10 Budgeting Categories You Need In Your Life
10 Budgeting Categories You Need In Your Life
10 Budgeting Categories You Need In Your Life
10 Budgeting Categories You Need In Your Life
March 14, 2024
March 14, 2024
March 14, 2024
March 14, 2024
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At one point or another, we’ve all been told “..And that’s why you need a budget.” It was probably after you overspent, relative to your financial situation of course, on a pair of shoes or a night out.
Making sure that your personal budget is in line with your financial goals is extremely important. Afterall, you can’t plan to spend $5,000 a month if you’re only making $4,000 a month.
In order to stay on track financially, it’s crucial that you break your expenses down into different categories. But how many budgeting categories are right for you? Read on to learn about which budgeting categories are essential and which ones not so much.
How Many Categories Should You Have In Your Budget?
To keep it short, there is no solution that fits all when it comes to your monthly budget. While there are a handful of different methods you could use, people tend to follow one of the more common strategies like the 50/30/20 budget or the 70/20/10 budget.
The 50/30/20 budget rule breaks down your income (after taxes) into three categories: needs, wants, and savings/debt repayments. Fifty percent of your income is allocated to your wants. These are things like housing, insurance, utilities, and transportation. Thirty percent is dedicated to your wants; travel, non essential shopping and eating out. The last 20% is used for savings and any debt repayment. Things like investing in your future or putting money in a high-yield savings account fall under this category.
The 70/20/10 budget rule is a similar strategy, but your after-tax income is allocated a bit differently. Instead, 70% of your budget is allocated for essential expenses, 20% goes towards savings and investments and the last 10% is spent on donations or debt repayments.
At one point or another, we’ve all been told “..And that’s why you need a budget.” It was probably after you overspent, relative to your financial situation of course, on a pair of shoes or a night out.
Making sure that your personal budget is in line with your financial goals is extremely important. Afterall, you can’t plan to spend $5,000 a month if you’re only making $4,000 a month.
In order to stay on track financially, it’s crucial that you break your expenses down into different categories. But how many budgeting categories are right for you? Read on to learn about which budgeting categories are essential and which ones not so much.
How Many Categories Should You Have In Your Budget?
To keep it short, there is no solution that fits all when it comes to your monthly budget. While there are a handful of different methods you could use, people tend to follow one of the more common strategies like the 50/30/20 budget or the 70/20/10 budget.
The 50/30/20 budget rule breaks down your income (after taxes) into three categories: needs, wants, and savings/debt repayments. Fifty percent of your income is allocated to your wants. These are things like housing, insurance, utilities, and transportation. Thirty percent is dedicated to your wants; travel, non essential shopping and eating out. The last 20% is used for savings and any debt repayment. Things like investing in your future or putting money in a high-yield savings account fall under this category.
The 70/20/10 budget rule is a similar strategy, but your after-tax income is allocated a bit differently. Instead, 70% of your budget is allocated for essential expenses, 20% goes towards savings and investments and the last 10% is spent on donations or debt repayments.
For those who are just starting out with budgeting, both of these strategies will give you a better idea of how to track your money. The Hiatus app is also a great option because it lets you create custom budgets based on your spending.
For those who are just starting out with budgeting, both of these strategies will give you a better idea of how to track your money. The Hiatus app is also a great option because it lets you create custom budgets based on your spending.
Budgeting Categories Explained
While there are different types of strategies that you could plug and play with, some people want more control when it comes to managing their budget. Here are some recommendations for budget categories if you prefer to go about it on your own.
1. Housing and Utilities
Recommended Amount: 25-35%
Making sure that you have a roof over your head and that the lights stay on are non-negotiable when it comes to any budget. This category is often the largest expense in anybody’s budget and is the foundation to your financial plan.
Things that fall under this category include the basics like rent or mortgage payments and utilities. However, property taxes, homeowners insurance, and maintenance costs also fall under this category.
2. Transportation
Recommended Amount: 10-15%
Another significant category that should be included in your budget is transportation. Everybody needs a way to get around and no matter if you have your own car or use public transport, the expenses needed to move around have to be accounted for.
Anything from car payments, gas, insurance, Uber or Lyft costs, public transportation fares, and maintenance all fall under this category. If you’re looking to improve your finances and stay on top of your budget, consider carpooling or even walking places when the distance isn’t too far. Not only will this burn fat, but it’ll also trim the expenses used on transportation.
3. Food & Groceries
Recommended Amount: 10-15%
We all need to eat, and putting food on the table for yourself and family is a fundamental part of daily life. This is why food and groceries are an essential spending category to include in your budget. Any food related purchases, ranging from take out to grocery shopping and even quick bites to eat should be included in this category.
According to the Census Bureau’s Household pulse survey, the average household spends over $1k on groceries. By purchasing groceries in bulk, meal prepping, and making a grocery list before you go to the store, you can save money fast and avoid any impulse purchases.
Becoming a pro in this category will put less weight on your body and more weight in your wallet.
4. Debt Repayment
Recommended Amount: 10-20%
In today’s America, most American households have some type of debt they need to repay. In fact, Clever’s survey in 2023 revealed that almost 2 out of 3 Americans have credit card debt. Whether it’s credit card debt, student loans, or personal loans, not paying off your debt can be detrimental to your credit score.
This is why it’s important to allocate part of your budget to paying off these debts. By paying off your higher interest debts, you can speed up the process of becoming debt free. In doing so, you’ll have more money to allocate to other parts of your budget as well.
5. Self-Care
Recommended Amount: 5-10%
While it may seem “selfish” to set aside money for yourself, it’s important that you and your family maintain good hygiene and mental health. That’s why allocating part of your budget to take care of personal and family care will help you live your best life, in a smart way. If you don’t track the expenses, it can be easy to blow money on things that are in this category.
This category should include things like your gym membership, haircuts, spa treatment, chiropractor visits, daycare, and non-essential shopping like clothing and gifts.
6. Investing & Savings
Recommended Amount: 5-10%
Any concrete financial plan should include investments and savings. Without them, your money will never grow and it will feel like you're stuck in mud. Although nobody hopes it happens to them, emergencies are a part of life and if you don’t set aside an emergency fund, you could find yourself in a big dilemma.
By setting aside money for investments and savings, you’ll be able to work towards your long-term financial goals. Things like retirement accounts, real estate, bonds, and stocks would all fall into this category. An easy way to ensure you’re contributing to this category would be to set up automatic transfers in these accounts.
7. Healthcare and Insurance
Recommended Amount: 5-10%
Healthcare expenses are another critical budgeting category that should not be overlooked. At times it feels like these premiums can cost an arm and a leg. This category includes health insurance premiums, deductibles, copayments, prescription medications, and out-of-pocket expenses.
Setting aside money towards insurance and healthcare, you can be sure that you’ll get your family the best possible coverage and help protect yourself against any unforeseen expenses.
8. Education and Skill Development
Recommended Amount: 5-10%
Putting aside money to develop your skills or improve your education allows you to grow personally and professionally. In doing so, you’ll likely increase your chances of promotions at work or even finding a job with a higher starting salary.
Expenses for your books, courses, workshops and even tuition fees would all fall under this budget category.
9. Miscellaneous Expenses
Recommended Amount: 5-10%
Unpredicted and miscellaneous expenses should be a part of everybody’s budget. Even if you don’t know what the money’s going to be used for, it’s better to have it accounted for then not. Worst case scenario is that you have extra money and can use that for other categories.
Some things that fall under this category are things like last minute travel-plans that arise or even a great deal on something you’ve wanted for a while. It’s possible the price may never go that low again so you want to splurge now.
10. Entertainment and Recreation
Recommended Amount: 5-10%
Nobody wants to live a dull boring life. While this would be considered a nonessential budget category, it is widely seen as a necessity. Having fun and not being stuck in your house should be a part of everybody’s life. The expenses that fall in this category include traveling, going to concerts, seeing a movie, and even subscribing to different streaming services.
It’s important to keep track of subscriptions because they can sneakily add up and you may be spending hundreds of dollars before you know. The Hiatus app can track your subscriptions for you and let you cancel what you don’t want in just a few taps.
In Summary
Implementing these 10 budgeting categories into your financial planning can help you take control of your money. By avoiding budgeting mistakes and being smart with your finances, you’ll know which categories you need in your budget and which ones you don’t.
So when somebody asks “how many categories should you have in your budget”, the right answer is as many categories as you need in order to stay on top of your money.
Budgeting Categories Explained
While there are different types of strategies that you could plug and play with, some people want more control when it comes to managing their budget. Here are some recommendations for budget categories if you prefer to go about it on your own.
1. Housing and Utilities
Recommended Amount: 25-35%
Making sure that you have a roof over your head and that the lights stay on are non-negotiable when it comes to any budget. This category is often the largest expense in anybody’s budget and is the foundation to your financial plan.
Things that fall under this category include the basics like rent or mortgage payments and utilities. However, property taxes, homeowners insurance, and maintenance costs also fall under this category.
2. Transportation
Recommended Amount: 10-15%
Another significant category that should be included in your budget is transportation. Everybody needs a way to get around and no matter if you have your own car or use public transport, the expenses needed to move around have to be accounted for.
Anything from car payments, gas, insurance, Uber or Lyft costs, public transportation fares, and maintenance all fall under this category. If you’re looking to improve your finances and stay on top of your budget, consider carpooling or even walking places when the distance isn’t too far. Not only will this burn fat, but it’ll also trim the expenses used on transportation.
3. Food & Groceries
Recommended Amount: 10-15%
We all need to eat, and putting food on the table for yourself and family is a fundamental part of daily life. This is why food and groceries are an essential spending category to include in your budget. Any food related purchases, ranging from take out to grocery shopping and even quick bites to eat should be included in this category.
According to the Census Bureau’s Household pulse survey, the average household spends over $1k on groceries. By purchasing groceries in bulk, meal prepping, and making a grocery list before you go to the store, you can save money fast and avoid any impulse purchases.
Becoming a pro in this category will put less weight on your body and more weight in your wallet.
4. Debt Repayment
Recommended Amount: 10-20%
In today’s America, most American households have some type of debt they need to repay. In fact, Clever’s survey in 2023 revealed that almost 2 out of 3 Americans have credit card debt. Whether it’s credit card debt, student loans, or personal loans, not paying off your debt can be detrimental to your credit score.
This is why it’s important to allocate part of your budget to paying off these debts. By paying off your higher interest debts, you can speed up the process of becoming debt free. In doing so, you’ll have more money to allocate to other parts of your budget as well.
5. Self-Care
Recommended Amount: 5-10%
While it may seem “selfish” to set aside money for yourself, it’s important that you and your family maintain good hygiene and mental health. That’s why allocating part of your budget to take care of personal and family care will help you live your best life, in a smart way. If you don’t track the expenses, it can be easy to blow money on things that are in this category.
This category should include things like your gym membership, haircuts, spa treatment, chiropractor visits, daycare, and non-essential shopping like clothing and gifts.
6. Investing & Savings
Recommended Amount: 5-10%
Any concrete financial plan should include investments and savings. Without them, your money will never grow and it will feel like you're stuck in mud. Although nobody hopes it happens to them, emergencies are a part of life and if you don’t set aside an emergency fund, you could find yourself in a big dilemma.
By setting aside money for investments and savings, you’ll be able to work towards your long-term financial goals. Things like retirement accounts, real estate, bonds, and stocks would all fall into this category. An easy way to ensure you’re contributing to this category would be to set up automatic transfers in these accounts.
7. Healthcare and Insurance
Recommended Amount: 5-10%
Healthcare expenses are another critical budgeting category that should not be overlooked. At times it feels like these premiums can cost an arm and a leg. This category includes health insurance premiums, deductibles, copayments, prescription medications, and out-of-pocket expenses.
Setting aside money towards insurance and healthcare, you can be sure that you’ll get your family the best possible coverage and help protect yourself against any unforeseen expenses.
8. Education and Skill Development
Recommended Amount: 5-10%
Putting aside money to develop your skills or improve your education allows you to grow personally and professionally. In doing so, you’ll likely increase your chances of promotions at work or even finding a job with a higher starting salary.
Expenses for your books, courses, workshops and even tuition fees would all fall under this budget category.
9. Miscellaneous Expenses
Recommended Amount: 5-10%
Unpredicted and miscellaneous expenses should be a part of everybody’s budget. Even if you don’t know what the money’s going to be used for, it’s better to have it accounted for then not. Worst case scenario is that you have extra money and can use that for other categories.
Some things that fall under this category are things like last minute travel-plans that arise or even a great deal on something you’ve wanted for a while. It’s possible the price may never go that low again so you want to splurge now.
10. Entertainment and Recreation
Recommended Amount: 5-10%
Nobody wants to live a dull boring life. While this would be considered a nonessential budget category, it is widely seen as a necessity. Having fun and not being stuck in your house should be a part of everybody’s life. The expenses that fall in this category include traveling, going to concerts, seeing a movie, and even subscribing to different streaming services.
It’s important to keep track of subscriptions because they can sneakily add up and you may be spending hundreds of dollars before you know. The Hiatus app can track your subscriptions for you and let you cancel what you don’t want in just a few taps.
In Summary
Implementing these 10 budgeting categories into your financial planning can help you take control of your money. By avoiding budgeting mistakes and being smart with your finances, you’ll know which categories you need in your budget and which ones you don’t.
So when somebody asks “how many categories should you have in your budget”, the right answer is as many categories as you need in order to stay on top of your money.
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