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Having control of your finances can be a challenge. Still, if you take the time to properly arrange and organize your expenses into categories such as bills, payments, savings, etc., it’ll help make money management easier. Harnessing this approach means you’re in charge – enabling yourself to decide exactly where your hard-earned money is being spent!
As most budgeting plans require you to categorize your spending, we will explain the budget categories and give you a list to give you a starting point.
Budget categories can group your expenses and income into different categories to help you understand and manage your finances. Budget categories can be specific or general, depending on the level of detail you want to include in your budget. For example, a general budget category might be “Transportation,” while a specific category might be “Car Payments.”
The purpose of budget categories is to help you identify your spending habits and make better financial decisions. By breaking down your expenses into specific categories, you can see where your money is going and where you might be overspending. This can help you adjust your budget and prioritize spending to meet your financial goals.
Common budget categories include housing, transportation, food, entertainment, health, clothing and personal care, debt repayment, savings, gifts and donations, and miscellaneous expenses. However, the categories you choose for your budget will depend on your personal circumstances and spending habits.
Reviewing and adjusting your budget categories regularly is essential to ensure that they still accurately reflect your spending habits and financial goals. By regularly tracking your income and expenses in specific categories, you can better understand your finances and make informed decisions to achieve your financial objectives.
Although categorizing your spending is a personal thing, that is, you have to create categories by your needs; there are a few categories that are, most likely, universal. These are a few examples of such categories and what should be considered. This should give you a great starting point and a better understanding of categorizing.
This category is probably the one that everyone has in their budgeting plan. It includes your rent or mortgage payment, property taxes, homeowner’s or renter’s insurance, and utilities like electricity, gas, water, and internet/cable bills.
To expand on it, this category should include the following:
Whether you own a car or use public transportation, this category is essential when creating your budget. If you happen to own a car, take into consideration these subcategories:
If you use public transportation, such as buses, trains, or subways, the cost of tickets, monthly passes, or tokens should be included in your budget. The same goes for ride-sharing services such as Uber or Lyft. Include the payments for these services in your transportation budget category.
A big surprise — this category is concerned with food! Here you should consider every expense that is related to food. It can be split into the following subcategories:
This category is concerned with money you spend on various fun activities. It also includes expenses that are related to your hobbies. When calculating the expenses in this category, take into account the following:
The health category in a budget typically includes any expenses related to healthcare and wellness. When filling this category, consider the following:
The personal care category concerns various items that improve and maintain your looks. The expenses here contain the following:
Creating effective budget categories is one of the best ways to track where your hard-earned dollars are going every month—and, more importantly—where they should be going. By defining what goes into each bucket within your finances and setting financial goals for yourself based on these buckets, you create structure around spending decisions so that when unexpected costs arise or opportunities present themselves down the line, managing them becomes easier because there is already an established framework in place.
Taking care of expenses is important, and having an easy income for those expenses is something that everyone wishes to have. As you have started with budget categories, start indulging in passive income. Honeygain is a great place to start!
