I think about 5% of income is right. For many years, I spent a lot less than that, but I had a really casual workplace wardrobe, and was a young professional in a somewhat expensive metro area.
I decided in the past few years that I needed better professional attire, and I also lost weight. This pretty much meant an entirely new wardrobe, and I spent probably 10% for the first time in 15 years. I am not anticipating that I'll need to spend that much again for awhile!
As for budget, I do what some here have already stated: pay for the non-negotiable items (housing, savings for the future, utilities, insurance, basic food, minimum car, my beloved dog), and set an annual savings goal, such as increase my cash savings account by X dollars this year, and after that, I spend what I have left on recreation, activities, vacation, clothing, food and wine above the minimum, a better car, restaurants, gifts/others, etc. Works for me, and I haven't done a budget since I set up the basic principles.