8 common monthly expenses and tips to manage them

Experts recommend keeping housing costs between 25-30% of your gross monthly income to maintain financial balance. A bird's eye view can apply to many things. And the approach to managing your finances is no exception. Understanding your common monthly expenses is an important step to taking control of your monthly budget.

It can be beneficial to check what common household expenses might be eating up your hard-earned paycheck, and then discuss some simple tips to navigate them. After all, if you know where your paycheck is going, that creates freedom to spend money on what you love.

Let's get into specifics. The U.S. Bureau of Labor Statistics (BLS) publishes an annual report on consumer expenses. The report looks at consumers in terms of "units," with an average of 2.4 people per household, and breaks down the average annual expenditures for a wide variety of categories.¹ The expense categories and figures below are from that report. How do you compare? Are you spending more or less than the average U.S. household? Here's a breakdown of some of these common expenses:

1. Housing

This one's a big bill, often the largest for many of us. And even still, rent or a mortgage doesn't show the full picture. Some additional expenses you may incur include utilities, household operations, supplies, furnishings, and lawn equipment (you don't want to get a dirty look from a neighbor if your grass is too high after all!)

Hot tip

While you may not be able to completely control housing costs, a rule of thumb is that this expense should be kept to 25 to 30% of your gross monthly income. If that's not possible, you may need to look for other ways to cut this cost such as moving to a less expensive area or smaller home.

2. Transportation

Beep beep! There are many modes of transportation, and they can even vary by location, number of days in the office and the length of your commute. If you take public transportation, it can cost less per ride if you buy a monthly pass. If you drive to work, add insurance, maintenance, and a car payment. There are also tolls and often a parking garage bill.

Hot tip

Buy only the vehicles you need. If you are part of a couple, do your job schedules allow you to share a car. If public transportation or other options are available, that car might not be needed. To cut down on gas expenses you can consider looking for reward programs or cash back credit cards so that every time you swipe at the pump you can earn money back.

3. Personal insurance, Social Security and retirement plan contributions

While this is one of the larger expenditure categories, it's possible that you don't even notice it on a month-to-month basis. That's because this cost is often taken directly out of your paycheck by your employer. Try not to think of this category as an expense or something that you would want to cut back on. Personal insurance can be a financial lifesaver in times of need, and Social Security and retirement plan contributions are intended to help fund your future retirement.

Hot tip

For personal insurance, it's important to work with a qualified financial professional to make sure that you have the right types and the right amount of coverage. For retirement plan contributions, if your company offers a 401(k) plan, see what percentage of your monthly salary you can comfortably allocate toward it. It's also important to find out if your company offers any matching program where they'll match a percentage of your contributions to your 401(k). Even if your company does not offer a 401(k), you may be able to open your own IRA and begin making contributions.

4. Health care expenses

Health is indeed wealth, and not something you can skimp on. While costly, health insurance is a necessary monthly expense. After all, you're investing in the most important thing — your well-being. Only you can determine what plan works best for you. If you have a large family or recurring doctor visits, you may want to raise your coverage.

Hot tip

While some months can feel heavier than others when it comes to health care costs (such as an emergency hospital visit) you could look at last year's monthly bills and divide them by 12 for a rough estimate to budget for this year. Keep in mind that annual physicals can be considered preventative care with some insurance policies and as an added bonus, help keep your "engine" running smoothly.

5. Food

The average monthly cost of groceries can be a large amount. Spending on food accounts for 12.9% of total expenditures, and increased 6.9% in 2023 compared to an increase of 12.7% in 2022¹. Keep in mind this number easily can double if your family grows, and don't forget about your pets! They need to eat too.

Hot tip

Go into the store with a shopping list and stick to it. Look for items on sale (or consider a digital coupon) and be willing to consider the store brand items or large superstores with bulk items. Luckily, rewards from cash back credit cards used at the grocery store can really add up over the year, but it's important to make sure to pay your balance down each month to save on interest charges.

6. Restaurants

Do you consider yourself a foodie? While watching the Food Network is free, dining out is sadly not. While eating out can be a fun activity and a great way to spend time with friends, it can also become a large monthly food bill in addition to your groceries.

Hot tip

To save on restaurants, try to limit the number of times you go out to eat or order takeout. When you do treat yourself, research the restaurants you are interested in beforehand, so you have an idea of what's on the menu and the costs. If you do decide to go out, get a return on your visit by using a rewards credit card.

7. Entertainment

We get it. Some streaming services bring a lot of joy to our lives, and those plot twists just keep coming! Just be sure you read all the fine print when it comes to different services.

Hot tip

Life gets busy. It's possible you may have signed up for several streaming services you aren't even still watching. It could be beneficial to take an inventory of what you are still actively using and cut the ones you're not.

8. Child care

If your family includes children, or you plan to have them, it's likely that at some point in time child care will be a significant expense. This could include daycare, preschool, after-school programs, or babysitters. If your child goes to private school, that's also an added cost. According to the most recent data from the U.S. Department of Labor, U.S. families spend between 8.9% and 16.0% of their median income on full-day care for just one child.² And if your family includes a special needs child, monthly costs are elevated and can include services such as speech therapy or a caregiver.

Hot tip

If there is a neighbor or family member willing to trade off child-care days, that can be an advantage. Also, keep in mind your cost of daycare usually lessens as kids move out of the infant stage into toddlers, and then become school-age. Also, don't forget activities. If your children have hobbies or are involved in sports, you'll have to budget for those as well (especially hockey!).

Managing monthly expenses and your budget

You've already taken a step in the right direction by reading up on personal finance. Now, have fun! Try out a budgeting app or tool to lay out your monthly expenses. It may sound obvious, but remember to not allow your spending to overtake your earnings. Consider what items you absolutely need like health insurance vs. a want, such as multiple streaming services. Creating a budget can help you feel like you're in control of your life, rather than dodging monthly bills thrown at you every which way. Perhaps there's some left over to invest, start an emergency fund (with a recommended amount of three to six month's living expenses), or even save toward a larger goal such as a house. After figuring out your monthly budget, some trimming may be in order to stay within your means.