Budget categories: The only 4 you need to be successful

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budget categories

I will admit I get a little nutty when it comes to organizing, filing, and doing all things related to creating categories. It’s pretty easy for me to fall down the rabbit hole and get WAY too into the details. So today I’m discussing budget categories and how to know which ones you should use and where it pays to be specific and where you can afford to be more general.

Budget categories type 1: Needs

This first category type is where you need to start by being specific. This is just your basic list of bills you have to pay each month to keep a roof over your head and the lights on. I include rent/mortgage here even though it’s a mortgage is a type of debt because I still think “roof overhead” = need. Here is the list of categories I have right now:

  • Mortgage
  • Power
  • Natural Gas (we have gas heating and for our stove)
  • Water
  • Garbage
  • Car Insurance
  • Daycare
  • Phone
  • Internet
  • Home alarm system
  • Netflix

Some other budget categories you should include might be:

  • Health, dental and/or vision insurance (I get this through my employer so I don’t pay it monthly like a bill)
  • Sewer service (if it’s not included with your water)

Budget categories type 2: Debt payments

Yup, these need to be specific too if you are making monthly payments there is no way of getting around it. You need a budget category for every payment. If you bundle all your credit card payments together you are likely to forget one. Here’s what your debt payment list might look like:

  • Car payment(s)
  • Credit Card(s)
  • Student loan(s)
  • Personal loan(s)
  • Orthodontist payment plan (anyone else have a kiddo with braces? These are crazy expensive!)

You might also have items like:

  • Home Equity Line of Credit (or HELOC)
  • Overdue bills – yes those are considered debt too – especially by the credit bureaus
  • Other medical bill payments – man those things add up
  • Payment plans you signed up for – like if you bought an online course or something

Budget categories type 3: Savings!!

This is where you can start to get a bit more general depending on the circumstances. I’ll give you a breakdown of what I currently have as well as some other things you might want to consider
Savings budget categories I use:

  • Emergency fund – this is the “don’t touch it unless we lose a job and all other options are gone fund”
  • Vacation – we plan our vacations at least a year in advance, or at least a budget for it and then calculate what to set aside each month so we have the cash for the vacation by the time it comes around. Vacationing with cash is the best!
  • Home maintenance – this is the “oh crap our dishwasher just broke” fund
  • Home improvement – this is the “it sure would be nice to get some new plants in the garden” or “let’s repaint” fund
  • Auto maintenance – I hope this explains itself – oil changes, tires, brakes, the inevitable engine failure
  • School Fees – for annual pictures, school supplies, etc
  • Gifts – birthdays, anniversaries, Christmas
  • Haircuts/Pedicures – serious business around these at my house to get their own category
  • Subscriptions – I bundle the fees for all our annual memberships –  Playstation, Instacart, Amazon prime, safe deposit box
  • Clothing – duh. A gal needs her shoes…..
  • Other temporary goals – like our current Playstation 5 fund

There are definitely some next level stuff you could save for as well once you get the basics under control. Some things to consider are:

  • Your next car purchase – save up to pay in cash (or at least put down a hefty deposit)
  • Down payment on a home or next home
  • Major renovations on your home – like a new level, new kitchen, etc.

More budget categories: Spending and wants

First, since you’ve read about how I like to create my budget so you know I recommend having a separate account for your spending. It is the easiest way to make sure you feel free to purchase up to a certain amount while never going into your bill or savings money. It’s a lovely blend of freedom and just enough restriction to keep you on course to your goals. Here are my spending categories:

  • Gas
  • Groceries

Simple right? I used to get really hung up on specifics here and have separate budget categories for household, personal care, groceries, dining out, etc. Now, it’s all groceries. I suppose I could name it something else but that’s what makes the most sense. Plus, now that I keep the account separate I never go over budget so it doesn’t matter how it breaks out (at least not to me). There are other things you could certainly include here if you have more money, like:

  • Entertainment
  • Free money (just to blow on whatever)
  • Date night

The budget categories you should use are the ones

that work and are worth it

It’s all well and good to categorize everything down to the specific penny – but is it worth it? Will you put in the time and energy it takes to split all the charges apart to categorize them? Even with Simplifi my favorite money tool, it will take more time the more categories you have. I’m not saying it isn’t worth it – but make sure it IS.

And if you are going to be specific make sure you know the exact reason you want to track that particular expenditure. If you want to track how much you spend on shampoo – be my guest – but what purpose will it serve? Will your overall budget be saved by knowing your shampoo spending total? Maybe but probably not.

It’s easy to make too many budget categories – I did it at first too. But I whittled it down until I was only tracking the numbers that mattered. And that’s what I recommend to you as well my friend.

I’m Sarah


On a mission to change the world of finance from stuffy suits and guilt-trips to a place of understanding supported by solid strategy; I have personally journeyed from homeless teen mom to ass-kicking CEO and now my work centers around empowering women like you to do the same.

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