Last Updated on December 7, 2021 by
Today we’ll talk about budget categories and why they are an important aspect of a serious budget.
Budgeting is a timeless personal finance tool. Once you know how to budget, you’ll surely be on the right to financial freedom.
However, there are basics in budgeting one must master first.
And that is having the correct budget categories.
If you want to create effective budget moving forward one must first choose the right budget categories as a starting point.
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What are Budget Categories
Budget categories refer to items where you allocate your money with. They are the main baskets where your monthly expenses belong with.
Here are different budget categories that your present or your future budget should have.
1. Tithes. This consists of 10% of your total income. Other variants of this budget category will be Offerings, Missions (if you are supporting a missionary) and giving fund.
2. Utilities. Utilities refers to all the daily, weekly or monthly subscriptions that you need to pay with. Under Bills are the following:
Electricity
Gas
Telephone
Internet
Water
3. Housing. Though this could be included in the Bills category but I choose to separate this one to give you a much thorough breakdown on sub categories that you need to allocate money with when we talk about house.
Rent or Mortgage
House Repair
Property Tax
Insurance
4. Food. This category is of high importance for we need to eat in order to live.
Groceries
At work food allowance
Dine Out
Snacks
5. Transportation. Personally, this is where most of my income goes since I choose to ride conveniently on an FX (Skyway) going to and from work. In short, I choose convenience over saving money here. Below are other sub categories:
For those who commute:
Commutting to and from work
For those who own their car:
Fuel
Tires
Oil Change
Car Maintenance
Parking Fees
Toll Fees
Repairs
6. Investments. If you have different investment instruments then you need to allocate an amount for each.
Stock Market
Mutual Fund
Bond Fund
Others
7. Savings. This is something that you need to put emphasis on –building your emergency fund. Put this as part of budget allocation so you won’t forget to put aside some money.
Emergency Fund
Fun Fund
Financial Goal Fund
Sinking Fund
Opportunity Fund
Others
8. Personal/Household Expenses. This are expenses that are considered mostly of a personal and or your whole household/family in nature.
Clothing Allowance
Load Allowance
Gym Memberships
Salon Services
Cosmetics
House Help
9. Leisure. Let's be honest, we all have these recreational activities that more often than not will cause us to spend some money. Make sure you are allocating properly.
Vacation/Trips
Gifts
Movies
Books, Magazines, Newspapers
Hobbies, Crafts, Arts Supplies
Gym Fees or Equipment
Subscriptions
10. Miscellaneous or Other Expenses. There are expenses that just come along the way so it's better to put aside some reasonable amount.
I created a free Budget Categories Checklist to help you get started with a better budget. You can access the checklist for free in the SavingsPinay Resource Library.
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Helpful Budget Tips
Now that we’ve established the different budget categories you can use, I’d like to quickly share some helpful budget tips you can follow:
1. Discern your unique budget categories
It’s important to make your categories as close as to what you really in a spend. We all have different expenses and spending habits so you want to ensure your budget categories reflect as well where exactly your money goes.
2. Be as specific as you can be
Instead of just writing down Subscriptions, narrow down the item by enumerating the specific monthly subscriptions you really have. Doing this will not just enable you to budget better, it will also help you assess whether a subscription is still necessary or can be ruthlessly cut!
3. Start with the most important categories first
When you are already allocating your money, you may want to take a good look at your list of budget categories and take care of what matters to you most. Then, fill the rest of your budget categories next stil making sure you stay within your assigned allocation.
4. Keep things simple
Setting up your own budget categories, just like budgeting, may seem daunting at first. The key here is to keep things as simple as possible. Sometimes having one simple category works as well especially if you don’t spend that much money on a particular item anyways. For example on my budget I simply put Transportation Allowance instead of narrowing down the category to all the transportation-related items I spend my money on.
5. Be real with your income. Of course you need to enumirate your sources of income as well in every budget. The most common source of income is salary but, if you have other sources of income, you should include them as well.
Salary
Dividends
Bonus
Interest Earned
Side Hustle Income
Others
Final Notes from SavingsPinay
We all are aware of what a budget is and why it is important.
I believe over almost a year and a half that I’ve been blogging under the finance category I’ve tackled this topic time and time again. I call Budgeting as a timeless personal finance tool. Once you know how to budget you’ll sure is on your right track to financial freedom.
The very first post that I published is the 50-20-30 Rule of Budgeting. This budgeting technique is good for beginners. All you have to do is to simply allocate your income in different percentage such as 50% essential, 20% savings and 30% lifestyle. This by the way is less tithe. I believe that no matter what religion you are in, tithing is important. Give God what is due to Him.
I also featured two budget series which can be done by almost anyone. The Notebook Style and The Envelope Style. I remember when I was in college and starting to earn through hosting I use the above methods because I need to track the money that goes to my account manually. I don’t have any savings account back then so the notebook and the envelope helped me a lot.
Things that Ruin my Money is a blog post I created to remind myself of my the things that I need to stop doing in order to stick with my budget. These are common things that I believe a lot can relate to. Because of its success I even created a Part 2 entitled More Things That Ruin My Money.
Now if you still have no idea how to create a budget you can click any of the two posts below:
How To Effectively Budget Your Money
I hope this post helps you!
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