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It might seem simple to throw a budget together in five minutes and call it good and done. More often than not though, this is how budgets tend to fail. 

Would you like to know why?

Because if you just throw some random numbers into a spreadsheet, you might not capture all of the necessary expenses that come up every month. Forgetting expenses on your budget can be disastrous. 

If you’re looking to create a budget that won’t fail, take a look at this list of personal budget categories that you should triple check have made it on your own list. You might not use every single item on this list, but keep it as a reference as you work to create a personal budget.

List of Personal Budget Categories

Income

First and foremost, all budget categories (should) start with one in particular: income. Without it, we’re only capturing expenses and can’t see how much we can use to pay for these. Make sure that when you’re setting up a budget, you gather a list of all sources of income, even the incomes that you earn occasionally. 

Examples of income include: salary, alimony, tax refund, interest, or side hustle incomes.

Quick tip: use your “disposable” income number, the amount available to you after taxes and other deductions have been taken out.

Essential Expense Categories

As the name implies, these are the essential expense categories you need to include in your own selection of personal budget categories. Many of these are what Dave Ramsey calls the Four Walls that are absolutely critical for where you spend your money.

Housing

Housing expense is typically the largest category for anyone who creates a budget. This cost can include rent, mortgage, insurance, property taxes, HOA fees, and even maintenance costs. Basically, this is any expense you pay to keep a roof over your head. This makes it priority #1 when planning for your monthly expenses.

Utilities

Another key personal budget category that you can’t miss is utilities. We often remember to budget in rent or our mortgage, but it’s easy to forget the cost to keep the lights on. Literally. The most common utility costs include: water, electricity, and HVAC (heating, ventilation, air conditioning).

Other types of household costs that could be considered utility type costs include trash or recycle collection, cable, internet expense, or even your cell phone bill. Many people might not remember these miscellaneous types of costs, but it’s important that they find a home within your budget.

Food

This is probably the easiest budget category to remember. Well, at least it has been for myself. Most people don’t forget that they have to eat and pay for eating out or groceries every month. And while most people do remember this budget, it’s often a common overspend category.

Factor in how much in groceries you’ll spend each month. And don’t forget to add in a budget to eat out or to grab delivery here and there. The food category can be a bit tricky to control spending on so it might be helpful to break it into subcategories if you need to. You could also move your dining out expense to the non-essential categories section we’ll talk about next.

Auto & Transportation

Another key personal budget category that you want to make sure you capture is auto & transportation. Even if you live in a city and can rely on public transportation, you’ll likely need to purchase public transportation passes if you use it often. 

If you live outside the city, you’ll likely own a car and use it to get from A to B. And, as you might know, having a car costs money in more than one way. You’ll have a monthly payment if you’re paying down a car. Along with this, you’ll have car insurance, maintenance costs, registration costs, gas and tolls, parking costs and more.

Regardless of how you get around, you’ll want to factor in a budget to cover the costs to make sure you can always get where you need to go. 

Medical

Whether you get sick a lot or you barely get sick at all throughout the year, make sure you budget a certain amount for medical costs. Whether it’s your monthly insurance premiums or out of pocket costs for primary care, specialty care, dental care, prescriptions, and more. 

Medical costs are essential so make sure that you or your family have enough to comfortably seek medical help when you need it.

Savings

While many might not recognize this as an essential budget category, I disagree. I think that savings is an essential cost that you need to make sure you’re prioritizing. It’s important to learn how to pay yourself first when you have an income. Whether you’re saving for an emergency fund, a retirement account, or towards a house or other future purchase, it’s a necessity to have money stored up.

Obviously there are months where you might save less than others because of unexpected costs or emergencies, but don’t make this a monthly habit of running out of money to pay yourself.

Debt Payments

Making debt payments is an essential budgeting category that you can’t afford to miss. Not only will it ding your credit score, but it could result in late fees or debt collections. Make sure that you are budgeting at least the minimum payment every month on your debts to avoid any of these actions. 

Ideally you are cutting back in other budgeting categories and putting more than the minimum payment down every month on these debts, especially ones with high interest. 

Debts could include credit card bills, student loans, and other personal loans.

Non-Essential Expense Categories

Once you’ve paid off the essential budget categories for yourself or your family, you can now take what’s left of your income for non-essentials. This can include anything from personal products, fun outings, vacations, and more. 

Non-essential expenses are usually variable, unlike essential categories we talked about in the previous section. When you need to cut your budget to fund an essential category, you should start with these.

Personal & Miscellaneous

One of the first non-essential budget categories you want to start with is personal & miscellaneous. Some people prefer to break this category into smaller categories, but it’s fine to make it a lump sum category.

Here you’ll capture several different types of expenses that you might forget to budget for but you might find yourself purchasing every month. Such items include: 

  • Salon costs/hair product costs
  • Toiletries & laundry supplies
  • Cleaning supplies
  • Personal hygiene supplies
  • Shoes/clothing
  • Gym membership

There are several more costs that might fit into this category but make sure you’re capturing items you might not think about regularly.

Leisure/Entertainment

While most people think that a budget is all serious and no play, I argue that if you’re meeting all of your essential costs and making a dent in your savings and debt, you need to have some fun! It’s important to make room for fun in your budget. 

Whether it’s going on vacations, weekend trips, day trips, to the movies, video streaming subscriptions, etc. Whatever it is that you enjoy doing in your free time, budget that here.

Miscellaneous

While we do already have the above category named personal and miscellaneous, I find it helpful to budget for general miscellaneous costs every month. These aren’t necessarily recurring costs, but they often happen randomly or unexpectedly. They aren’t essential, but they might be nice to have items or general catch-all’s. One example could be gifts or giving to charity.

Even if I don’t end up using this category, the cost budgeted can either roll over into the following month or I can push it to my savings account.

Where to go from here?

Budgeting categories aren’t as scary as people often think. The ones mentioned here are some of the most basic but crucial personal budget categories that I think will simplify the budgeting process.

The most important rule is to make sure that you keep your budget flexible and change it up if it’s not working for you. Sometimes it takes some initial work, or trial and error, to set it up and adjust to your situation. But, once you do, it will help you to start tracking your spending and making sure your money is working for you.

100 Budget Categories

Depending on preference, you might want to add even more specific categories in your own budget. And that’s totally okay. For my own budget, I also like to add a few extra sub-categories or specific items to track outside of these basics. This gives me a greater level of detail and it helps me track what I’m spending better. 

If you need ideas for more specific categories to include, check out this free download I created called 100 Budget Categories. Use this to customize your budget and track your money in a way that works best for you and your goals.

Update 2/7/2021: Our 100 Budget Categories download is pending some final retouches but will be ready shortly. In the meantime, please sign up for the email list while you wait.

What is one essential budget category you can’t live without? Have you ever forgotten an essential category and ended up in a bad situation?