Are you looking to master your money this year and want to get started with a budget? If you’re new to budgeting, you may not be sure where to start or what budget categories you should include.
Don’t worry; budgeting isn’t really that difficult once you get started. While there will be a little work required upfront, once you’ve built your budget, it’s just a matter of tracking than anything else. Plus, with so many different budgeting methods available, you’ll be sure to find something that works for your spending habits and lifestyle.
The time and effort you put forth into building your initial budget can be time-consuming. However, once you build your personal budget, managing it regularly is going to be relatively easy.
While budgeting isn’t that difficult, it can be tedious, and you can find yourself unpleasantly surprised if you haven’t accounted for all the different things that can take your money. You see, many people build a budget and allocate their money based on the major expenses and do well for a time. But if you’re hit with an unexpected expense you didn’t budget for, you could find yourself in financial trouble.
That’s why we set out to compile this huge list of 18 budget categories that you should take into account when building your budget.
Even though some of the items on this list may not apply to you or could be irregular expenses for you, we recommend going through each item on the list and allocating some funds to those items that apply. That way, each item will have some funds dedicated to it every month, so you’ll never be surprised if and when those expenses do come up.
Here are 18 budget categories to help you master your money. We’ve broken things down into income and expenses, along with smaller categories within each and individual budget items to consider within each category.
18 Budget Categories to Help You Master Your Money
Your income will likely be the easier of the two broad categories to compile. However, if you have multiple income streams or your income varies every month, this could be a bit more complicated.
It is important to break down each income source to know exactly how much money is coming in and from where. It’s also important to only include your take-home pay, meaning what will actually go into your pocket after taxes and other deductions. In other words, the money that is actually available for spending.
If you have a main job and other irregular income streams, we recommend building your budget based on the steady income from your main job and using other streams to supplement. For example, when I was building my first budget, I based my money allocations on my salaried job and treated my side income as extra. I wanted to make sure my steady job could cover all of my expenses if my side income fell for a month or two.
If you have irregular income (aka not a predictable paycheck), base your budget on the least amount you expect to earn. It’s better to guess too low and have extra money than to guess too high and not have enough to cover your necessities.
Aside from your main job, you may have income from:
- Side Hustles
- Earned Interest/Dividends
- Rental Income
Again, base your budget on your predictable/regular income that you absolutely know will be coming in every month. Use side hustles and other irregular income as supplementary.
Expenses are typically where you’ll spend the majority of your time budgeting.
It’s best to start allocating for regular monthly expenses, then allocating the rest of your funds to non-essential categories. If you know you have enough income to cover all your necessities, we recommend allocating the available money toward savings/retirement goals before non-essentials like entertainment.
We’ve broken expenses down into two main categories: essentials and non-essentials. As stated, start with allocating money for essential expenses to ensure those are covered before you start allocating funds to non-essentials.
These are expenses that you will need to cover every month and should be prioritized, especially if you don’t have a lot of disposable income. These budget categories are essential to your basic comfort and survival.
Housing is typically the largest expense in most budgets, so it is the first of the expense budget categories.
Housing expenses include your mortgage or rent but could also include HOA (homeowners association) dues, property taxes (if not included in your mortgage), and home warranties. While there are plenty of other expenses that come with owning or renting, we’ll include those in other categories as irregular expenses.
Food is obviously another essential expense that needs to be in your budget. For this category, we recommend including only essential food you would buy for your household, not eating out, coffee, or other non-essential food expenses. Those will be included later.
For now, stick to what you typically spend every month on the food you eat at home.
Utilities are also an essential budget item because you will need to pay them every month whether you own or rent your home.
While some utilities will stay consistent, others may vary from month to month or season to season. Try to estimate the most you’d pay every month for each utility, so you’re not surprised by a higher than normal bill. One way of doing this is to take the average you paid for the past year and allocate that amount in your monthly budget.
Common utilities include:
- Cell phone
For many, debt is another large monthly hit to the expense side of their budget. As with income, it’s important to break your debts down into individual loans and their minimum monthly payments, so you know exactly where you stand with each.
We recommend allocating the minimum payment amount for each loan into your monthly budget so that you ensure you can cover your minimum liability as well as your other essential categories. If you have money left over after the essentials, consider paying extra on your highest interest loans to save money on interest and get out from under the loan faster. Reading the fine print will explain how long it will take to pay off the debt with minimum payments and the amount of interest it will cost you.
Some examples of common debts include:
Transportation includes everything other than an auto loan that you need to pay to get around. While many of these expenses will be irregular, you must include them in your budget, so they don’t surprise you. One way to do that is to allocate more than the known monthly costs so that you build up a cushion for when irregular costs arise.
Whether you have a car or use other modes of transportation, it’s important to factor in these monthly costs, which include:
- Tags/registration/DMV fees
- Regular maintenance (oil changes, tires, etc.)
- Bus/train/subway fare
Insurance is another essential item to include in your budget, although some common types of insurance may not apply to you depending on your situation. Insurance can either be paid monthly, bi-annually or annually. We recommend breaking your insurance costs down into their monthly amount, so you make sure you allocate enough.
Insurance types you may need include are:
- Homeowners/renters insurance
- Car insurance
- Life insurance
- Health/dental insurance
If you don’t have access to employer-sponsored healthcare, then you will need to budget for monthly healthcare costs, as noted above. However, even with healthcare through an employer, you should still budget some monthly healthcare costs, including:
- Visit co-pays
- Medical equipment
- Recurring appointments (therapy or other specialists)
Again, try to estimate the most you might spend for this category in a given month so that you can cover these costs when they occur.
Now that we’ve covered everything you absolutely must budget for and cover every month (even if not all the categories apply to you), we’ll move onto non-essential expenses. The difficulty here is that many of these budget categories fall into a grey area between essential and non-essential, depending on who you ask and your situation.
We’ll start with items that fall into this grey area and then move onto truly non-essential items.
This is a huge grey area because childcare costs could be essential for some and non-essential for others. Regardless of where you fit, make sure if you have kids that you consider these potential costs when building your budget:
- Private school tuition
- College tuition (college fund)
- School supplies
- School fees
- Field trips
- Before/after school activities or care
As with many other budget categories, some of these potential expenses will be monthly, and others will be irregular. Include all the known monthly costs and try to estimate the monthly breakdown of costs for others. If you’re able, allocating a little each month toward irregular costs will help avoid a hit to your emergency fund or savings when the time comes.
This is another grey area because household expenses are essential, but they could be excluded for a few months if you really needed to tighten your budget.
Household expenses are anything regularly used to maintain the home, including:
- Cleaning supplies
- Kitchen supplies
- Toilet paper/paper towels
- Yard supplies (rakes, lawnmower, clippers, weed control, etc.)
Personal care is another category that could be tightened if necessary. While many things included in personal care are essential, others could be cut altogether if necessary.
Personal care includes:
- Toiletries (lotion, makeup, soap, shampoo/conditioner, etc.)
- Clothing and accessories
An emergency fund is something that everyone should have and something everyone should allocate money to in their budget. However, because it isn’t necessary for monthly survival, we have included it with non-essential expenses.
An emergency fund is a savings account meant to be used just as it sounds: for emergencies. While many things could fall into the category of an emergency, an emergency fund’s true purpose is to help you cover true emergencies such as unexpected job loss or medical bills.
Ideally, items such as broken appliances, car repairs, and other unplanned expenses would be covered with the maintenance/non-regular expenses budget category. Still, an emergency fund could also be used to cover these expenses.
Experts recommend starting with a $1,000 emergency fund and then building to at least 6 months’ worth of expenses saved.
Next on our list of grey area items is retirement savings. Again, this is something that everyone should be doing but isn’t an expense needed to make it through the month.
Many recommend saving 10-15% of your income per year as a good goal for retirement. It’s also advised that you start by contributing to an employer-sponsored 401k at least up to any employer match. Other retirement vehicles include IRAs, HSA’s, 403(b)’s, and brokerage accounts.
The last of our grey area budget categories are reserved for maintenance/non-regular expenses. These are expenses that tend to pop up at least once a year in a variety of areas. Most of these maintenance expenses are either housing or car-related and include:
- Appliance repair or replacement
- Mechanic/auto work/tires
- Home repairs (siding, paint, gutters, roof, etc.)
- HVAC system (water heater, furnace, AC, etc.)
These tend to be large-ticket items and can be quite the hit to the budget if you’re not prepared. You can either allocate a chunk of money each month to a generic maintenance/non-regular expenses category or start a sinking fund for each item that applies to you.
A sinking fund is money set aside every month to be able to fund a future expense. Put another way; a sinking fund is saving a little bit now for something you know you’ll have to pay for later.
Sinking funds can be used for various items, such as the maintenance/non-regular expense items listed above. They can also be used to set money aside for an upcoming trip, a car purchase, or something else.
While a useful financial tool, sinking funds are icing on the cake in terms of your budget and should be funded after meeting your essential expenses and the other grey areas described above.
We get it, pets are wonderful additions, and most feel their pets are a part of the family. Pets are also expensive, and you must ensure you can afford to properly care for one before you add a pet to your family.
Potential expenses associated with pets include:
- Purchase price/adoption fee
- Flea medication
- Shelter (houses, beds, etc.)
- Litter, litter boxes
- Grooming supplies
- Accessories (collar, leash, toys, etc.)
- Vet visits
- License/registration fees
Anything that you do for fun or reward yourself falls into the entertainment category. While it’s okay to treat yourself regularly, this is the category that tends to blow the budget, and you must pay attention to how much you’re spending each month on non-essential entertainment.
Items that might fall into the entertainment category include:
- Eating out
- Concerts/sporting events
- Cable/cable alternatives
- Anything else you buy for fun
The last of the major budgeting categories you need to be aware of is gifts. This is definitely a non-essential item, as well as an irregular item. If you have the disposable income in your budget to allocate funds to this category, you should set aside a little every month to buy gifts.
The gifts category typically covers birthdays, Christmas/Hanukkah, and other gift-giving holidays, as well as baby showers, weddings, or graduation parties.
One way to handle this category is to list all the essential birthdays/holidays and those you will need to get gifts for. You can then create a monthly gift fund allotment based on how much you want to spend for each holiday/birthday. You could also allot a set amount of money each month to this category and spend on gifts based on what’s in the fund.
Moral of the Story
There is a lot to pay for every month, and many of these items you may not even be aware of until it comes up. Unfortunately, those unexpected expenses can really put a wrench in our budgets, especially if they’re already tight.
The best way to prepare for anything that comes your way is to make sure you have all possible budget categories accounted for. Even if you aren’t able to allocate a ton of funds to each category, at least you’ll know some of the things you might have to pay for eventually, and they won’t be such an unpleasant surprise when they do arise.
We’ve detailed the ultimate list of 18 budget categories to help you take control of your money. Go through each item and add what is relevant to your personal budget.
Try to cover all your essential expenses and as many grey-area expenses as you can before moving onto the full non-essentials.
Now that you know all the budget categories and which to prioritize, what changes will you make to your budget?
Talk about Budget Saved.
Tawnya is an elementary special education teacher by day and co-blogger at Money Saved is Money Earned by night.
She holds an Honors BS in Psychology from Oregon State University and an MS in Special Education from Portland State University. She has had a pretty successful writing career, first as a writing tutor at the Oregon State University Writing Center, and in recent years, as a freelance writer.
Tawnya and co-blogger Sebastian have a wealth of knowledge and information about personal finance, retirement, student loans, credit cards, and many other financial topics. They teach people how to save money, make money, and understand money.