How to Create Budget Categories

Personal budget categories help you organize your spending so that you can plan more easily. Sort your expenses into groupings that make sense for your life, then use your budget categories list to determine the specific expenses you want to put in your budget.
Budget Categories

Ready to budget, but don’t know where to begin? Creating personal budget categories is a great way to get organized and make planning easier.

So what is a budget category? It’s quite simple: just a group of related expenses that you budget for. Think of budget categories as buckets: you just group your spending into some simple budget categories that will help you decide how to divvy up your money.

Here’s an example: you might have a “media” budget category that includes all the media you spend money on: subscriptions to Netflix and Spotify, money you plan to spend on video games, and your monthly donation to your local public radio station.

Some other common budget categories:

  • Housing
  • Food
  • Transportation
  • Debt
  • Travel
  • Entertainment/fun
  • Savings

The benefits of budget categories

Starting a budget can be overwhelming! If you put a line item in your budget for every single thing you purchase, you’ll soon be drowning in details. When you start by creating simple budget categories that group related expenses, you can get an organized view of how you spend your money—then slice things up into the individual line items you want to plan for and track in your budget.

Speaking of organizing: your categories will give you insight into the overall trends in how you spend your money. Seeing just how much you spend on broad categories can spark ah-ha moments—like noticing that you spend twice as much on entertainment compared to savings—that help you make more informed decisions about how you want to plan for the future.

Another benefit of creating budget categories: it helps you remember all the expenses you need to plan for, even the sneaky once-or-twice-a-year things that are easy to miss!

What to put in your personal budget categories

Each of your budget categories should encompass your monthly expenses, other expenses that come up infrequently, and the things you plan to spend money on in the future.

Let’s break down one of the most common categories: housing. This category might include things like:

  • Rent or mortgage payments
  • Property taxes
  • Housing association or condo fees
  • Renters insurance, homeowners insurance, mortgage insurance
  • Utilities like gas, electric, water, sewer, garbage
  • Home improvement and repairs
  • Furniture and interior decoration
  • Costs to make a home more accessible (like ramps for people with mobility needs or high-contrast counter liners for people with low vision)
  • Gardening and landscape maintenance

You may have housing expenses that aren’t listed above—and you certainly won’t have every expense on this list! The key is to gather up all your expenses in the category, including those easy-to-forget ones that don’t come up very often.

Here’s one more example: transportation. Individual costs that might make up a budget category for transportation include:

  • Transit pass (for toll roads/bridges or public transit)
  • Fuel (gas or electricity)
  • Maintenance (oil changes, tire rotations, tune-ups)
  • Roadside assistance programs (annual fees and per-use fees)
  • Emergency equipment (flares, jumper cables, etc.)
  • Car payments
  • Auto insurance
  • Car washes and detailing
  • Car modifications for disabilities
  • Registration and emissions testing
  • Funds for unexpected repairs

How to create your budget categories list

To figure out the right personal budget categories for you, a great way to start is with a good old-fashioned brainstorm. Here’s a common budget categories list, with just a few ideas for what your expenses might be under each one, to get you started:

  • Savings (emergency fund, moving fund, vacation fund)
  • Debt (minimum payments, get-out-of-debt plan)
  • Housing (rent, mortgage, utilities)
  • Food (groceries, takeout, coffee)
  • Medical (premiums, copays, medications, adaptive equipment)
  • Insurance (car, home/renters, mortgage, life)
  • Education (tuition, workshops, books)
  • Pets (food, toys, vet costs)
  • Gifts (holidays, birthdays, anniversary)
  • Kids (childcare, clothes, toys)
  • Grooming/clothes (clothing, haircuts, nail care)
  • Transportation (gas, transit pass, car maintenance)
  • Fun (vacations, books, movie rentals)
  • Taxes (self-employment taxes, tax preparation service)

After you brainstorm, it’s a good idea to cruise through your bank records to see what you might have missed.

How to turn your categories into expenses for your budget

Now that you’ve got a list of your own personal budget categories, it’s time to put them into a nuts-and-bolts budget. How specific you get is all about how you like to plan and track your spending.

You might create a separate line item in your budget for different expenses in a category, or you might find it easier to just create one expense for an entire category. Take that “media” budget category we discussed above—you can slice it many different ways, such as:

  • create four separate expenses: Netflix, Spotify, video games, and public radio
  • create one expense for monthly recurring costs (Netflix, Spotify, public radio), and one separate expense for what you plan to spend on video games
  • create one expense for the whole shebang

A good general rule is to use narrow categories when you need to track spending closely, and broader ones when you need flexibility. For example, you might track all your spending on food in one category—groceries, takeout, the works. But if you’re trying to cut takeout costs, consider making “takeout” its own category so you can monitor it closely.

If extreme precision is your jam, you can have as many categories as you like. But if you have more than you can comfortably track, you may end up feeling overwhelmed and discouraged. So find the balance that feels good to you.

Use your categories to start budgeting!

With your spending organized into budget categories and a list of the specific expenses you want to break out for your budget, you’re all set to put money management into practice. Here are your next steps:

  • Choose a budget strategy. There are plenty of philosophies out there about how to build a budget—this guide will help you find the one that makes the most sense for you
  • Set savings goals. It’s smart to have a budget category for savings, and it’s easier to sock money away when you know what you want to save for. This article will help you set goals that motivate you (and give you some inspiration from Simple customers)
  • Lay it all out in a template. We’ve created easy templates that do the math for you. Just enter your income and expenses—then boom! You’ve got a budget
  • Put it all together with Simple. Here’s an easy guide to putting your budget right into your Simple Account using Expenses. And to make sure your savings plans are in the mix, check out this overview on adding Goals and Protected Goals Accounts.

Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: We do our best to make sure information is accurate as of the date of publication, but things do change quickly sometimes. Any outbound links in this post will take you away from, to external sites in the wilds of the internet; neither Simple nor our partner bank, BBVA USA, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. Individual situations will differ; consult your favorite finance, tax or legal professional for specific advice. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.

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