We may earn money or products from the companies mentioned in this post, and as an Amazon Associate I earn from qualifying purchases. Please see my full disclosure for more information.
Are you finding a budget categories list that will work for your expenses? Well, look no further. This guide contains the ultimate budget categories list to help you create the perfect budget and manage your money more smartly.
At its core, a budget is nothing but a simple plan for how to spend your income. A thoughtful, considerate, and well-drafted budget can help you spend your money more wisely. You can take control of your finances, save money where you can, and still leave enough to pay for your necessities.
What is a Budget Categories List?
Creating the perfect budget is tricky, but it doesn’t need to be. If you’re having a hard time understanding, you might need a budget category list every time you’re making a budget.
Making a budget categories list involves breaking down regular expenses into categories. The budget system is ideal for beginners, as it allows them to see the bigger picture. You can better look at your spending patterns and the ways that you can change them.
Budget categories can be extremely helpful whether you’re paid monthly, or if you find yourself needing to budget weekly paychecks and struggling.
Why you need budget categories
This budget categories list is designed to help you to remember what you are spending your hard-earned money on. If you haven’t categorised your expenses, it’s all too easy to go over your budget, which can be extremely frustrating when you’re trying to save money or pay off debt.
These budget categories should provide options for any financial situation you’re in, and help you to measure your spending month-by-month. This way, you can easily identify where changes might need to be made in order to reach your goals that bit faster.
Gather the Essential Budget Categories
Typically, you don’t have to follow a strict set of rules when making a budget. Yet, having a system in place is essential for ensuring that you’re spending your money smartly. Budget categories can help divide your total money into mandatory expenses, which ensures that you don’t fall short of cash at any point.
Creating a budget categories list every month is excellent for people who are just starting out. For that, identify your ‘disposable’ monthly income- the money you have left after deductions and taxes. Then, you can divide your available money (disposable monthly income) into budget categories, including housing, transportation, food, utilities, and others.
Housing is the budget category that makes up the most significant part of your monthly expense (between 25% and 35%).
Your housing budget typically means the money you spend on a house, but this can mean different things for different people.
For example, it includes rent money and renters insurance for tenants. On the other hand, homeowners need to budget for property taxes, monthly mortgage, maintenance, etc. Other expenses that make up the housing budget include:
- Homeowners /Renters Insurance
- Home repairs/maintenance
- Homeowner’s Association Fees
- Home Equity Line of Credit
- School taxes
- Pest control
- Yard services
- Property taxes
No matter where or how you live, monthly transportation costs can make up as much as 10 to 15 % of total disposable monthly income.
According to BLS, it may be the second-largest expense for most earners in the US. After all, you need to get from one place to another for work, school, etc. Similar to housing expenses, transportation costs go beyond car payments.
For example, it may include gas, repairs and maintenance, DMV fee and registration, auto insurance, and warranty. Transportation costs can rack up very quickly, especially when they also include:
- Car inspections
- Car maintenance/repairs
- EZ pass
- Parking fees
- Public transit costs (train, subway, bus)
- Tolls Gas
Of course, food and groceries are essential expenses for all families.
However, it is critical to understand that ‘food’ and ‘groceries’ are not the same. Yet, most budgeters prefer combining the two types of expenses in a single category. In that case, this should make 10% to 15% of costs in your budget categories list.
Typically, grocery constitutes a mandatory expense, while restaurant meals (lunches, food delivery, dining out) differ. Additionally, other items such as personal grooming products don’t fall into this category, even if you purchase them at the grocery store. The list should strictly include household essentials and food.
That said, creating a separate list if you tend to spend more money on gourmet food and beverages can give a clearer picture of your expenses.
- Groceries (food, basic hygiene, and household items)
- Holiday meals
- Alcoholic beverages
Recommended post: 10 Free Printable Grocery List Templates (Shopping Lists)
You can’t afford to ignore the utility bills if you want a practical and well-functioning house.
After all, electricity, gas, water, HVAC, sewer, and internet utilities are essential for a convenient life. Depending on your region, you might also need to pay for other services, such as trash collection.
Typically, utilities make up 5% to 10% of your disposable monthly income, making it essential to add to your budget categories list. Make sure you cover all necessary expenses critical to keeping your appliances and other systems in the house up and running.
On that note, keep in mind that services like cable TV, video streaming, and landline phone do not count as mandatory. These services fall under luxury expenses as you don’t need them for survival.
- Alarm system
- TV (cable, satellite, streaming)
Everyone needs healthcare to ensure their health and overall well-being. Therefore, adding medical and healthcare to your budget categories list is crucial and separating at least 5% to 10% of your disposable monthly income.
This budget category should include all expenses related to your family’s and your health. This may include speciality care appointments, primary care, emergency care, prescriptions, and medical supplies. Make sure to add all your appointments you know are coming up in the month.
Besides, the healthcare budget might also include health insurance if you don’t already have it in a separate budget category such as ‘insurances.’
- Primary Care
- Monthly Appointments (eye care, diabetes, dermatology, psychology)
- Dental Care (orthodontics, toothache)
- Urgent Care (emergency medicine)
- Prescription Medicines
- Medical Supplies (insulin syringes, medical devices like glucometer or sphygmomanometer)
- Health Insurance
- First aid kit
- Health Insurance
- Home insurance/ Renter’s Insurance
- Auto Insurance
- Disability Insurance
- Life Insurance
- Gadget insurance
- Travel Insurance
Recommended post: Do You Need Travel Insurance? Always!
- Adults’ Clothes and Shoes
- Children’s Clothes and Shoes
- Dry cleaning
- Summer Camps
- Pocket Money
- Extracurricular Activities
- Baby sitters
- Toys, books, games etc
- Subscriptions for groups, classes etc
- Cosmetics (makeup, facials, skincare)
- Student Loans
- Credit Cards
- Personal Loans
- Financial Planning
- Emergency Funds
- Tuition Fees
- Retirement fund
- Savings post
- Hobbies (books, paints)
- Family Vacations and Activities
- Sports Events
- Concerts and Gigs
- Pet training
- Veterinary bills
Best budgeting methods to fit these categories into
So, there are your budgeting categories. Now what? The above list can be overwhelming on its own – so this section contains a few excellent budgeting methods to help you organize the categories you’ll be using.
50/30/20 Budgeting Method
The simple 50/30/20 budgeting method breaks your budget down into the following sections:
- Needs: 50% of expenses (e.g. rent, mortgage, utilities etc)
- Wants: 30% of expenses (e.g. personal budget, entertainment)
- Savings: 20% of outgoings (e.g. savings pot, investments, pension)
If you aim for your expenses to follow this rule, you’ll be able to categorise your spending much easier and keep track of where your money is going.
The zero-based budget, at its simplest, gives every single dollar of your income a job to do. To calculate your budget, you’ll subtract an expense from your income until you reach $0.
The upside of this is that you’ll typically end up putting more money towards your savings goals, as this unaccounted-for money would typically just end up floating around your account as disposable income. The downside is that it’s not very flexible, and can be quite time-consuming.
An envelope budget means you have an envelope (either literally or a digital envelope) for each spending category you’ll use from the above budget categories list. Then, you’ll only use whatever cash you put in those envelopes at the start of the month for that specific category. Nothing more, nothing less.
The 80/20 budgeting method – also known as pay-yourself-first is ideal for anyone who wants to prioritize debt repayment. The idea is that you’ll put 20% of your income into savings, investments, debt-repayment, or retirement funds, and the remaining 80% for your general budgeting categories.
Although the budget categories list mentioned above does not contain each category, it includes some major ones. These categories can help you make a typical budget to manage your money more smartly.