11 Budget Categories to Include In Your Financial Plan

By Todd Kunsman

Saving Money

Published on

Updated on

So you are ready to budget or maybe have a basic one started. Great! You have taken an important step in helping your personal finances.

However, to really understand where your money is going, you’ll want to have specific budget categories that keep everything highly organized.

These will help you be more detailed, without having to track every little cent.

But by categorizing your budget, you can quickly identify problems or see where you need to make adjustments.

Below you’ll learn the value of a budget, the categories you need to consider adding, and some budgeting tools to help you.

Why Do I Need to Budget and Have Categories?

Understanding budgeting will help you to begin improving your relationship with money and, in turn, build a better financial situation. You can use a budget to work on debt, stop living paycheck to paycheck; or start building a nest egg for the future. 

Budget categories are important in your planning, as they itemize your spending (sometimes, even down to the dollar). This gives you control over spending; and ensures you have a monthly plan for your cash.

In particular, budget categories specifically target your fixed expenses and variable expenses, so that you’re not left wondering where on earth all the money went this month. 

There are many different versions of budgeting; each with its own categories and methods.

For example, You Need A Budget is a popular budget software. Some prefer to use cash when assessing their finances, as known as the Cash Envelope System. Whichever version suits you best; each budget contains three major sections.

What Are the 3 Main Budget Categories?


The Needs are your essential expenses; things like rent or mortgage payments, bills, transportation, insurance, and groceries. They are usually fixed expenses and, usually, do not change significantly from month to month. 


The Wants are your non-essential luxury costs. Such as subscriptions to Netflix or Hulu, dining out, going for coffee, etc. They are usually variable expenses, as can change dramatically from month-to-month. 


In case you’re not already doing it, you should create room in your budget for savings. Typically, this should equate to saving around 20% each month; although experts vary in their exact figures as every person’s income and outgoings are different. 

Breaking Down the Budget Categories

In those above three sections, you can breakdown the budget categories you need further. How you do this is entirely up to you, but these are the main categories you want to include in your budget and financial plan.

1. Income 

Simply put, income is the money you earn each month. This can be 100% through your paycheck or can be made up of a job alongside several side hustles, passive income streams, under the table jobs, and any other ways you produce cash.

However, some people get caught up by not remembering taxes; so ensure you calculate pre and post-tax income. Knowing exactly how much money you’re making each month is the first step in making better financial decisions. 

Income category examples:

  • Paycheck
  • Investments
  • Side Hustles
  • Your Own Business
  • Interest
  • Rental Income

2. Housing 

Whether you pay rent or a mortgage, chances are that some of your outgoings are due to housing. But there are extended housing costs, associated with household repairs (that darn AC!), property taxes, and other housing-related fees.

Luckily, this cost should not change drastically through the months, and unexpected expenses when household items require repair should be incorporated into your budget. 

Housing category examples:

  • Rent or Mortgage
  • Property Taxes
  • HOA Fees
  • Household repairs

3. Transportation 

Chances are, if you’re going to and from places, have kids to take to school or are doing any sort of commuting; you’ve got transportation costs to consider.

If you own a car, that’ll include payments for car insurance, gas, ownership, or leasing, and maintenance; alongside the other associated fees. Otherwise, you might incur costs related to public transport, such as taxis, ridesharing (like Uber or Lyft), and busses. 

Transportation category examples:

  • Car payment
  • Gas
  • Car Maintenance & Repairs 
  • Registrations & Fees
Tip: You can save on car insurance or home insurance with Gabi. You’ll be able to quickly compare and find the best rates to save money. Learn More and Sign-up for Gabi.

4. Food

Again, food costs are likely to be similar each month, as they’ll include your regular grocery list. But, your budget should also account for restaurants and dining out, to avoid shock and debt at the end of the month.

If you’re finding that your expenses are too high, cutting out your restaurant dining can be an easy fix to cut costs. Here are some ways to save money on food.

Food category examples:

  • Groceries
  • Restaurants

5. Utilities

You know, those pesky bills that you just can’t live without. Frequent check-ins with your utilities providers (at least every year) should enable you to get the best deal possible, but overall, utility bills are going to be fairly consistent from month-to-month.

The most effective way to cut costs in this department is to compare and switch using comparison sites. I’ve called my internet provider a few times when they decided to hike the price and always got better deals.

Utility category examples:

  • Water
  • Gas
  • Electricity
  • Garbage
  • Phone
  • Internet
  • Cable

6. Medical

Here is where unexpected expenses can really add up if emergencies are not in your budget. You may be enrolled in Medicare or private insurance, but this does not necessarily cover all medical situations.

So check your coverage, and ensure you’re budgeting for medical emergencies that could put you and the family out-of-pocket. A great additional way to be prepared is to sign-up for a health savings account from Lively.

Medical category examples:

  • Primary care
  • Dental care
  • Vision care
  • Medications
  • Specialty care

7. Insurance 

Whatever your living situation; you’re likely to need some kind of housing-related insurance. It protects you in case of damage and reduces your exposure to risk.

Some types of insurance are mandatory (for example auto insurance), where others are optional (such as life insurance). It is important to consider whether you could afford the out-of-pocket costs associated with these insurance situations and if the premiums are realistic for your budget. 

Insurance category examples:

  • Homeowner’s Insurance
  • Renters Insurance
  • Auto insurance
  • Life Insurance
  • Disability insurance
Tip: Looking for affordable life insurance? Get a free quote online within minutes by using Bestow. No exams or waiting for days to get a quote or coverage.

8. Personal Finance

Yes, saving, investing and debt payments should be budgeted for too. Especially as they are intentional payments that are consistently made, which means they are predictable from month to month.

If you are in the position to start building a nest egg, look at high-yield savings accounts and a diversified investment portfolio (as well as considering the level of risk you are happy with).

Alternatively, those with debt should look to make payments the priority, as per Dave Ramsey’s 7 Baby Steps method. 

Personal finance category examples:

  • Saving
  • Retirement
  • Student Loans
  • Credit Cards
  • Financial Planning

9. Personal  

When putting together your budget, consider efficacy. This is the ability to produce the intended result, a.k.a, how well you are able to stick to the plan.

If you don’t leave a buffer for normal lifestyle expenses, such as personal grooming or babysitter services; you’ll end up going over budget each month.

So remember that personal care deserves to have a place in your budget. But don’t go overboard. For example, you can use online thrift stores to find fashionable, yet affordable clothes.

Personal category examples :

  • Haircuts
  • Salon services
  • Babysitters
  • Spa & Massage
  • Shopping

10. Entertainment 

Here is where some get excited and begin to live a lifestyle they cannot afford. Entertainment and relaxation are important, especially to our mental health.

However, money problems can arise when we take out credit cards or loans to pay for keeping up with the Jones. If you need to cut costs your entertiamint budeget category could be the easiest thing to go. 

Entertainment category examples: 

  • Movies
  • Games
  • Vacations
  • Subscriptions
  • Concerts

11. Miscellaneous

That buffer mentioned earlier? It’s here too. Because unexpected costs ALWAYS crop up, and you should be able to afford them without diving into credit card debt.

Are you accounting for tax season? Are you supposed to be saving towards a child’s education? If you’ve got the funds, it’s brilliant to add these extra steps into your budget so that you can feel calm and collected about having it all under control. 

Miscellaneous category examples:

  • Travel
  • Taxes
  • Education
  • Gifts & Donations

Tools to Help Organize Your Budget Categories

Personal Capital

Personal Capital combines wealth management and advice with automation and technology; relying on algorithms and data to best serve its users.

Those wanting to sign-up for advanced tax strategies and financial advisors, are also required to have a minimum of $100,000 invested into the account.

But Personal Capital offers a range of free financial tools, including fee analyzers and net worth calculators, for example. The software creates scenarios for each stage of life, including:

  1. Retirement planning
  2. Saving for college
  3. Day-to-Day budgeting 


Famous for allowing individuals to produce a financial plan in just 5 minutes, Savology is free to use, and without fees.

Their gamified platform makes it easy and fun to build a budget, and the software even gives you tailored, holistic financial recommendations based on your own strengths and weaknesses.

Calculate your net worth, or even take one of their free classes aimed at improving financial literacy and education. You can’t go wrong! 

Tiller Money

For those wanting to keep an eagle eye over their day-to-day financial changes, Tiller Money may be the right option.

Tiller delivers a financial spreadsheet every single day to give you a clear snapshot of the direction your finances are heading. It’s online, accessible from the cloud, and we should all know how to use a spreadsheet by now!

This is a paid, subscription-based site, but they do offer a free trial so that you can determine if this system would work for your situation. 

You Need A Budget

As one of the original budgeting software, You Need A Budget is a popular and all-encompassing budgeting app series.

In case the program doesn’t suit your budgeting style, I discussed some You Need A Budget alternatives worth checking out (some are already listed in this post).

However, if you can afford the monthly fee, this is in-depth financial software, including goal setting and monthly reports to keep you motivated and on-track. 


Boldly claiming to be the “#1 most downloaded personal finance app,” Mint is a free budget tracker and planner. The service stands out as it offers 24/7 access to your credit score, alongside offering highly encrypted protection for your financial data.

Don’t just listen to us, though, as Mint has been featured in many of the top media outlets, including HuffPost, The New York Times, and Business Insider. 


Your budget categories do not have to be super complicated, but as you can see there can be plenty of areas worth keeping tabs on. And as you begin to budget, keep in mind the 50/30/20 rule.

This can help you better organize where your money should be going and help you categorize it easier. The traditional 50/30/20 rule breaks down to something like this:

50% For Needs

  • Housing
  • Utilities
  • Transportation
  • Health Insurance
  • Life Insurance
  • Dental Insurance
  • Groceries

30% For Wants

  • Dining Out
  • Leisure
  • Clothes
  • Hobbies
  • Grooming

20% For Personal Finances

  • Paying Down Debt
  • Increasing Your Savings
  • Investing For Retirement

I personally try to keep the essentials and wants lower, so I can increase my saving and investing rates. But you can start where you feel comfortable as use the 50/30/20 rule as a basic guideline.

Budgeting might not be fun, but is a necessity to improve your financial health. Now, time to get started!