Expense Ratio Calculator

Understanding your expense ratio—the percentage of income that goes toward expenses—is crucial for financial health. A high expense ratio leaves little room for savings, investments, and financial goals, while a lower ratio provides flexibility and accelerates wealth building.

This free expense ratio calculator helps you analyze your monthly spending, calculate your expense-to-income ratio, and identify opportunities to optimize your budget. It breaks down expenses by category and shows you exactly where your money goes.

Use this tool to track your spending patterns, identify areas for reduction, and ensure you're maintaining a healthy balance between expenses and savings.

Follow these steps to analyze your expense ratio:

1. 1

   Enter Monthly Income

   Input your total monthly take-home income (after taxes). This is your baseline for calculating expense ratios.

2. 2

   Enter Expense Categories

   Input your monthly expenses in each category: housing, utilities, groceries, transportation, insurance, debt payments, and other expenses.

3. 3

   Review Expense Analysis

   See your total expenses, expense ratio (percentage of income), remaining income, and savings rate. Compare to recommended ratios.

4. 4

   Optimize Your Budget

   If expense ratio is too high, identify categories to reduce. Aim for 80% or less to leave room for savings and investments.

80% or Less (Excellent): Leaves 20%+ for savings and investments. This is the target for most people following the 50/30/20 budget rule (50% needs, 30% wants, 20% savings).

81-90% (Acceptable): Still manageable but leaves limited room for savings. Consider reducing expenses in non-essential categories to improve your savings rate.

91-100% (Risky): Living paycheck to paycheck with little to no savings. This is unsustainable long-term and leaves no buffer for emergencies or financial goals.

Above 100% (Critical): Spending more than you earn, going into debt. Immediate action required to reduce expenses or increase income.

1. Track All Expenses

Use expense tracking apps like Expenvisor to see exactly where your money goes. Awareness is the first step to reducing expenses.

2. Reduce Housing Costs

Housing is typically the largest expense. Consider downsizing, getting a roommate, or refinancing to lower your mortgage payment. Even small reductions have big impact.

3. Cut Non-Essential Expenses

Review subscriptions, dining out, entertainment, and other discretionary spending. Cancel unused services and reduce frequency of non-essential purchases.

4. Negotiate Bills

Call service providers to negotiate lower rates on insurance, utilities, internet, phone, and other bills. Many companies offer discounts to retain customers.

5. Pay Off Debt

Eliminating debt payments reduces your expense ratio and frees up money for savings. Focus on high-interest debt first using the debt payoff calculator.

6. Increase Income

While reducing expenses is important, increasing income also improves your expense ratio. Consider side hustles, asking for raises, or finding higher-paying opportunities.