Personal Budget Categories – Keep Your Budget Organized

This post may contain affiliate links. Please read my disclosure for more info.

Using budget categories is the best way to keep your personal budget information organized. Budget categories will help you to understand where your money is coming from and where it is going. This will help you make decisions which will improve your spending habits.

Budget Categories – How Detailed Should you get?

When I first started budgeting I used high level budget categories. For example, I would use “food” as an expense category for all grocery, restaurant, vending machine, or random coffee shop purchases I made. Over the years, I have changed my budget categories for “food” to: groceries, restaurants, and coffee.

Breaking out my budget categories into subcategories has helped me to know where every penny comes from and goes.

My husband likes to go to Starbucks. Before this expense category was defined, he was spending $100 a month on coffee and breakfast foods! After defining this category his spending went down to $25 a month. Make your budget categories as granular as you need in order to be financially successful.

In the book, “Your Money or Your Life,” Vicki Robin encourages readers to get extremely granular with their budget categories. Her reasoning is that every minute of your working life has a dollar value attached to it based on how much you earn. Once you see how much time you pay for each expense, you will give a more critical eye to your spending each month.

Detailed budget categories are a great way to take ownership of what you earn and spend.

Budget Expense Categories or Sinking Funds

After you have been budgeting for some time, you may notice that you have quarterly, bi-annual, or annual expenses. You can create one budget category for these miscellaneous items, or you can break them out in your budget. I have budget categories for “propane” and “professional dues.” 

At the end of the year, I will calculate what I spent in total for those types of categories. I then put that information into my budget each month as an expense amount equal to the total expense divided by twelve. Another way to calculate these expenses are to take the amount you need to save and divide it by the amount of time you have until the expense occurs. These expense categories are known as sinking funds. 

A sinking fund is a strategic way of setting aside money into a savings account each month. This helps to keep your budget more predictable. By saving a small amount each month, you are better able to tackle any known expenses that come your way.

Creating Budget Categories for the First Time

If you are new to budgeting, you can easily determine which budget income and expense categories you need to track. To do this, print out your last three to six months of bank statements and categorize your expense and income items.

For our income categories we have W2 employment earnings, side hustle earnings, and cash from selling items. Use my information as a guide to determine which income categories you need.

Primary expense categories to start with are: food, utilities, housing, transportation, health, insurance, recreation, personal spending, savings, debt repayment and miscellaneous.

After you have calculated how much you spent each month for the above expense categories, you can then make the decision to break out your primary categories into secondary categories. Having your budget categorized into many categories allows you to challenge yourself to improve. What gets measured gets improved!

After you have determined your budget categories, you may want to set up your budget on a monthly, bimonthly, semimonthly, or weekly basis. 

Currently we have 30 budget expense categories in our semimonthly budget, but we don’t use all of them each month. For example, we have a “clothing” expense category. We will determine how much we want to spend each year for this category and then create a semimonthly sinking fund for this expense. We shop for clothing for ourselves, or our children, 2 to 3 times a year.

This year I challenged myself to a “no spend year” for clothing and shoes in order to put more money towards savings!

Use as many budget expense categories as you need to make your budget successful.

Budget Expense Category Ideas

Here is a list of 85 expense budget categories you may need in your budget:

• Food: groceries, restaurants, brunch, coffee, alcohol, bar, snacks, vending, delivery food, work meals, meals with friends
• Utilities: electric, natural gas, phone, internet, water, sewage, garbage disposal, cable TV, pest control, storage unit fees
• Housing: rent, mortgage
• Transportation: gas, tolls, oil change, tires, maintenance, registration fees, license fees, car wash
• Health: co-pays, expenses an HSA or FSA won’t cover, pharmacy expenses
• Insurance: health insurance, car insurance, life insurance, homeowner’s insurance, pet insurance, renter’s insurance
• Recreation: movies, date night, hosted parties, books, audiobook subscription, satellite radio, Netflix, Hulu, Spotify
• Personal Spending: childcare, babysitter’s fees, pet food, pet care, vet expenses, professional dues, courses for professional development, education costs, education supplies, Amazon subscription, clothing, gym membership, personal trainer, exercise class fees, haircut, personal grooming, maid service, pocket money, gifts, laundry, dry cleaning, tithing, giving, charitable donations, personal office equipment, personal office supplies
• Savings: emergency fund, savings account, retirement account, college funds for kids, housing savings fund, housing repair savings
• Debt Repayment: credit card repayment, personal loans, student loans
• Miscellaneous: any expense that doesn’t fall into a traditional budget category

This list may not have a budget category you might need, but it is a great place to start when thinking about what expense budget categories you will need in your budget. Get as detailed as you need in order to be successful with your spending goals!

Ready to Start Your Budget?

I hope that you use this information to start your budget or refine your existing budget. Budgeting has allowed me to pay off $70,000 of debt and counting and save a $30,000 emergency fund. At the end of each month I determine where I can make improvements so that we can budget our way to financial freedom!

Use the instructional video below to help you get started with your budget today!

Use your budget to improve your spending habits. Do you need a budget? Grab a spreadsheet or editable printable PDF budget in my Etsy shop!

Share your budget categorizing tips below!