When you are setting up your personal budget, do you know where you spend your money? Add these budget categories to your monthly and weekly budget so you’ll know exactly where your money is going.
Budget categories are super important. If your budget is too vague or too specific, it can create problems that make you want to throw the entire thing in the trash. So how do you set up a budget that you’ll actually stick to? That’s what I’m going to show you today!
The secret to a fantastic budget that you actually follow (and enjoy setting up) is that you pick the budget categories that reflect your lifestyle and habits. In this guide, I’ll describe and explain the most common budget categories that people usually use.
What Are Budget Categories
Before we get into the budget categories themselves, it’s important to understand what budget categories are. This way, if a category from the list doesn’t fit your life, you can create your own.
A budget is a plan you set up that prepares you for how you are going to spend your money. The idea is that a well-planned budget will give you the money you need when you need it. It will also show you how much more you need and where you need to cut back.
The categories you place in your budget are very personal and depend on what you currently spend on.
A budget category is a name you give a specific type of withdrawals.
Before you create your budget, don’t just use the categories we give you. You should only use the ones that apply directly to your spending habits.
Go through the past 3 months of spending and organize and categorize your spending. This will show you what you spend your money on and which categories are the most important.
How Specific To Make Your Budget Categories
There are lots of different budgeting methods out there. The most successful one is the one that is easiest for you and your partner/spouse to stick to. If it makes more sense to just have a few broad categories, do it!
Broad categories include:
- Home Essentials
That’s as basic as it can get.
The benefit of being specific with your categories is that when you need to cut back or you are having a tight month, you can easily take a closer look and know exactly where you can pull money from.
For example, if you have a variety of precise categories, then you will know how much you spend on kid’s clothes and your makeup. You will be able to cut money from a very distinct place without disrupting other bills.
Budget Categories You Must Include In Your Budget
Are you ready to create your budget? Here are the most popular budget categories that you should include!
When you set up your budget, there are going to be categories that just about everyone should have in it. These include things that you can’t avoid paying – food, shelter, transportation. I also included a few categories that I highly encourage you to put in your budget. These are things like savings that, even though not required, will rescue you when you need it.
The very first thing you need to include in your budget is shelter and housing. This is basic and includes just your rent or mortgage payments. Some people prefer to make one large category that includes utilities too since they are all required and equally necessary.
If you want to, you can create a separate category for utilities. It’s best to only include the bills that you can’t live without. The reason you should create a separate category for utilities is that the amounts change from season to season.
If it helps you can create sub-categories for every single bill. This will help you see where all of your money is going and be able to plan for every bill.
These days, your phone and internet are both required for jobs and entertainment, so you should definitely include them in your budget. You can also include cable TV if it isn’t bundled with your internet.
The automotive category can also be called “transportation” if you don’t have a car. This way you can budget for subway passes, bus passes, or driver fees.
If you do own a vehicle, plan ahead for how much gas you will need that month and then put aside some money for things like oil changes, new tires, and other car upkeep things.
Some people like to put car insurance in this category too. Others pay their insurance annually so they prefer to have a separate category.
Everyone needs to eat!
How often do you eat at restaurants or order takeout? If it’s pretty frequently, then you should include “eating out” in your grocery and food budget. If it’s rare, then you can give that its own category.
Should household supplies – like toilet paper – be included in the grocery budget? That’s another personal choice. Some people split this up in budget categories because they want to control how much they spend on it.
This is a really broad category that includes anything that you do for fun. This can include any of the following activities:
- Apps and Games
- Computer Games
- Dates/Going Out
Another name for this category is “fun money.” Experts agree that you should always include fun money in your budget. It will make you more likely to stick to your budget without overspending.
Even though you might be able to live without a savings account today, the time will come when you will need to dip into it, so make this one of your budget categories. Aim for saving at least one month’s income first, then build it up to 3-month’s income. This way, you can survive and pay all your bills if something happens to your job.
Budget for things like copays and paying off medical debt. If you pay for your health insurance out of pocket, that amount should go here too. If your budget has some wiggle room, you can even set aside money for any unforeseen emergencies like ER visits.
This is a broad category and includes everything from life insurance to auto insurance and health insurance. As you plan for your insurance premiums, look for cheaper options that give you a better value. This is a fantastic time to look for ways to save money!
This category is really flexible and can include any age group. If you have kid(s) in college that you send money to, include it here. Other things to plan for in this section include:
- School trip fees
- School supplies
- Educational subscriptions
- Private school tuition
- Extracurricular fees
Your clothing category will look different depending on how many kids you have and how old they are (and how much you love to shop!). This is one category that can be adjusted easily just by shopping sales and secondhand.
Even though it might be tempting to not put this in your budget, you should always give yourself an allowance for shoes and clothes. There will be times that kids will grow out of shoes and you need to have money set aside for it.
12. Personal Care
Self-care is essential for your mental health, but you should still keep track of how much you spend in this category. Often, there are ways you can save money and still get the same benefits. For example, you can do workouts at home and save money on your gym membership.
You will always need hair cuts and such, so plan ahead for them! Here are a few different things you can include here:
- Gym membership
This is another essential budget category. If you have debt, make a plan for paying it off and include those larger payments in your budget. Try to pay off the smaller debts first then roll those payments onto the larger debt. Before you know it, you’ll have your major debts paid off!
The worst thing you can do is max out your credit cards and just pay the minimum payments. If you can afford it, try to pay more than the minimum.
Finally, you should always include any charitable giving in your budget. Give yourself the extra money that you can give away. How much you give is a very personal decision.
Talk it over with your spouse/partner and decide this together!
The Best Way to Track Your Budget
There are so many different methods you can use you to track your budget and ensure you stay on track. My favorite, however, is my Budget Life Planner. This handy tool keeps all the important info you need in one space!
If you prefer to use a program to help keep track of everything and already have budget categories, take a look at Quicken or Mint. These online budget programs can help you stay on track and make creating a budget super easy.
If you don’t know which one to choose, take a look at this post that gives you all the pros and cons of each program and find the right one for you!
There might come a time when you’re writing your budget that you realize you don’t have enough money to cover all your expenses. Not only is this frustrating, but it might also make you want to stop budgeting altogether.
If this is the case, then you aren’t alone. To help you make ends meet each month, you might have to comb through your budget and choose where you want to cut back on your spending. Take a look at your budget and ask yourself these 3 questions about each category:
- Do I need this item in my budget? Is it necessary?
- Can I reduce this category in some way? Can I negotiate a lower rate or shop around for a better price?
- Can I completely cut out this expense from my budget? I can always add it back into my budget in the future!
If you want to make a big impact on your budget without cutting back on your fun money, then take a look at your insurances. From car insurance to home insurance, you can likely find a lower monthly or yearly rate! Be willing to shop around and try out a different company. It might just pay off! Check out competitive car insurance rates in your area below:
- Your budget categories will likely change over time. Remember that they are not set in stone. Your budget is a fluid document that can change and grow as your finances do.
- Including sinking funds in your budget will help you save up for big expenses such as car maintenance and Christmas. You’ll be thankful that you have this money saved when the time comes!
- Setting up your bills on autopay is a great way to quickly pay your bills. Just be sure to check on them every now and then, especially if the amount you owe changes each month (like your electricity bill).
Budget Categories: Final Thoughts
There you have it! This is everything you need to know about budget categories. When you sit down and start to make your budget, take a deep breath. Remove all distractions, and try to create an air of positivity. The point of a budget isn’t to constrict or control you. It’s supposed to give you insight into your spending habits so you can discover where it’s all going.
Creating a budget could even give you more money than you even knew you had. With just a few small behavior changes, you can be in control of your money, instead of the other way around.
Get Started Today
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