Budget Categories: Long list or short list?

by Rob Bertman, CFA®, CFP® in Budgeting, Most popular blog posts
September 29, 2023

Budget Categories: Long list or short list?

Have you ever been surprised by your credit card bill at the end of the month? You thought you were doing fine, but then “Wham!” you see the actual number and are totally surprised by it.

I didn’t know why I wasn’t losing those last few pounds, because I thought I was eating ok. To figure it out, I started tracking what I was eating. 

(What does this have to do with family budget categories? I’ll get there.)

The first thing I noticed is that I had wildly underestimated the calories I was eating. It wasn’t until I started tracking it that I was able to figure out ways I could improve.

Most of the extra calories came in the form of 50 extra here and there throughout the day, but it added up. Nothing, and I mean nothing, I at after 8pm was helping my cause.

That process helped me identify where my calories were being eaten. Then I used that info to make some changes, and I lost 10 pounds in 5 weeks!

Tracking your spending will have the same effect. While the goal of monitoring your eating is to get to your ideal weight. The purpose of budgeting is to improve your spending habits so you can have more money left over at the end of the month. 

Budget categories are the meal logging of personal finance. It will help you figure out where the areas of overspending are coming from and give you the awareness to make positive changes in your spending.

Now the question is, “How detailed should I get?” 

If you’re just starting or have had trouble budgeting, DEFINITELY start with a short list of budget categories.

Which strategy works? Well…both will work. The question is which will work for YOU? 

What categories should I include in my budget?

The first thing to consider is what level of detail you are willing to commit do. It’s better to make progress doing anything rather than map out the perfect budget process but be so overwhelmed that it doesn’t end up geting done.

If you’re a detail-oriented person who loves spreadsheets, then get as granular as you’d like. 

If you’re someone who is looking for a method that you can easily maintain, then use a simple budget and keep the budget categories to a minimum. 

Creating a budget is not a one-size-fits-all thing. Different systems work for different people.

The categories you should include in your budget depends on the kind of person you are.

Let’s take the food budget for example:

  • Simple budget categories: Groceries, Dining out
  • Detailed budget categories: Groceries, Coffee shops, Breakfast, Lunch, Dinner, Drinks, Fast Food, Snacks

I’ll take you through both the detailed approach first, and then we’ll talk through the simple approach. 

At the end, I’ll show you my effective, yet bare minimum, 3 step budget system as a way to organize and track your spending. Often it’s the easiest to maintain that has proven to get my clients great results.

If you have had trouble getting your budget to stick, this budgeting method will work great for you.

Before we dive in, think about your budget. Which one of the 3 options below are you?

what categories should i include in a budget

Ok! Let’s dive in.

Detailed List of Budget Categories

Before we start listing out the budget categories, we need to get all of your spending in one place.

Sometimes, it’s helpful to start with a comprehensive list of budget categories to make sure you don’t miss any spending. 

If this list seems too intimidating, skip to the next section where I’ll simplify it for you. 

Start here if a list of 182 separate categories sounds like heaven 🙂


  • Salary & Wages
  • Self-employed income
  • Bonus
  • Tips
  • Tax refund
  • Gifts received
  • Alimony received
  • Child support received
  • Rental income
  • Dividend income
  • Interest earned


  • Mortgage/Rent
  • Homeowners association (HOA fees)
  • Homeowners insurance / Renters insurance
  • Property insurance (i.e. jewelry)
  • Home repairs / Maintenance
  • Property taxes
  • Home improvement
  • Furnishings

Home Services

  • House cleaning
  • Lawn care
  • Security system
  • Pest control


  • Natural gas / Electricity
  • Landline / Home phone
  • Mobile phone
  • Home internet
  • Garbage
  • Recycling
  • Water
  • Sewer

Household Items

  • Cleaning supplies
  • Paper products
  • Tools
  • Toiletries
  • Laundry supplies
  • Postage
  • Furniture
  • Home décor
  • Pool supplies


  • Groceries
  • Fast food
  • Coffee shops
  • Breakfast
  • Lunch
  • Dinner
  • Drinks
  • Snacks


  • Car payment / lease payments
  • Car insurance
  • Gas
  • Oil change
  • Maintenance / Repairs
  • Personal property taxes
  • Registration
  • Public transportation
  • Ride sharing (Uber, Lyft)
  • Tolls
  • Parking Fees
  • Roadside assistance (AAA)


  • Health insurance
  • Dental insurance
  • Vision insurance
  • Prescriptions / Medication
  • Doctor bills
  • Dentist visits
  • Hospital bills
  • Optometrist
  • Glasses, contacts
  • Chiropractor visits
  • Vitamins/Supplements


  • Life insurance
  • Disability insurance
  • Long-term care insurance
  • Umbrella policy
  • Identity theft


  • Tuition
  • Daycare
  • Babysitter / Nanny
  • Diapers, formula – baby necessities
  • Summer camp
  • School or Extra-curricular activities
  • School supplies
  • School lunches
  • Lessons
  • Allowance
  • Toys
  • Kids discretionary spending
  • Child support
  • Kids clothing


  • Veterinarian visits
  • Pet food
  • Pet medication (i.e. flea shots, heart worm medication)
  • Pet toys/beds
  • Pet accessories (leash, collar, etc.)
  • Pet grooming
  • Pet insurance

Subscriptions/Streaming Services

  • Netflix/Hulu
  • Amazon Prime
  • Music (Spotify, Pandora)
  • Sports TV subscription (like ESPN or Fox Sports)
  • Software subscriptions
  • Magazines
  • Professional Society annual fees


  • Work clothing
  • Athletic clothing
  • Leisure clothing
  • Alterations
  • Dry cleaning

Personal Care

  • Haircuts
  • Hair coloring
  • Hair products
  • Cosmetics
  • Nail salon
  • Eyebrows
  • Massages
  • Spa Services
  • Grooming
  • Gym Membership
  • Counseling/Therapy

Personal Development

  • Books
  • Personal coach
  • Self-improvement
  • Conferences
  • Online courses
  • In person courses

Financial/Professional Fees

  • Financial advisor
  • Lawyer / Attorney fees
  • Tax professional (CPA, online accounting firm)
  • Business consultant


  • Movies
  • Concerts
  • Hobbies/Crafts
  • Hosting parties
  • Books
  • Entertainment
  • Sporting Events


  • Vacation
  • Trips to see family
  • Trips for weddings, bachelor/bachelorette parties
  • Souvenirs
  • Baggage fees
  • TSA Precheck or Global Entry


  • Mobile phone
  • Computer / Computer accessories
  • Speaker system
  • Wifi mesh system / Wifi extender
  • Smart home (Amazon Echo, Fire, Nest, Google)
  • Gaming system / Video games / Gaming accessories


  • Family birthday gifts
  • Friend birthday gifts
  • Wedding/wedding shower gifts
  • Anniversary gifts
  • Baby/baby shower gifts
  • Teacher gifts
  • Service person gifts (mail carrier, home service, personal assistant, 
  • Thank you gifts
  • Holiday gifts
  • Special occasions

Charitable Giving

  • Charity/Donations
  • Tithing
  • Religious
  • Community
  • Political
  • Non-cash donations (Goodwill, Salvation Army, clothing, canned food, electronics, stock, etc)

Savings Goals / Investing

  • College savings
  • Retirement savings
  • New car savings
  • Health Savings Account/Plan
  • Emergency Fund
  • Brokerage investments
  • Traditional / Roth IRA
  • Down payment savings

Debt Payments

  • Credit card debt
  • Student loan debt
  • Medical debt
  • Personal loans
  • Auto loan payments
  • Back taxes
  • Past due bills
  • Alimony

If I’m being honest, this is a little overboard.

So how do you know if you have too many budget categories? 

If it becomes intimidating to create a budget, then simplify your categories.

Simple list of budget categories

Let’s condense all 182 listed above into 12 more general budget categories.

Here’s what it would look like to simplify these major budget categories and many subcategories.

  • Housing – includes all housing, home services, utilities and household items
  • Food – All food
  • Transportation – all in cost of getting around town
  • Health – include all medical, health, personal care, insurance
  • Kids – Any kid-related expense
  • Personal development / Recreation – Also includes fun, streaming services / subscriptions, travel
  • Clothing
  • Technology
  • Pets – Pet food, veterinarian visits, pet insurance
  • Giving – charitable and personal gifts
  • Financial / Legal / Professional fees
  • Net worth building – saving, investing, debt payments

simple budget categories
Simple Budget Categories

The Family Budget Expert 3 Step Budgeting Process

How do we take all these budget categories and to help you find more money in your budget?

My clients have acheived the best results when they start with simple budget categories. It helps them easily identify where to cut spending without feeling like they’re sacrificing their lifestyle.

After all, your spending should ultimately be a reflection of your values and priorities.

Financial experts out there LOVE a percentage based approach to towards spending and budget categories or giving every dollar a job.

Some like the 50/30/20 budget (50% to needs, 30% to wants, 20% to save money and pay off debt). I like the 20% savings rate here, but what is a need vs a want? Wants are ok aren’t they?

Others like zero based budgeting. The goal is to have every single dollar allocated to various budget categories each money. No dollar unaccounted for. This usually works best when using the prior month of income instead of trying to predict the current month’s income.

These budget techniques are too aspirational for most and can be very hard to stick too, especially if you’re trying to figure out how to live below your means when you already have the lifestyle you’re accustomed to. 

The biggest mistake I see is setting a budget before knowing where your money is going first.

So no matter how you budget, the first step with budgeting is to track your spending.

That will inform how you can make changes and cut your spending so that you can save more money, invest for the future, and pay off your pesky debt. (Remember the meal logging example from above?)

For example, if I asked you to cut your spending by 10%, where would you start?

Most people go through each category and see what they can cut back based upon other people’s judgements and where they are spending their money. 

But a budget that sticks is one that resonates with how YOU want to live YOUR life, spending in alignment with YOUR values & priorities.

Step 1: Fixed, Flexible, Net Worth Building – Simple Budget Categories

First, let’s see what expenses we can change without uprooting our life. 

For example, you may not want to start with selling your house even if your mortgage seems high. You might want to first find other ways to cut your spending.

Fixed expenses

These are things you don’t have control over how much you spend on a monthly basis. These are regular monthly bills that you have to pay or else it would significantly change your current life. 

Cutting your spending here means making a fairly drastic lifestyle change like moving, selling a car, possibly changing your kids’ school, etc.

Here are examples of fixed expenses:

  • Mortgage / rent
  • Auto payment, gas & maintenance
  • Utilities
  • School tuition / daycare expenses
  • Insurance
  • Pet expenses

*Fixed expenses can be different from the traditional “necessities” or “needs” budget categories. For example, the mortgage on a $400,000 house is not a necessity, neither are $500 per month car payments, but they would be considered fixed expenses.

Flexible expenses

discretionary expenses

A flexible expense is anything that you could have some level of control over without making a drastic change. It would include all discretionary spending, anything you could cancel, or places you could spend less money if you wanted to.

Examples of flexible expenses include:

  • Travel
  • Technology / Electronics
  • Clothing
  • Dining out
  • Groceries (yes groceries are flexible)
  • Personal care / personal development
  • Gifts (charitable & personal)

Net Worth

How much of your money is going toward net worth building activities?

A net worth building activity is when money flows to a form of saving or investing. Fun fact, most people forget that paying off debt also builds your net worth. Yes, any debt reduction counts as a net worth building activity.

We’ll exclude housing payments / rent and auto payments from this since they’re included in the fixed expenses section.

The money in this budget category is not an expense per say. The money is staying with you. It’s just going to a different account on your balance sheet.  For example, if you put $1,000 from your savings into your Roth IRA the money is staying with you.

Paying down debt can get a little complicated, because part of the payment is an interest expense. The other part goes to paying down the loan principal. We won’t worry about that nuance right now. Let’s just account for the full debt payment.

Here are places your money can go to build your net worth:

  • Credit card payments
  • Student loan payments
  • Personal loan payments
  • Retirement savings (401k, 403b, IRA)
  • Savings account transfers
  • 529 plan savings for college.
  • Short term and long term savings goals.

What comes after fixed, flexible & net worth?

Ok, so now you have your fixed and flexible spending as well as how much money is going towards building your net worth.

Can we use these budget categories to cut spending and find more money to save, invest and pay off debt? 

Heck yeah! Here’s how.

Step 2: Keep, Cut Back, Eliminate

budget priorities

How wonderful would it be if your spending was fully aligned with your values and priorities? What if you got rid of spending that is wasted based upon that framework?

Start with the flexible spending budget category. This is the easiest and least disruptive category to make changes to. 

Then apply my Keep, Cut Back or Eliminate framework


This spending is in full alignment with your values and priorities. You not only like what you got for your money, but you also feel good about the amount you spend on it.

Think about the spending you want to KEEP in terms of you as individuals, as a couple, and as a family. 

What are the things you enjoy doing that keep your relationship strong? What keeps your family strong and helps you raise your kids with the values you want them to grow up with?

Please remember the things you enjoy doing on your own too. As parents, this often is an afterthought.

It could be a social activity, a hobby, an interest that is important to you but others in your family don’t normally participate in them. Before my kids were older, this was seeing action or superhero movies for example.

If you’re married or financially attached, KEEPs as individuals can be tricky, because your spouse/partner probably isn’t interested and wonders why you’d spend your money here (and vice versa for their interests).

Just remember that you might not understand why it’s a keep for your spouse/partner, it’s important to them. It stays a KEEP with no veto power. You don’t have to agree here as long as one of you isn’t destroying your family finances.

Let’s table any arguing or judgment here so you can work together and agree on the next two categories.


CUT BACKs are things you enjoy but there’s a way to do it for less money. Normally we can find spending cuts of 20-25% without feeling like you are drastically changing your life. You can either do it less often or find a cheaper alternative. 

Going out to eat (or ordering in these days) is a perfect example. If your normal food bill is $50, can you do it for $40? If you get lunch out 5 days a week, can you just pick one day to make it at home?

Next time you book a vacation, would the $200/night room be fine compared to the $250/night room?

A CUT BACK should not feel drastic. It just takes the edge off every time you spend money.

Go back and review your spending to see if you can find any patterns where you could cut back the traditional budget categories. Most of the people I work with pick Dining Out, Target, or Amazon.

If you’re having trouble figuring out how to make this happen, there are plenty of creative ways to save money.

Remember, you have to be in agreement here.


ELIMINATE is the easy to identify. This is spending you can 100% get rid of and won’t even miss it.

It could be that extra streaming service you’re not using. It could be something that’s detrimental to your health or your relationship. It could be something you simply forgot you were paying for until you saw it. These are things you cancel outright.

By the way, we often get FOMO when canceling things. But trust me, you can always pick it back up if you really miss it. Netflix will take you back 🙂

ELIMINATE items are not at all aligned with your values and priorities. No need wasting your money here. It would be better served building your net worth than spending it on something you don’t care about all that much.

Step 3: Track your spending in 3 budget categories or less + Track your net income

Next we set a budget for those CUT BACKs and ELIMINATEs. Set the budget category 25% lower than what you’ve spent in those categories over the last few months. 

Budgeting apps make this painless because it will pull in the last 90 days of transactions and show you what you actually spent.

These budget categories (keep it to 2-3 tops) will be the only ones you track in your budget. 

“Do I need to track all budget categories?” – NO!

You only want to track spending that you are trying to improve. Tracking fixed expenses like your mortgage payment just clutters your budget (and your brain).

It becomes a distraction to the information that will ultimately help you spend less money and save more of it.

If you’re not trying to improve it, don’t track it.

Finally, track your net income each month (overall spending compared to your income). 

That is the most important number if you want to stop living paycheck-to-paycheck and have money left over at the end of the month.

Then it’s all about having as much money left over as possible by your spending is fully aligned with your values and priorities. 

Budgeting is the #1 skill in personal finance

Why focus on the budget?

Even the best financial plan won’t work if you don’t have the money left over.

What good is it to have financial goals like saving, investing and debt repayment if you can’t come up with the money in the first place to put toward these financial goals?

Figuring out whether you should pay off debt or invest comes after.

Budgeting is the key skill that will help you find that extra money so that you can reach financial independence. It will also make sure that you have money to cover unexpected expenses that come up.

You can decide if you want to use 100+ budget categories or keep it simple. Honestly, there’s no right or wrong way to do it.  The most important thing is that you pick a system that works for YOU.

Pick the approach that you can stick to consistently.

Need Family Budget Help?

Just getting started creating your family budget? Not sure how many budget categories to include or how to start the process?

Tried budgeting before but it hasn’t worked?

I’m here to help you create a budget that sticks while spending in alignment with your values and priorities as individuals, as a couple, and as a family.

Let’s start with a free 30 minute consult to see the kind of help you’re looking for, the challenges you’re trying to overcome, and if I can help you get there.

Want help but not ready to talk?

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