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You’ve heard everyone saying you need to create a budget and now you’re finally serious about it or at least you’re having thoughts about creating one. If you have no previous experience with creating a budget it may seem overwhelming or ridiculous at first, but if you want to get serious about managing, saving and investing your money you need to have a budget.
A budget is simply having a plan for your money and knowing where your money is going every month.
Have you ever been in a situation where at the end of the month you’re trying to figure out where your money went or if you’re constantly penny pinching and wishing you had more money. Oftentimes getting more money won’t solve your money issues. Changing your spending behavior and learning to manage money is the only way to become financially free.
My favorite budgeting tools
The 68 budget categories outlined below are the most common categories found in personal budgets and will ultimately give you an idea of what to include when you’re creating your budget. Also remember that not all of the categories are monthly such as an oil change, but you still need to account for those things in your budget!
Jump to Sections in this Post
- Income
- Savings
- Housing
- Utilities
- Food/Household
- Transportation
- Debt
- Leisure
- Personal
- Medical/Health
- Education
- Miscellaneous
Income
Your income can come from a variety of streams but the most common income categories are listed below.
- Salary/Wages
- Side Hustles
- Investments
- Bonuses
- Tips
- Gifts
Savings
Your savings are accounts where you put away money that you don’t plan to touch for a while or will only use if an emergency comes up.
- Retirement
- Investments
- Emergency Fund
Housing
Housing categories are things such as mortgage/rent and any other expenses that may arise related to housing.
- Mortgage/rent
- Property taxes
- Household repairs
- Homeowners/housing insurance
- Home security service
- HOA fees
- Lawn care
Utilities
Utilities are those necessities such as water and electricity and some may consider cable a necessity. With services like Netflix and Hulu, ditching cable to watch your favorite shows whenever and wherever has become the norm.
- Electricity
- Water/Sewage
- Garbage
- Heat/Gas
- Internet
- Phone Service
- Cable, Satellite or Tv subscriptions (Netflix, Hulu, etc.)
Food/Household
Your budget for food and household products will most likely fluctuate by month but be sure to not under budget this category. You’ll probably find that your spending on takeout food will decrease once you become more aware of what you are spending your money on.
- Groceries
- Dining Out
- Alcohol/liquor
- Household supplies
- Pet food
Transportation
Owning a car can come with forgotten and sometimes unexpected expenses. When creating your budget don’t forget to include those regular and unexpected expenses.
- Car Payment
- Car Insurance
- Gas
- Maintenance- tires, oil change, vehicle registration renewal
- Toll fees
- Parking fees
- Car registration
- Air travel
- Public transportation fees
- Carsharing expenses (Uber, Lyft, Taxi)
Debt
Debt has become a normal part of life and there are many categories you can include in the debt category of your budget. If you rent to own furniture you can include that in your debt category.
- Student Loans
- Medical Bills
- Credit Cards
- Personal Loans
Leisure
What’s life without a leisure budget category? If you travel often or have a hobby be sure to include those categories in your budget.
- Vacation/travel
- Movies/concerts/hobbies
- Gaming systems
- Amazon prime
- Music subscriptions (iTunes, Spotify, etc.)
Personal
Guy or girl, we like to have new personal items every now and then so don’t forget to add these items to your budget!
- Hair care
- Clothing
- Beauty/toiletries
Medical/Health
You can’t plan for when you’re going to get sick, but planning for copays and the approximate cost of medicine can keep you out of a bind when those expenses do come about.
- Copays
- Prescription medicine
- Dental insurance
- Life insurance
- Medical insurance
- Vision insurance
Education
If you’re in college and footing the bill yourself or if you have kids who are in school, don’t forget to budget for these things even though they may not be as frequent as other expenses.
- Tuition and fees
- School supplies
Check out these post to get control of your personal finances:
- 39 Best Money Saving Tips
- 17 Smart Ways To Build An Emergency Fund
- 17 Successful Ways To Control Impulse Spending
Miscellaneous
We often forget to include the following most important miscellaneous categories in our budgets.
- Tithing
- Giving
- Child care
- Veterinarian visits
- Pet accessories
- Gifts- wedding, birthday, holidays, anniversary, baby shower
- Memberships – gym, professional
- Kid camps
- Postage/shipping
- Computer expenses
Outlining your budget categories is only 1 step of the budgeting process. Assigning specific amounts to each category is the next step. It’s important to know that your first few weeks or month or two of budgeting may be somewhat of a challenge however, by sticking to your budget the process will get much easier.
Although these budget categories are arranged a certain way, feel free to arrange them in a way that works best for your family’s budget.
FAQs
The 7 different types of budgeting used by companies are strategic plan budget, cash budget, master budget, labor budget, capital budget, financial budget, operating budget. You can read about the Union Budget 2021-22 Summary in the given link.
What are the 7 types of budgets? ›
The 7 different types of budgeting used by companies are strategic plan budget, cash budget, master budget, labor budget, capital budget, financial budget, operating budget. You can read about the Union Budget 2021-22 Summary in the given link.
What are 5 major things to consider in your budget? ›
What Are the 5 Basic Elements of a Budget?
- Income. The first place that you should start when thinking about your budget is your income. ...
- Fixed Expenses. ...
- Debt. ...
- Flexible and Unplanned Expenses. ...
- Savings.
Here are the most common components of an operating budget:
- Revenue. This includes all the different ways a company makes money by selling goods or services. ...
- Variable Costs. These are costs that rise or fall in lockstep with sales volume. ...
- Fixed Costs. ...
- Non-Cash Expenses. ...
- Non-Operating Expenses.
How do you figure out a budget? that works for you. We recommend the 50/30/20 system, which splits your income across three major categories: 50% goes to necessities, 30% to wants and 20% to savings and debt repayment.
What are the essential elements of a budget? ›
The five basic elements of a budget include: determining resources needed and justifying them in terms of potential profit or savings ^[Finney], defining and understanding costs and what drives costs ^[Finney], forecasting revenue ^[Finney], predicting performance improvement ^[Finney], and dealing with financial and ...
What are the four 4 main types of budgeting methods? ›
The Four Main Types of Budgets and Budgeting Methods. There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based.
What are the six key components of a financial budget? ›
The six components of a financial plan include tracking income and expenses, budgeting, saving and investing, insurance, and retirement planning. By understanding and implementing these components, freelancers can create a secure financial future. It's essential to start planning as soon as possible.
What is the 50/30/20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What are the 4 simple rules for budgeting? ›
4 simple steps to creating a budget
- Calculate your earnings. The first step in creating a budget is to identify the amount of money you have coming in monthly. ...
- Pay your bills on time and track your expenses. ...
- Set financial goals. ...
- Review your progress.
For any organization, a budget, whether done annually or conducted throughout the year in the form of rolling forecasts, is a critical component for success. Any successful budget must connect three major elements – people, data and process.
What is a master budget? ›
A master budget is the central financial planning document that includes how a company will spend and how much it expects to earn in a fiscal year. A master budget contains budgets of departments within the organization and projections that allow for management to plan for the upcoming year.
What is not an essential component of a budget? ›
Expenses are divided into non-discretionary or discretionary costs. In other words, essential and non-essential expenses. Some expenses, such as vacation costs and luxury items, are not necessary to maintain a household and, thus, are classified as discretionary expenses.
How should my budget be divided? ›
The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.
How do I categorize my expenses? ›
Budgeting 101: Personal Budget Categories
- A list of recommended personal budget categories is a great place to start when creating a budget. Here are two ways you can get the most out of the list:
- Housing.
- Transportation.
- Food.
- Utilities.
- Clothing.
- Medical/Healthcare.
- Insurance.
CBO: U.S. Federal spending and revenue components for fiscal year 2023. Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.
What are 5 budgets? ›
The five most commonly used business #budgeting methods are the zero-based budget, incremental budget, activity-based budget, value proposition budget, and Flexible budget. each of these methods has its #advantages and #drawbacks, so it's important to choose the one that is best suited for your business.
What are the 4 parts of a budget? ›
The Key Components of a Budget
Learn about net income, fixed expenses, variable expenses, and discretionary expenses and examples of each.
Which budgeting method is best? ›
5 budgeting methods to consider
| Budgeting method | Best for… |
|---|
| 1. The zero-based budget | Tracking consistent income and expenses |
| 2. The pay-yourself-first budget | Prioritizing savings and debt repayment |
| 3. The envelope system budget | Making your spending more disciplined |
| 4. The 50/30/20 budget | Categorizing “needs” over “wants” |
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