsides as well. Below, you can compare the pros and cons of this budgeting strategy to see if it’s right for you.

• It helps you keep your finances organized.
• It isn’t as strict about how much you need to spend on certain things as some other budgeting models.
• It makes sure every dollar of your income is accounted for, and helps you avoid the temptation to overspend.
• It’s simple and straightforward.
• If your income and expenses vary from month to month, it’s easier to use this strategy than it is to set specific dollar amounts to spend on things every month.

• Since it requires you to plan out your expenses in a very specific way, it may not work as well with certain budgeting tools as other budgeting strategies. But it’s very easy to make a spreadsheet and use tools like WalletHub Premium to track your expenses.
• If you don’t know exactly how much something will cost you ahead of time, and the amount you subtract is off, you may need to adjust the plan mid-month. For example, if you think your heating bill will be $100 and it’s actually $150, you need to remove $50 of expenses from elsewhere to get back to zero.
• Some people may feel tempted to subtract less money for important financial goals so they can fit in more of their “wants.” Not putting enough toward your goals is a danger for any budgeting strategy, but it can be more prominent here since there’s less guidance about how much to set aside.

Zero-based budgeting isn’t the only strategy to consider. You can learn more about what a budget is and how to make one here on WalletHub.

Businesses use the term zero-based budgeting differently than the way it’s used for personal finance. Instead of the word “zero” referring to having $0 of income left at the end of the budgeting process, it refers to starting the entire budgeting process from scratch each year or after a certain period determined by the business.

The biggest part of zero-based budgeting for a business is justifying each expense. In other words, just because something received money in a previous budget doesn’t mean it should receive the same amount of money in future budgets (or even any money, in some cases).

Going back to the drawing board like this can save businesses money in the long term because they’re not just giving mindless increases to every budget item each year, but rather constantly reevaluating what’s necessary and where they can cut costs.

WalletHub asked a panel of experts to share their thoughts on zero-based budgeting. You can click “Read More” under each expert’s name and title to see their answers to the following questions.

1. Who should try zero-based budgeting?
2. Who is most likely to struggle with zero-based budgeting?
3. Do you have any tips for getting the best results from zero-based budgeting?

< >

• Gaurav Kumar Ph.D., CPA – Professor of Accounting, School of Business - University of Arkansas at Little Rock
• Xiaoli Yuan Ph.D. – Professor of Accounting – Department of Business, Accounting, and Sport Management – Elizabeth City State University
• Dhruba Banjade Ph.D., Department Chair of Business Analysis, College of Business and Communication - Brenau University
• Janet R. Jones Ph.D., CPA, Temple-Inland Employees Distinguished Professor of Accounting, Associate Professor of Accounting and Assessment Coordinator - Stephen F. Austin State University
• Kaustav Sen Ph.D. – Lubin School of Business, Pace University
• Lloyd A. Mitchell MBA, Associate Professor of Accounting, Gus Machado College of Business - St. Thomas University

• Request a physical insurance card online from your insurance company’s website
• Access digital proof of insurance on the company’s smartphone app
• Wait for insurance ID cards to come in the mail if you are a new policyholder
• Call customer service to request either digital or physical proof of insurance
• Ask for digital proof of insurance via email

Learn more about how to get proof of insurance.

[car_insurance_widget]

1. What Is Included on Proof of Insurance?
2. What Counts as Proof of Insurance?
3. Why Proof of Insurance Is Necessary
4. Proof of Insurance Laws by State
5. Proof of Insurance Tips
6. Proof of Insurance FAQ

Proof of insurance information may vary depending on the insurance company.

An auto insurance card or insurance ID card is the main form of proof of insurance. Often, after purchasing a policy, a card will be mailed to you that displays your policy information. Many insurers also allow versions of this card to be accessed online or through email and printed at home.

Learn more about insurance cards and how to get them from major insurers.

Digital proof of insurance is accepted in 49 states and the District of Columbia. In these states, digital proof of insurance can be accessed either through your insurers’ app or website, even during traffic stops. The exception is New Mexico, which allows digital proof of insurance in some cases but does not require that police accept it as proof.

Massachusetts includes your insurance information on your vehicle registration. Since you should always have your registration in your car, you know you’ll have a physical copy of your insurance details, too.

A proof-of-coverage document shows similar information as an insurance ID card but it also describes the policy limits. Proof of coverage is usually needed to prove to a lender or lessor that you are carrying the specific types and amounts of coverage required by your loan or lease agreement.

SR-22s and FR-44s are sometimes called “certificates of financial responsibility” and are required in certain states after serious moving violations or a suspended license. These forms are filed with the state by an insurer to certify that a driver has the required amount of insurance coverage.

Some states have specific forms that must be used to prove you have the state-required amount of insurance. These forms are typically only used by the state’s department of motor vehicles and do not need to be kept with you while driving.

• Maryland – Form MD FR-19
• North Carolina – Form DL-123 and FS-1
• Texas – Form PC418

If you have a car, you’ll need proof of insurance either to show a law enforcement officer that you are not driving without insurance or to share details of your insurance after an accident.

• When you are registering a vehicle
• If you get pulled over for a traffic violation
• After an accident with another driver
• When you are filing a car insurance claim
• To reinstate your license or registration after certain violations

Having a physical copy of your proof of insurance is still important, even if you have access to digital versions. A physical copy gives you back up in the event of no internet, bad reception, or a dead battery.

Using fake or falsified proof-of-insurance documents can lead to serious fines, license suspensions, and even jail time. Additionally, even if they may fool another driver in event of an accident, they won’t fool the cops or the other driver’s insurance company.

Driving without insurance is never a good idea. Beyond fines, license suspension, possible jail time, and having your vehicle impound, you’ll also end up paying significantly more for car insurance in the future. Additionally, if you cause an accident while driving without insurance, you could be sued by the victim for a lot of money.

You should regularly check your proof of insurance to ensure that all of the information it shows is accurate. Having an outdated proof-of-insurance document is essentially the same as not having proof of insurance at all. If you check your proof of insurance regularly, you’ll also remember where it is if you’re pulled over or involved in an accident.

Make sure you destroy any expired or inaccurate proof-of-insurance documents. This will ensure you never get them mixed up and that you’re always carrying only the most up-to-date version. It will also help keep your personal information safe.

Try WalletHub's free budgeting tools

Housing will account for a significant portion of most people’s budget. This typically includes your mortgage or rent payment, home insurance, HOA fees, property taxes, and home maintenance.

The food category will include groceries, food delivery and eating out at restaurants. If you want to spend less of your income on food, try cooking more at home instead of eating out.

Money that you spend on gas, car maintenance, and public transportation will go in the transportation category. Since you may not need to perform maintenance every month and gas prices change daily, the percentage of your income that you spend on transportation can change every month.

Some examples of utilities include electric, water, gas, and internet. The amount of your income that you spend on certain utilities, such as water and electric, will vary every month since your bill will be based on your usage.

Insurance coverage, such as health, car, home and life insurance, is typically a fixed expense that will stay the same every month.

The percentage of your income that you set aside for emergencies, retirement, and future goals will be under your savings category. If you are unable to save 10% to 20% of your income, you can save as much as you can afford to save now and increase this percentage later as your income increases or you find ways to reduce spending in other categories.

Things like clothes, gym memberships, and haircuts fall under the personal care category.

The amount of money that you spend on things like doctor visits, dental exams, and prescriptions will vary every month based on how often you need these services.

The percentage of your income that you spend on items such as movie tickets, hobbies, sporting events and concert tickets may change every month. If you need to reduce spending, you can look at items in this category first since they are considered non-essential.

Gifts to others and donations to charities will be under this category. The percentage of your income that you assign to this category can change every month based on how many occasions you will need gifts for and how often you donate to charities.

Any expenses you can’t fit into the other categories you have can go here. This can include fixed monthly expenses like daycare or irregular expenses like an annual subscription fee.

This section can also cover the overflow for expenses in other categories that you hit the limit for. For example, if you budget $150 for your electric bill for the month but your bill was $200, you can use the funds budgeted in your miscellaneous category to cover the difference.

Earmarking a certain percentage of your income for these miscellaneous expenses every month can help make sure you don’t go over budget.

50/30/20: Your paychecks get separated into three categories: 50% for needs, 30% for wants, and 20% for savings.

70/20/10: You allocate 70% of your after-tax income to your living expenses, 20% to savings and investments, and the remaining 10% to debt and donations.

40/30/20/10: You split your after-tax income into four categories: 40% for needs, 30% for wants, 20% for savings and debts, and 10% for donations.

60/30/10: Necessary living expenses take up 60% of your income after taxes, while your wants take up 30%, and 10% of your income goes to savings and paying off debt.

75/15/10: You separate your income after taxes with 75% going to your living expenses, 15% going to investments, and 10% going to savings.

60/20/20: Your paycheck after taxes gets split like this: 60% to needs, 20% to wants, and 20% to savings.

80/20: You allocate 20% of your after-tax income to savings, and the remaining 80% goes to everything else.

60/40: Fixed expenses, like insurance and your mortgage, take up 60% of your after-tax income, and the remaining 40% goes to savings and expenses that fall outside of your normal monthly spending.

Check your past bank and credit card statements for the last few months to see what you are spending your money on. Calculate how much of your income is going to these expenses.

You want to choose a budgeting percentage that can realistically fit your spending. For example, if your necessary expenses surpass 50% of your income, the 50/30/20 will not work for you. Instead, you should try a budget rule that allocates more of your income to necessary expenses, like the 70/20/10 rule or the 60/30/10 rule.

Certain budget percentage rules prioritize particular categories over others. For example, if you are looking to invest some of your income, the 75/15/10 rule allows you to allocate 15% of your income to investments. However, if you are looking to pay down debt, the 70/20/10 rule specifically makes you set aside 10% of your income for debts.

Budgets are made to be adjusted. So, if one percentage rule is not working for you, try another. You may have to try several different budget percentages to find the one that works best.

WalletHub asked a panel of experts to share some tips for strategically allocating your spending using percentage-based goals. You can click “Read More” under each expert’s name and title to see their answers to the following questions.

1. Do you think using a percentage-based budget strategy, such as the 50/30/20 rule or the 70/20/10 rule, is the most effective approach?
2. Who would benefit the most from using percentage-based budgeting strategies, such as the 50/30/20 rule or the 70/20/10 rule?
3. What do you think is the best way to allocate money between necessities, luxuries and savings?

< >

• Lawrence Chui Ph.D., CPA, CFE, Professor of Accounting, Opus College of Business - University of St. Thomas
• David W. Barman J.D., Associate Teaching Professor - College of Business, School of Accounting - Florida International University
• Dalisha D. Herring Ph.D., CFP®, Associate Lecturer - Herbert Wertheim College of Business, Florida State University
• Dr. Jeffery S. Bredthauer Associate Professor, Finance, Banking and Real Estate - University of Nebraska – Omaha
• Jeffrey Anvari-Clark Ph.D., MA, LMSW, Assistant Professor - Department of Social Work - University of North Dakota
• Alejandro Gutierrez-Li Ph.D., Assistant Professor - North Carolina State University, College of Agriculture and Life Sciences

How many categories should you have in your budget? The number will vary based on your individual financial needs, your personal preferences, and the budgeting strategy you use. You can learn more below.

• Some of the most common budget categories include housing, utilities, food, transportation, savings, debt repayment, insurance and entertainment.
• You should create a miscellaneous category to account for expenses that won’t fit into other categories.
• The number and types of budget categories you use will depend on your individual needs.

Below, we’ll give you details on the 12 common categories that can help you organize your spending.

Try WalletHub's free budgeting tools!

1. Housing

This category will account for a significant portion of most people’s budget since it includes mortgage or rent payments.

• Mortgage or rent payment
• HOA fees
• Lawn maintenance
• Household repairs
• Appliances
• Property taxes
• Pest control
• Household supplies

Any of the bullet items could be split into its own subcategory, too. The same is true of the bullet items below.

2. Transportation

This category includes car expenses, as well as anything else you may need to get from point A to point B.

• Car loan payment
• Car repairs
• Gas
• Public transportation fees
• Uber/Lyft rides
• Annual car inspection & registration fees
• Parking fees
• Tolls

3. Food

Food is essential for your survival. But this category can include both groceries and dining out, so if you’re looking for some expenses to cut in your budget, you may want to consider cooking at home rather than eating out at restaurants.

• Groceries
• Restaurants
• Delivered meals
• Coffee shops
• Drinks

4. Utilities

Along with housing and food, utility payments should be an essential priority in your budget. These are things you will need to live comfortably in your home.

• Electricity
• Water
• Natural gas
• Sewer service
• Telephone service
• Internet service
• Trash pickup
• Recycling pickup

5. Insurance

From your home and car to your family, insurance helps protect the things you need and love. It also accounts for a large portion of most people’s budget. For example, U.S. households spent an average of $4,049 just for health insurance in 2023.

• Homeowners or renters insurance
• Car insurance
• Health insurance
• Life insurance
• Pet insurance

6. Medical/Healthcare

Things you need to take care of your health and the health of your family are essential. These should always be included in your budget.

• Health insurance copays & deductibles
• Primary care visits
• Medical specialists visits
• Dental care
• Vision care
• Prescriptions and over-the-counter medications
• Urgent care
• Pediatrician visits
• Veterinary care
• Medical tests
• Medical devices and supplies

7. Personal

This category will include anything that is for your personal care, such as expenses to take care of your appearance and your physical and mental well-being.

• Clothes
• Shoes
• Gym memberships
• Fitness classes
• Hair cut
• Nail salon
• Cosmetics
• Massage
• Therapy

8. Debt Repayment

According to WalletHub’s analysis, the average household debt is $149,358. This category should include all your debts.

• Auto loan
• Credit card bills
• Student loans

9. Savings.

Money that you put away for the future will be listed in this category.

• Emergency fund
• Retirement account
• Investment account
• Savings account

10. Gifts/Donations

Any presents or monthly donations to charities should be accounted for under this category.

• Charity donations
• Birthdays
• Anniversaries
• Weddings
• Graduations
• Christmas
• Tithe

11. Entertainment

The entertainment category should be one of the lowest priorities in your budget since items listed here are not necessary expenses. Even though finding some enjoyment is good for your mental well-being, this category should be one of the first places to look when you are trying to cut down on spending.

• Concert tickets
• Sporting events
• Movies
• Books
• Hobbies
• Vacations
• Streaming services subscriptions

12. Miscellaneous

Anything that doesn’t fit into any other category can be listed here. It can include high-priority items like child care as well as low-priority items like home décor.

• Child care
• Home décor and furnishings
• Pet grooming
• Taxes

You can use budget categories to organize your expenses, prioritize bills and set spending limits. The categories can also make it easier to follow some budgeting strategies, like 50/30/20, that require you to group your expenses by category.

When you have your categories listed, go through your expenses and put them in their respective categories. This can also help you keep track of what areas you tend to spend the most money on.

The way you organize your categories will depend on the strategy you choose, as some budgeting methods have stricter guidelines than others. For example, the envelope budgeting method allows you to organize your spending categories any way you want. With the 50/30/20 method, on the other hand, you need three overall categories specifically for essential expenses, discretionary spending, and savings (though they can have subcategories within them).

When you organize your expenses into categories, you can prioritize the bills, such as your rent and electric payments, and allocate funds there first to make sure they get paid. Then, when they are taken care of, you can use the remaining funds for non-essential items in other categories.

Divvy up your income and set a max amount of money you are willing to spend in each category. This can cut down on unnecessary spending in areas that are low priority. The envelope budgeting method is a good strategy to use if you want to set strict spending limits.

Especially if you are over budget, looking at your non-essential categories, such as entertainment or gifts and donations, and seeing where you can reduce your spending in these categories can be a good way to stay under budget. For example, deciding to cook dinner at home rather than eating out at a restaurant can save a couple bucks that you can use elsewhere in your budget.

Learn more about making a budget.

WalletHub asked a panel of experts to share some advice on how people can organize their budgets. You can click “Read More” under each expert’s name and title to see their answers to the following questions.

1. What are the most important categories to include in a budget?
2. What categories do people often forget to include?
3. Is it possible to have too many categories in your budget?
4. What are some tips that can help people organize their expenses better?

< >

• Tres Loch Ed.D., Director of Business Advising, Lecturer - Rollins College
• Karen M. Foust Ph.D., MBA, CGMA, CPA (inactive) - Senior Professor of Practice - A. B. Freeman School of Business, Tulane University
• Steve E Isbell MSRE Graduate Advisor, Senior Lecturer, Internship Coordinator Finance and Real Estate – University of Texas at Arlington
• Barbara O'Neill Ph.D., CFP®, CRPC, AFC®, CFEd, CPFFE – Distinguished Professor Emerita, Rutgers University and Owner/CEO, Money Talk: Financial Planning Seminars and Publications, Author of Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life
• Omar Watts Associate Professor; Chair, Accounting/Finance - St. John Fisher University
• Rosemond Desir Ph.D., Associate Professor of Accounting – Florida Atlantic University, School of Accounting

Unfortunately, budgeting isn’t something that’s often taught in schools, despite 94% of the country thinking it should be, according to a WalletHub survey. The good news is that it’s a skill that’s never too late to learn, and it’s actually a lot easier than it seems.

Try WalletHub's Free Budgeting Tools!

Below you can learn even more about budgeting, from why it’s important to how to actually go about doing it.

1. Key Things to Know About Budgets
2. Why Is Budgeting Important?
3. How to Make a Budget
4. Budget Example
5. Types of Budgets
6. Best Budgeting Tools

• Importance of Budgeting: Having a budget is important because it keeps you organized and can improve your financial status. Other benefits include building discipline and feeling like you’ve accomplished something.
• Creating a Budget: To build your budget, first gather information on your income and expenses. Then, set goals, choose budgeting tools, prioritize your expenses, and allocate money based on your priorities.
• Tracking Your Budget: You’ll need to track your budget progress each month and reassess from time to time, to make sure you’re on the best financial path possible. It’s also important to be honest about your spending and whether you meet your goals. Nearly 1 in 5 Americans aren’t honest with themselves while budgeting.
• General Budgeting Guidelines: Many people recommend setting aside 50% of your income for necessities, 30% for “wants,” and 20% for other things like building your savings or paying down debt. This is called a 50/30/20 budget.
• Different Budgeting Strategies: With a “zero-based budget,” you focus on making your income minus your expenses equal $0, regardless of specific percentages. An “envelope budget” can help you tangibly lay out cash for each spending category. And a “pay yourself first” budget prioritizes saving and investing.

There are many reasons why having a budget is worthwhile – and even essential – for everyone. They include:

• It improves your financial situation. Budgeting helps you avoid overspending, and it helps you work toward goals like building an emergency fund, paying down debt, growing your investments, or saving for a big purchase. Sticking to a budget can also help improve your credit score.
• It helps you stay organized. Knowing exactly how much you plan to spend on each item in your budget makes it easier to set money aside and track your progress each month. People who have a budget feel significantly more secure, confident and in control of their lives, according to a survey by the Certified Financial Planner Board of Standards.
• It expands your knowledge. Budgeting gives you a better idea of how much you’re spending relative to how much you earn, as well as what you’re spending your money on.
• It builds discipline. Sticking to your budget may involve passing up on things that you want, which can build self-control and other good habits. Only 1 in 5 Americans with a budget say they exceed it, according to a recent WalletHub study.
• It gives you a sense of accomplishment. Budgeting may not be fun, with 27% of Americans saying they’d rather do laundry and 20% saying they’d rather do their taxes. But once you have a budget, you’ll find that setting goals and achieving them feels good, especially when it also leads to growing your net worth or reducing your debt.

Making a budget might seem daunting at first, but it’s actually pretty simple once you break it down into the proper steps. Plus, once you make a budget for the first time, you’ll have the skills you need to update it as your financial needs change.

• Gather information: Figure out how much money you take home each month, and then come up with a list of your monthly expenses and how much they typically cost.
• Set goals: Decide what you want your budget to accomplish, such as getting debt-free in a certain time period, growing your emergency fund to a certain amount, saving up for a big trip or investing a certain amount every month. Your goal can even be as simple as staying organized and spending less than you make.
• Use tools: There are a number of free and paid budgeting tools available that can simplify the process. We recommend WalletHub Premium, as it can sync with your payment accounts and automatically track your progress each month.
• Prioritize: Divide your expenses into categories of high, medium and low priority. High priority means you must put money toward them. Medium priority means you should allocate them some funds, but they’re not the most important. Low priority means you can do without them.
• Plan: Decide how much money to give to each item on your budget. You can start by setting aside money for all your mandatory bills, and then divide the remaining money between your personal “wants” and more important things like paying down debt, saving, and investing.
• Track your progress: Use your budgeting tools to automatically or manually track your spending each month. See whether you are able to stick to your budget or you frequently exceed it.
• Reassess: The budget you make now won’t necessarily be the right budget forever. If you meet one of your goals, you can set a new one and adjust accordingly. In addition, if you’re having trouble with your current budget, you may need to go back to the drawing board.

This was just a quick overview of the budgeting process. You can check out WalletHub’s guide on how to make a budget for a much more detailed breakdown of each of these steps.

Below is an example budget for a typical American household, broken down into some common expense categories the household might have. This example is based on the real median household income, which is around $64,200 per year or $5,350 per month, after taxes. Keep in mind that actual incomes and expenses will differ widely by person and location.

In general, many sources say that you should follow a 50/30/20 structure with your budget, spending 50% on “needs,” 30% on “wants,” and 20% for savings and paying down debt. As you can see, though, it may be difficult to keep your “needs” to 50% of your budget during this inflationary period (the example budget above spends 62% on “needs”). In addition, it may be wiser to spend a higher portion of your budget on things that will help you financially, like paying off debt and building your savings, rather than things you simply want to have but don’t really need.

You can learn more about budgeting with WalletHub’s helpful budgeting tips guide. You can also join WalletHub for free to gain instant access to our budgeting tools. Plus, if you upgrade to WalletHub Premium, you’ll receive advanced features that can automatically track your expenses and progress each month while sending you alerts on important changes.

There are several different types of budgeting strategies you can use, and you may want to try out various ones in order to see which works best for you.

50/30/20 Budget: You put 50% of your income toward your “needs,” 30% toward your “wants,” and 20% toward debt payoff, savings, and investments. This budget allocation is a good general rule of thumb, but you don’t need to strictly follow the recommended percentages, especially if your “needs,” or essential expenses, take up more than 50% of your income.

Zero-Based Budget: Zero-based budgeting focuses on ensuring that you don’t spend more than you make, requiring you to assign every dollar you make to a specific expense. Its concept is simple – your income minus your expenses should equal $0, regardless of how you distribute the money.

Envelope Budget: This is a budgeting style for people who want to make sure they don’t spend too much in one specific category. Essentially, you put a certain amount of money into “envelopes” each month for each spending category. This can be actual physical envelopes with cash or just virtual envelopes on a spreadsheet. Each time you pay for an expense, you take money out of the envelope, and once it’s empty, you’re not allowed to spend any more in that category.

Pay-Yourself-First Budget: Unlike other types of budgets, this one focuses the most on your future. It stresses that the first thing you should do each month is set aside a certain amount of money for savings and investments. After you’ve done that, you can divide the rest of your budget between essential expenses and things you want. This type of budget is good for people who want to make sure they don’t treat saving and investing as an afterthought.

The No-Budget Budget: This is the loosest type of budget, and we don’t recommend it over other types. With this budgeting strategy, you just focus on the things you absolutely must pay for each month. As long as you track your spending and set aside the money you need for those essential expenses, you can spend the rest of your money on whatever you want, without a defined plan. Budgeting this way is better than nothing, but planning out all or most of your monthly expenses in detail is always better.

There are a number of programs and apps you can use to make budgeting easier, either for free or for a small monthly/yearly fee. Some examples include:

• WalletHub Premium
• Free WalletHub Account
• Microsoft Excel
• Google Sheets
• Open Office

We recommend trying out WalletHub Premium because it removes most of the legwork. You can learn more about these and other budgeting tools, along with their pros and cons, in WalletHub’s guide on how to budget.

WalletHub asked a panel of experts to share some budgeting advice. You can click “Read More” under each expert’s name and title to see their answers to the following questions.

1. What are some benefits to having a budget?
2. Are there any downsides to budgeting?
3. Do you have any tips to help people create and stick to a budget?

< >

• Marc Sardy Ph.D., Associate Professor of International Business & Finance, Department of Business, Rollins College
• Gary Simmerman MBA, MPS, CFP® - Adjunct Faculty, Finance, Southern New Hampshire University
• Laura Hendrix Ph.D., Accredited Financial Counselor®, Professor - Personal Finance & Consumer Economics - University of Arkansas System Division of Agriculture Cooperative Extension Service
• David Allen Ammerman Ph. D, Teaching Associate Professor - University of Tennessee, Knoxville, Haslam College of Business
• Dr. Scott Morrissette Assistant Academic Chair, Purdue University Global
• Raymond P. Kluender Styslinger Family Associate Professor of Business Administration at Harvard Business School

[bk-trust version="v2"]

WalletHub's best prepaid debit card picks are completely independent and not provided, commissioned, or endorsed by any issuer. In addition, our editors follow a strict editorial policy. Some offers may come from WalletHub's advertising partners.