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Setting your budget categories is a simple way to get warmed up to budgeting. If you’ve been struggling to figure out what to include in your budget, and don’t know where to start, then you’re in the right place. First of all, don’t let the thought of creating a budget scare you. In its simplest form, a budget is just a spending plan. Setting a monthly budget helped me pay off $72,000 of debt in about two and a half years, all on one income. I know it works! But if you were like me in the beginning, you might be overwhelmed and frustrated. How do I start? What expenses should I include? How do I make it all work?

The simple truth is that you need to understand what you spend your money on and what your financial goals are. This all starts with your budget categories. The secret to sticking to a budget is having your spending plan organized with budget categories.

Start budgeting the right way with Budget Categories!

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    Why set up Major Budget Categories?

    Before we begin, let’s revisit the fact that your budget should mirror your financial goals. The first step starts with setting up major budget categories that fit your reality and your lifestyle. Budget categories shine a spotlight on your priorities and what you spend your money on. Best of all, you’ll realize pretty quickly if your spending habits align with your financial goals. For example, let’s pretend that your goal is to pay off debt, but you continue to pay the minimum payments. You don’t think twice about spending more than your debt payments combined on entertainment and eating out. You‘ll instantly see it if you check your budget categories.

    When you split out budget categories, you’ll instantly get a reality check. Are you really paying as much as you can towards debt? Do you really want to continue spending this much towards dining out and your food budget? Your individual budget categories will help you locate areas you’re overspending in. You may even find that you may be neglecting certain budget categories too. The point is to create your budget by listing all of your major budget categories.

    Helpful Hints for Setting Up Major Budget Categories

    Don’t make your budget categories too broad or detailed. Strike a balance that works for you. Broad categories make it difficult to figure out precisely what you’re overspending on. Detailed categories may take too much time to keep up with and not add any real value.

    Each major category like household or transportation will have several detailed items under each. The goal is to list major categories and write down all of the expenses pertaining to it. Making categories too broad will make it more difficult to figure out if you’re overspending on food, household, or transportation.

    Budget Categories

    The first part of creating a budget is deciding on your budget categories. Before you start, read the entire post for ideas and tips. Here are some budget categories and specific items to include under each. Use this list as a guideline, and tweak it to what will work for you and your family. Organize your expenses and just start budgeting. Don’t overthink it. You can always change your budget categories the next month if they’re too broad or too detailed. Just remember to start. I personally use the free version of the Everydollar app to track my zero-based monthly budget.


    Before you start thinking about expenses, list all of your income sources. Track all of your actual take-home pay and other forms of income you expect to receive. You can always add to this category if you receive unexpected income or gifts.

    1. Salary/Wages
    2. Bonuses
    3. Side hustles
    4. Child support
    5. Investments
    6. Dividends
    7. Interest earned
    8. Monetary Gifts
    9. Tax refund


    Your household is your first priority, above anything else. Worrying about how you’ll pay for rent or your mortgage should never be a predicament you find yourself in. I account for the entire cost of running a household. This is why I include utilities, cleaning, and paper products under this category, while others separate it. Figure out what makes sense to you.

    1. Mortgage/Rent
    2. HOA Fees
    3. Property taxes
    4. Utilities
      1. Electricity
      2. Gas
      3. Water
      4. Trash
      5. Cell Phone
      6. Cable/Netflix
    5. Yard and garden maintenance
    6. Household Miscellaneous
      1. Minor household repairs or maintenance- (lightbulbs, batteries for smoke alarms, etc.)
      2. Small appliance repairs/replacements
      3. Kitchen Tools (minor appliances that you can cash flow from your budget in a month)
    7. Cleaning and Paper products
      1. Cleaning – all household cleaners (dishwashing soap, laundry detergent, sponges, mops, brooms, etc.)
      2. Paper products – toilet paper, napkins, paper towels, etc.


    Food is your second priority. Don’t scrimp on this category. Food is an area that most people have no clue how much they’re spending on it until they start budgeting. Make sure to include all food items – dining out, school lunches, and groceries.

    Here is one category where being a little bit more detailed works for my family. For dining, I separate it into different line items like one for family, work, one for my hubby and myself, and monthly events like graduations when they pop up. This may seem crazy, but it works. When we had only one restaurant budget, my hubby and I constantly fought over who spent what and when. Even though we have more food categories to track, we rarely fight over this category anymore.

    1. Groceries
    2. Dining Out (I break these down into smaller separate line items below)
      1. Family
      2. Work (potlucks, coworkers’ birthdays, vending machine snacks, etc.)
      3. Individual (for each specific person in your family)
      4. Events (minor holidays, graduations, etc.)
      5. Kid’s school lunches


    The third priority is transportation. Most of us rely on some form of transportation to get around. If you own a car, include the regular monthly expenses like gas, toll roads, and parking fees. If you rely on public transportation, include all of your travel expenses (bus, train, taxi, Uber, etc.) Don’t include car debt payments here. We’ll include that under our debt category. Car maintenance including repairs, oil changes, and annual car registration fees should be budgeted in a separate sinking fund, but we’ll get to sinking funds later.

    1. Car Gas
    2. Toll Roads
    3. Parking Fees
    4. Parking Transportation (Bus, train, taxi)
    5. Car Maintenance (Set up a sinking fund)

    Personal Care

    List out any personal care items. This is one category that is broken out depending on how you want to track it. Some items may be better suited budgeted out of your own personal spending money category. For specific items like makeup, I use my own personal spending money budget. Tailor your budget to what suits your family’s needs.

    1. Personal hygiene products (shampoo, body soap, deodorant, toothpaste, shavers, lotion, shavers, etc.)
    2. Haircuts, manicures, etc. (or use your own personal spending money)
    3. Waxing (or use your own personal spending money)
    4. Makeup (or use your own personal spending money)
    5. Memberships (gym, etc. or use your own personal spending money)
    6. Subscriptions (magazines, membership box subscriptions, etc.)
    7. Haircuts (or put in family member’s personal spending category)


    Even if you’re broke, try to budget a small amount of money for entertainment each month. When I first started budgeting, I didn’t budget anything in this category, and I was miserable. If you’re short on cash, schedule fun and cheap date night ideas or family outings. Budget a small amount for coffee dates or family ice cream treats.

    1. Date night
    2. Family night/outings
    3. Special holiday events (visiting the pumpkin patch, ice skating, etc.)


    Don’t forget to include this category. Consistently keeping regularly scheduled medical and dental appointments saves you money in the long run. Your doctor may catch health problems early on which may be expensive to treat later if left untreated. Staying healthy, exercising, and eating right are great forms of preventative care. Prescription and over the counter medicines can be pricey too. Make sure to budget these items during the cold season or when you’re running low on vitamins or supplements.

    1. Medical/dental copays
    2. Optometrist copays
    3. Medicines/herbal remedies
    4. Prescription glasses/contacts
    5. First aid items (band-aids, etc.)
    6. Vitamins
    7. Medical devices


    Insurance is your “peace of mind” category which covers your most precious assets (house, vehicle, even yourself or your family).

    1. Home owner’s insurance
    2. Renter’s insurance
    3. Life insurance
    4. Car insurance
    5. Health insurance
    6. Dental insurance
    7. Disability insurance


    All debt payments, except your mortgage, are listed here. Budget your mortgage under the household category. If you’re following Dave Ramsey’s baby steps, paying off debt is the second baby step. The debt snowball is a good method to pay off your debt.

    1. Student Loans
    2. Credit Cards
    3. Personal Loans
    4. Car loans
    5. All other types of debt or loan payments

    Personal Spending Money

    We personally have a separate category for each family member: hubby, myself, my son, and even the pets. I like to see how much we’re spending on each family member. Each month, we don’t necessarily budget the same amount for each of us. My hubby and I decide how much we want to budget based on our spending priorities each month. We no longer play the “I deserve it” game when someone makes a large purchase since we decide how to spend our money together.  

    1. One for each spouse
    2. One for each kid (include monthly allowance/commission)
    3. Other miscellaneous items for each family member (activities – swim lessons, tutoring, etc.) 


    Pets are expensive. Now that my pets have their own category, I can track actual costs and plan accordingly.

    1. Food
    2. Medication
    3. Insurance
    4. Treatments (grooming, baths, toenail clippings, etc)
    5. Miscellaneous (toys, accessories, leashes)
    6. Vet visits (budget here or set up a separate sinking fund)
    7. Animal Boarding


    Budget long-term savings, investments, and your emergency fund in this category. Short-term savings will have their own budget category under sinking funds which we will talk about later.

    1. Emergency Fund
    2. College Savings Fund
    3. Retirement funds (401Ks, IRAs)


    This category includes gifts not budgeted in your sinking funds. I suggest setting up sinking funds for Christmas and birthday gifts for your immediate family. Other gifts for family and friends are budgeted here.

    1. Birthdays gifts, other than immediate family members
    2. Anniversaries
    3. Weddings
    4. Charities
    5. Teacher gifts
    6. Graduation

    Sinking Funds

    Use sinking funds to save for short-term expected expenses that aren’t monthly or routine. A sinking fund is a savings account where you set aside a little each month for future expenses. Think how wonderful it will be when the money is just sitting there waiting to be spent when your car breaks down.

    1.  Events (birthdays, events, anniversaries, etc.)
    2. Holidays
      1. Gifts
      2. Holiday toy drives/donations to foodbanks
      3. Decorations/after-Christmas sales
      4. Events
    3. Kids (Back to School and Summer Activities)
    4. Car maintenance
      1. DMV annual registration fees/smog checks
      2. Maintenance and repairs – oil changes, tire replacements, etc.
    5. Car replacement
    6. House Maintenance/House Down Payment
    7. Vacation
    8. Pets (Medical visits)
    9. Any other short term savings


    Giving has been one of the most surprising benefits for me since becoming debt-free. Nothing can describe the feeling when I able to donate money or time to someone in need. It’s up to you how much you want to budget each month for giving, but keep this category in your budget as a reminder. You’ll find that giving brings more benefits than you can imagine.

    1. Donations
    2. Church offerings/tithings
    3. RAKs (Random Acts of Kindness)


    There will always be expenses that you can’t predict or plan for. For the longest time, I didn’t budget for unplanned events or items. It was frustrating using the emergency fund for unplanned expenses of less than $100. To end this frustration, I started budgeting $50 – $100 for unplanned expenses each month. If I don’t use it, I throw it in a sinking fund or the emergency fund.

    Start budgeting the right way with Budget Categories!

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      Summary of Budget Categories

      In the end, a budget is merely a spending plan. Using a monthly zero-based budget is the main reason why I have reached so many of my financial goals. Since December of 2016, I have paid off $72,000 of debt, live debt-free, and continue saving for early retirement. The budget continues to be the glue that holds all of my “Tall Order” dreams of living debt-free. I guarantee that when you start telling your money where to go, you’ll start winning with money. Creating your budget by setting up your budget categories is the first step. Happy budgeting!

      Please check out the helpful infographic below to learn which 16 budget categories you need to create a budget you’ll stick to. Share your budget categories in the comments below. I would love to hear how you build your budget to fit your own needs.

      2 thoughts on “”

        1. A zero-based budget is a different approach to budgeting. Each month, you start the month at zero and assign all of your income to all of your immediate and expected expenses. Every dollar has a job, and you want to net to zero at the end (Income – Expenses = 0).How to Create a Zero-Based Monthly Budget

          A sinking fund is a mini-savings account where you set aside a little each month for future, known expenses like birthdays, holidays, or car repairs. I separate my sinking funds from my normal savings account/emergency fund. Psychologically, for me, seeing smaller buckets of cash instead of one large pile helps me remember what the money is dedicated to. I don’t have to rely on “fuzzy” math calculated in my head, or refer to my Excel spreadsheet all of the time.

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