The ONLY 6 Budget Categories Needed

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Having a lot of budget categories can be slightly overwhelming. So instead of making you decide which categories should be in your budget, we’re going to be talking about the only 6 budget categories you need to include in your budget!

If you want to purchase a budget template for google sheets that has these 6 and only 6 budget categories, check out my Ultimate Wealth Planner! It’s the ideal simple budget template for excel. It has a budget and expense tracker with the categories already created for you!

Additionally, if you clicked on this by mistake, love customizing your budget and want even more budget categories, check out my massive 65+ budget categories list.

Table of Contents

Make Budgeting Simpler

Looking at a bunch of numbers on a spreadsheet is intimidating. Especially when you’re trying to get your financial journey started and all you can see is a sea of numbers.

These are truly the only budget categories you need. The point of making a budget is to create a plan and start building healthy spending habits. So we don’t have to make it more complicated than it needs to be.

You should never feel limited or restricted by your budget. Quite the opposite! A budget should show you that when you’re intentional with your money you CAN do the things you want to do and save for retirement.

A budget is to help you figure out how you want to live your life. Do you want to travel? Do you want to pursue the F.I.R.E Movement? Do you want more clarity on your spending habits? Whatever it is you’re after, a budget will help you form the plan to get there.

Therefore, I budget to be able to travel more and not feel guilty about my spending.

These 6 budget categories will help you stop overthinking your budget and get to the good stuff!

Related: How to Track Your Expenses
Related: Why your Budget ISN’T Working

This is only for expense categories!! Obviously Saving/Investing should be in here otherwise….

Just wanted to make sure no one is confused here. This post is only talking about budget categories related to expenses. Meaning things you’re spending money on.

The most important budget category of all is your savings so don’t get confused and leave it out!

#1: Housing

Housing is going to make up the majority of your expenses. Anything that relates to your living situation, whether you own a home or are renting, should be thrown into this category. It is completely normal to be spending the most in this category.

How much does housing cost? Ideally, I would try to not spend more than 35% of your take home pay for housing. I would try to stay around the 23-24% range.

If you’re renting:

Rent
Renters Insurance
Water / Trash / Sewage
Internet + Cable (but who really pays for cable nowaday)
Electricity

If you own your home:

Mortgage
HomeOwners Insurance
Property Taxes
Repairs / Maintenance
Water / Trash / Sewage
Internet + Cable
Electricity

Related: How to Budget and Save Money

#2: Transportation

Transportation takes into account everything related to your car and getting around. Don’t forget to include your random Lyft drives that always seem to accumulate somehow.

I like to save some money every month from this category for unexpected or unforeseen car maintenance expenses. Whenever my car needs repairs the bill is always shockingly high, so I like keeping a little cushion for maintenance. Read more about what 4 savings account types everyone should have.

Car Insurance
Car Repairs / Maintenance
Gas
Lyft/Uber
Parking
Bus Pass

#3: Food

The second largest category in your budget. It is incredibly easy to overspend on food. Which is why I have a post coming out talking about budgeting food and ways to save money on food. Keep an eye out for that!

Groceries
Eating Out
Happy Hour Drinks

Related: Why Should You Budget?

#4: Living Expenses

I like to call this category the cost of existing. There are just certain things that we will always have to pay for, because we exist as humans, so we kind of need this stuff.

Health Insurance
Beauty – face wash, shampoo
Hygiene – toilet paper, soap
Kitchen consumables – tin foil, paper towels
Gym Membership
Cell Phone Bill

I like including a gym membership in this living category to make it feel more useful to have a gym membership, but you can also include the gym in the next category.

Again, when it comes to budgeting, do what is going to work best for you. There is no cookie cutter, one size fits all methods to budgeting. This is simply a financial roadmap, but you get to choose the end destination!

Related: What I Spend in a Week
Related: How to Cope with Financial Stress

#5: Monthly Expenses

Monthly expenses means any minimum payments, subscriptions or sinking fund items you save for. Although this category seems pretty hefty, they all fit together I promise! This category is essentially the “catch all” for anything you pay monthly.

Although it seems like several things are stuffed into this category, not everyone is going to have all three items listed above. If you don’t have debt you won’t be including minimum payments. Similarly, if you don’t have a sinking fund you won’t need to include that either.

So let’s take a closer look at all of these items individually.

Minimum Payments

By minimum payments I mean the amount you must pay on your debt monthly. Essentially, this is the minimum amount you are allowed to pay in order to remain on good terms with your lenders.

Any debt items you are paying down will be included here!

Student Loans
Car Loans
Credit Card Debt

Furthermore, if you want extra help organizing your debt items and tracking your debt payoff, check out my cute debt repayment printables!

Related: Debt Snowball or Avalanche Method | To Pay Off Debt

Subscriptions

Subscriptions include all those little things that you pay for monthly as well, except instead of these being debt items they’re services. Take special care of this category. Make sure you’re only subscribed to things you’re actually using and getting value from.

It’s easy to sign up for a free trial and then forget to delete it. Stay on top of your subscriptions and don’t pay money unnecessarily!

Spotify
Instacart
Streaming Services

Sinking Funds

What is a Sinking Fund? If you’ve been reading my blog for a while you’ll notice I love talking about sinking funds!

A Sinking Fund is made to save and pay for those big expenses you know are coming. For example, I transfer 50 dollars to a seperate savings account every month for car maintenance. Do I pay 50 dollars for car maintenance every month? No.

But when I do have to pay for car maintenance and the bill somehow ends up being 700 dollars, I know exactly where this money is coming from!

You may be wondering why this is an expense category then. Well, this money isn’t actually being saved. You will spend it eventually, just not today. I like thinking of my sinking funds as a “for a rainy day” account.

Personally, I like having a sinking fund because I don’t like big expenses feeling like an out of pocket expense. Instead of having to include a 700 dollar bill on my budget, it’s already paid for!

You can have several different types of sinking funds. See below for my personal sinking fund categories!

Car Maintenance Expenses
Christmas Spending
Medical Costs
Home Repairs
Anything you know you’re going to have to pay for eventually.

If you want one of those^ budgets for yourself, get the exact wealth planner I use here!

I like to group these three items together because they all occur on a monthly basis, so it’s easy to know when your payment is due and how much you’ll have to pay.

Related: The 4 Must Have Savings Account Types

#6: Fun Money

Lastly, and probably most importantly, fun money! Don’t leave out fun money!!!

Like I said before, a budget shouldn’t make you feel held back. It’s incredibly important to allow yourself to spend money on things that bring you joy in life! I budget to be able to do MORE of these things.

Neglecting these fun activities isn’t going to help you now or in the future. If anything it will just cause you to feel burnt out and unmotivated. So make sure you’re getting your fun money’s worth of activities!

Entertainment
Travel
Clothing Shopping
Gifts / Christmas
Misc.

If you’re confused why clothing shopping is in here let me explain. Most of us have, for lack of a better word, a shit-ton of clothing. So although clothing is a “necessity” there is a difference between buying clothing you need and clothing you want.

However, most of us honestly don’t need more clothing, but we continue to buy it anyway. I included clothing here because shopping for clothing seems more like an activity to throw some dopamine your way, rather than fulfilling a need. If you truly need whatever it is you purchased, go ahead and throw it into the “living” category!

Lastly, I’d also recommend throwing in a miscellaneous section. There is always that one random expense that doesn’t seem to fit anywhere, so give yourself space to have that!

Related: How to Budget and Save Money
Related: How to Save Money on Any Purchase

Budget Percentage Recommendations

Ok so now that we have the perfect 6 budget categories anyone could have ever dreamed of, how do we put those into practice? What budget percentage is considered the “best”?

I typically recommend saving 50% of your after tax income, if you can. This expense category breakdown will be assuming you’re already saving 50%.

If you think this is a crazy amount to be saving check out my what I spend in a week for inspiration! Additionally, learn how to make your money go further with 5 tips that help you save money on any purchase!

For this example let’s take someone who is earning $63,000 a year. I like this number because this was my previous salary so I already have all the numbers for it ;).

A salary of $63,000, after taxes gets about $3,834 dollars a month (I used California state tax rates which are one of the highest, so if you live anywhere else in the country and make 63k these numbers should be a conservative version for you). Which means we’d be saving $1,917 or 50%. That also means we have $1,917 to spend, oh ya!

The way I like to think about it is, one check goes right into savings and the other goes into expenses. That way it’s easy and there is no confusion where your money should be going.

Housing: $900 or 23%
Transportation: $275 or 7%
Food: $300 or 8%
Living: $200 or 5%
Subscriptions: $42 or 2%
Fun: $200 or 5%

There you have it! 50% of your after tax pay goes to savings and the other 50% being broken out into these 6 categories!

Additionally, I will mention, if you aren’t paying down a car loan, you really only need gas and maybe some Lyft rides in your transportation budget. This means you could probably have an additional 200 dollars to throw into fun money or housing!

Alternatively, If you have debt you’re paying down, apply the same concept except instead of saving all of it, apply it towards your debt payments. If you want my opinion on the best way to pay off debt, check out this post here. Also, check out my debt snowball and debt avalanche printable bundles to help track your debt and stay organized!

Related: Hawaii Vacation Costs | Budget Breakdown
Related: Eco-Friendly on a Budget

My Current Budget Percentage

Just in case anyone was wondering, I figured I’d throw in my personal budget percentages. Like I always say, not everything is cookie cutter. Make a budget that is going to work for YOU. What is most important for you?

Even though I’m recommending the above percentages, my personal current budget percentage breakdown doesn’t look anything like that!

Things to note: I currently don’t have a lease, which means my budget percentages are wacky right now. This basically means my housing expenses are really low so my fun money and food budget are really high!

Additionally, this is with a 57% save rate. Aka this is only 43% of my after tax, take home pay.goes to my expenses.

Final Thoughts

Making your budget simpler might encourage you to use it more!

The theme of this blog is prioritizing your spending so you can do the fun things you want to do while being prepared for the future and for emergencies. Breaking down your budget into these easy 6 categories will hopefully help simplify your budget.

As mentioned before, if you want to snag my Ultimate Wealth Planner these 6 budget categories are already created and linked for you! Alternatively, I also have a wealth planner that is customizable so you can make your own categories if you prefer that!

Keep all your finances organized and in one place!

What more do you want to read from me? Let me know in the comments or send me an email!

The ONLY 6 Budget Expense Categories You Need