Coming up with useful budget categories can be a challenge. Especially if you’re like me, and can see relationships between pretty much everything.
But grouping your spending by category can make things so much easier down the road.
Why? Because you’re less likely to let important things slip through the cracks, or to be hit with surprise or irregular expenses.
To make the whole process easier, here’s a list of some of the most common budget categories for you, followed by tips on using them.
Basic Budget Categories
Let’s start with the most basic personal budget categories. Those are:
- Everything else
There’s a much larger list of budgeting categories a little further down. But if you’re budgeting based on percentages or don’t want to get into detail, the 7 above might be all you need.
In that case, you just assign a percent or amount of your income to each category. Make sure you can cover the most important ones first. (Food, housing, and basic transportation if you need it to get to work.)
50/30/20 Budget Rule Example
For example, if you’re using the 50/30/20 rule, you would assign 50% of your take home pay to needs. That would cover food, housing, transportation, and utilities. Then you’d assign 30% of your take home pay to wants (aka everything else). Finally, 20% would go to savings and debt repayment.
Keep in mind though that rules like that are only a guideline. You might want to send more to savings, need to send more to debt, etc.
These basic budget categories can be a good way to go. But many people want to break things down further so they have a more detailed plan for their money.
I find it much better to not worry about how much I “should” be budgeting for certain things. Instead, I focus on how much I both can and want to budget for things. There are no wrong answers, as long as you don’t run out of money and can still save.
Recommended Personal Budget Categories
Breaking things down into more detail can be especially good if you’re new to budgeting.
When you use more detailed personal budget categories and subcategories to create your budget, you’re likely to remember more of your expenses. That’s important, because it will help you to stick with it over time and to get better and better at it.
Budgeting is a process that pretty much no one gets right right off the bat, but this list can help give you a leg up. Don’t feel like you have to use all of them by any means. Pick and choose the one that apply to your life.
The major categories are in bold and the subcategories are below them as bulleted items.
- Groceries (including paper goods & toiletries)
- Dining out
- Lunch money for kids
- House payment or rent
- 2nd mortgage
- Property taxes
- Home or renter’s insurance
- HOA fees
- Repairs & maintenance
- Household items
- Public transit
- Car payment(s)
- Gas & parking
- Car insurance
- License fees/tags
- Car maintenance
- Car repairs
- Oil for heat
- Other paid TV (streaming services)
- Cell phone(s)
- Emergency fund
- Retirement contributions
- Education fund
- Other savings
- Student loans
- Credit cards
- Vacation loans
- Home equity loans
- Personal/Other loans
- Events (concerts, movies out, sports, etc.)
- Fun money
- Kids’ activities and allowances
- Gifts and parties (birthday’s anniversaries, etc.)
- Holiday gifts and entertainment
- Subscriptions (music, etc.)
- Food and supplies
- Vet (checkups, shots, emergencies)
- Pet insurance
- License fees
- Toys and treats
Health & Appearance
- Doctor visits
- Dental care
- Health club/gym
- Health insurance
- Disability insurance
- Life insurance
- Clothes (adults)
- Clothes (kids)
- Haircuts, color, etc
- Lawn care
- Pool maintenance
- Other caregiver
- Fees (bank, annual fees, etc.)
- Child support
- School supplies
The 5 Basic Elements of a Budget
No matter what you choose, you’ll be working with the the 5 basic elements of a budget. Those are:
- Your income. For budgeting purposes, this is usually your after tax take home pay.
- Necessities. Theses are usually fixed expenses that you need in order to live. Food, housing, a way to get places, and major utilities are examples.
- Savings. Savings should be a regular part of your budget, not something you try to do if there’s money left over. I know that can be really hard to do, but putting it ahead of variable expenses can help.
- Variable expenses. These are things like Netflix, going out to eat, paying for debt, etc. They are flexible expenses that you don’t need in order to live. The amounts might or might not be the same each month. Do try to have at least a little fun money in your budget each month too. It helps!
- Emergencies. No matter how it may seem, none of us breeze through life without having an emergency. You’ve got to plan for them, because they will happen.
All of the budget categories above cover these 5 basic elements. Because personal finance is personal, that means you’ll put them together in a way that works for you.
Putting Your Budget in Order
So how do you go about putting your budget in order? It starts with what you already know.
Take a look at the list above, and write down how much you’re spending on the items in it right now. If you don’t know, either look at past bank and credit card statements, or guess.
If you share finances with someone else, make sure you’re both involved in the process. It’s really common to start budgeting because of money problems. People think of it as being about restricting spending. That’s why it kind of has a bad rap.
But the thing is, budgeting isn’t about restriction. Instead, it’s a plan for your money. It’s how you get what you want!
Keep it Simple and Do What Works For You
Once you have your list of what you’re spending right now, put it in order from most important to least important. Then take a look at your income. How much of your list does it cover?
If it covers everything, that’s great!
If you need to cut expenses to make ends meet, cut from the bottom (least important) part of your list and work your way up. Of course you can also try to make more to close the gap. Here’s a list of side hustle ideas that may help.
Once you’ve got everything set up on paper (or pdf, or spreadsheet), it’s time to put it into action.
Because a budget is a living thing. It will change as your life does, and as you get better at planning.
So when deciding how much to spend in each category, think about this: What do you need and want to do with your money? You get to pick, and then you get to make it happen, based on what’s most important to you.
Of course, it will also depend on how much income is available to you. You’ll need to look that up as well if you don’t already know.
Putting Your Budget Categories Into Action
This is something I really struggled with back when I first started budgeting. There were two problems that I kept running up against:
- What to pay out of each paycheck
- Reviewing how I did at the end of the month and then beating myself up about it
I don’t think I’m alone here with those issues, so let’s talk about each one.
What to pay out of each paycheck
You may get paid every two weeks, twice a month, monthly, or get irregular paychecks. (I’ve been in that last category for years as an entrepreneur.) If you share finances with someone else, they might be paid on the same schedule as you, or a completely different one.
If you get caught up on all that, it can make it really hard to figure out what to pay out of each paycheck.
The thing is, most of your bills will probably be monthly, with a few others coming at random times.
For many, the easiest thing to do is to budget on a monthly basis. Because you need to pay for things each month, no matter when you get paid.
So take the least amount you usually make each month, and budget based on that. Then you can pay for the things in your budget based on when they are due.
Put a set amount in savings each month to cover the things that are only due once or twice a year. For example, if you have a $500 expense that you only need to pay once a year, put $41.67 a month into savings for that.
If you’re living paycheck to paycheck this can be hard at first. You’ll want to spend money you have earmarked in savings for a bill on something you need right now. That’s where doing what you can to bring in extra income and get creative can help.
If you’re not living paycheck to paycheck, the easiest way to handle this is to get at least a month ahead on your budget. That means you always have a buffer of at least one month’s worth of expenses in checking. You pay for things out of that while you are making money for the next month. This is over and above an emergency fund. (Here’s how to do that if you’re using YNAB.)
Reviewing Your Budget Categories at the End of the Month
Remember how I said I was reviewing how I did at the end of the month and then beating myself up about it? That’s the biggest mistake I made with budgeting. You see, you do NOT want to review your budget categories at the end of the month. Or at least, not only at the end of the month.
Instead, you want to track your spending as you go. How often you do that is up to you, but I recommend doing so at least weekly at first, and maybe even more often. The more often you do it, the more on track you will stay.
And when you first start out, you’ll be able to quickly find things you’ve missed and adjust. That’ll stop the beating yourself up at the end of the month. Remember, budgeting is not a test of how you did or a restriction on what you can do. It’s a practice. A practice that helps you get what you want, without a ton of stress.
So here’s how to track your spending so it actually makes a difference. Follow the steps outlined there, and you’ll soon be a happy budgeter.
To sum up, use the recommended budget categories list above (or get the free printable version here.)
Decide what you want to use your income for, track along the way, and adjust. Before you know it you’ll be on your way to telling your money what to do. And that’s so much nicer than being stressed out.
Take action now with building a budget. You’ll be glad you did.