Essential Budget Categories: A Comprehensive Guide for Financial Freedom

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If you’ve been around here for a while, you’ll know that we love a budget.

Budgets help you to live abundantly and without stress- no more wondering where all of your money has gone each month!

When it comes to creating a budget for the first time, there can be a bit of overwelm.

One of the things that you may get stuck on is what budget categories to have.

It isn’t important to have the most perfect looking budget ever, but rather have a budget that you will stick to and what works for you. Whether you do a monthly budget or not.

You may have looked at the budget categories Dave Ramsey shows, and be interested to find out more.

It’s different for everyone, so in this article, we will be doing a deep dive into all of the different budget categories.

 

What Are Budget Categories?

You may be wondering what are budget categories? And why is it going to help so much?

When you are starting your budget you will be listing out all of your various expenses.

You will then want to group them together in categories so you can see an overall picture of what you are spending on.

A lot of people get stuck on which budgeting categories to choose, so we will have a look through a comprehensive list of budget categories for you to help you out with your budget.

Of course, you could check out our budget spreadsheet with categories, which will do a lot of the hard work for you. We put this together to be as helpful as possible when starting your budget.

There are many budget categories and subcategories that we can go through.

 

What Are The 3 Basic Budget Categories?

There are 3 simple budget categories that are helpful to use as a good place to start when it comes to looking at your expenses. There are various household budget percentages you can use as well to help.

 

Needs (Living Expenses)

So firstly, the most important one – your needs. There are some things that you need to pay for in order to survive, and this is where these go.

The sort of things that go into this are expenses such as your housing, your water, electricity and gas, and so on. This is where there are budget categories for households.

 

Wants

Your ‘wants’ are the things that you want to buy but don’t need in order to survive. This is the differentiation between needs and wants.

This category is where most of the overspending and problems come from, but this is where having a budget really helps!

 

Debts + Savings

As well as the needs and wants, you’re going to want to have a budget category/section for your debt (if you have it) and savings.

 

How To Organize Budget Categories

Within those 3 broad budget categories, there are lots of smaller budget lines that we can go into a bit more detail on.

 

1. Needs (Living Expenses)

So, the needs. These are the most important expenses as you need to pay these in order to survive.

 

Housing

You’re going to need somewhere to live, and therefore housing costs are really important.

When it comes to housing costs you may just think of your mortgage or rent payment, but there’s a lot more that goes into running a house, and you want to make sure that you are covered for everything.

The housing costs will vary depending on whether you are renting or own your home. When you own your home you will have to think about additional costs such as for repairs.

Some examples of the types of housing costs that you want to include in your budget are:

• Mortgage/Rent
• Insurance
• Property Taxes

 

Utilities

Another important section for your budget is utilities. We need to pay for utilities in order to keep our home running, and there can be some added extras as well.

Examples of utilities include:

• Gas
• Electric
• Water
• Garbage
• Internet
• Cell Phones

 

Food + Medical

We all need to pay for food! Food is one of the biggest budget categories for a lot of people and something that can be broken down a bit more.

You will also want to think about any medical expenses that you have. Medical insurance is hugely important as well, and any prescriptions that you need to get.

• Groceries
• Eating Out
• Medical Insurance
• Prescriptions

 

Transportation

What are your transportation costs? You’ll want to make sure that you include all of this if you want to get around!

The amount that your transportation costs you will depend on where you live and how much you travel.

• Car Payments
• Gas Money
• Car Insurance

 

2. Wants

Now on to the “wants.” As mentioned, this is where a lot of people get a bit lost when it comes to sticking to their budget.

That’s ok, as we can make sure that we budget for these, which will mean that we don’t go over budget.

The thing about ‘wants’ is to not think of them as unnecessary or lavish. These are the things that bring us joy – we just need to make sure we don’t go crazy in this area and leave ourselves short.

There will be different budget categories for families – everyone is different.

So what are some examples of wants? Let’s take a look:

 

Donations

You may be someone who believes that tithing is really important and wants to put it in their budget. This, therefore, needs to be a line item in your budget. Tithing and donating will look different for everyone, so think about how much you want to do this for.

• Tithing
• Other Charities

 

Home Expenses + Personal Care

It costs money to take care of your home, between cleaning, maintenance, or maybe just sprucing up curb appeal.  

On top of that, there are personal care items that you will probably want to include in your budget. There are things that we need, but perhaps don’t want to spend a lot of money on.

Examples of these include:

• Cleaning Supplies
• Personal Supplies
• Diapers, etc.
• Clothing/Shoes

 

Entertainment

Whilst this sort of thing doesn’t go down as a ‘need’ but can be essential when it comes to living a life that we enjoy.

Life doesn’t need to be all doom and gloom and saving every single cent that you earn. Where’s the fun in that?!

There are all kinds of things that you can include under this budget category – it will be different for everyone!

Here are some examples:

• His + Her “Fun Money”
• Date Night Fund
• Streaming Services / Ebooks / Etc.
• Hobbies
• Gym Membership

 

Miscellaneous

Don’t underestimate the importance of the miscellaneous budget category.

A lot of the time, the reason for going off-budget is due to expenses that weren’t budgeted for. This is where the miscellaneous budget category can come in!

There are some specific things that you can budget for that aren’t unexpected, but when you are just getting started, the miscellaneous category will really help.

• Gifting (Birthdays, etc)
• Christmas Fund
• Buffer/Catch-All
• Miscellaneous Annual Costs

 

3. Debts + Savings

You might want to lump all debt and savings in together, but it does help to look at them separately.

That doesn’t mean that you can’t have a budget category called ‘debt’ or ‘savings’ – more so that you break them down to look at.

 

Credit Cards

When it comes to credit cards, you may have a few that you use. If you want to pay off your debt then it will help to list them all out as they are likely all different. You could do it like this:

• Credit Card Debt #1
• Credit Card Debt #2

 

Personal Loans

Same as above with credit cards, you may want to also list out all of your loans and see where you are with them. This could include:

• Student Loan #1
• Personal Loan #1

 

Immediate Savings + Investing

An important budget category to add is your various savings and investments. You may not have all of the ones that we have listed out below but that’s ok!

These are good examples of some that you should try and work towards:

• $1000 Emergency Fund
• 3-6 Months Emergency Fun
• Retirement Account #1
• Retirement Account #2

 

Future Savings + Goals

Don’t forget to include budgeting for the future! There are certain savings goals that you may have that you will want to include in your budget. This could look like the following:

• College Fund #1
• College Fund #2
• Car Repair Fund
• Home Maintenance
• Down Payment For Next Vehicle

 

Budget Categories FAQ

Hopefully, we will have covered a lot of your questions, but if you have more questions on budgeting categories and budgeting tips let’s try and cover some more below.

 

How Many Budget Categories Should You Have?

The number of budget categories that you have will depend on what your life looks like!

There’s no one right answer to this as we are all so different. However, you may find it beneficial to start off with a lot of budgeting categories (to make sure you cover everything) and then whittle them down over time.

 

Which Budget Categories Cover Variable Expenses?

Variable expenses are the expenses that “vary” – change each month. There are some expenses that don’t change each month such as your mortgage or rent.

There are some expenses that vary each month, and these are the ones that will be in your variable expenses.

This could be things like your groceries and fun money.

 

How Can I Set Up A Personal Budget On An Inconsistent Income?

We are believers that absolutely anyone can have a budget, no matter your income.

After all, a budget is just a way of figuring out how you spend the money you are getting in.

If you know how much you are going to be paid for the upcoming month then that is what you will be using as your income to budget from.

If your money is going to be coming in throughout the month then you will want to ideally get one month ahead of yourself.

This won’t be something that can be done straight away but is a good thing to work up to. You may find it useful to use budget categories and percentages.

 

Should I Include My Business Budget Categories In My Personal Budget?

We believe that you should keep your business and personal budgets separate. If you have business expenses you should be using your business income to pay them.

Try and have 2 separate accounts for your business and personal money so that you don’t get things mixed up. Having them all in one is very confusing and will be a nightmare when it comes to sorting out tax etc.

 

Final Thoughts On Budget Categories

When it comes to creating a budget we know how overwhelming it can be and you may have lots of questions for things like what budget categories you should have.

Hopefully, we have helped give you some insight and examples of the types of budgeting categories that you can have, but ultimately it will be up to you.

Everyone has a budget that is unique to them, their lifestyle, and family – there is no one budget that is the same for everyone.

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What budgeting categories do you have within your budget? Let us know below!