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Does your budget suck? – Budget Categories

Last Updated: September 10, 2018 BY Michelle Schroeder-Gardner - 77 Comments

Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please read my disclosure for more info.

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Lately, I have been having a good amount of people asking me for help with their budget and creating a budget. This includes my sister, my friends, and readers.

It seems like a lot of people aren’t sure what to put in their budget, or how to even start their budget. How to budget is such an important question though!

I know that not everyone has a budget, and some personal finance bloggers don’t even believe in a budget. However, I think budgets are important because it can help you reach your financial goals. Learning how to budget correctly can change a person’s life.

Some people think that budgets are only for people who are living paycheck to paycheck or people who have no money. WRONG.

Budgets help people manage their money better, it’s that plain and simple. A budget can help you realize where you might be going wrong with your finances and how to fix the financial issue that you may be having.  Budgets also help you designate a certain amount of money that you feel comfortable with to certain areas, such as investments.

Different people spend different amounts in their budgeting categories. A lot of this depends on what is important to you (some hate to spend a penny on their cars, whereas others love having cars). Some people live in high cost of living areas such as New York City.

How much do you spend on your budgeting categories? It would be awesome if you all would share what percentage housing, car and food is in your budget. I would love to compare!

Whether you are looking for tips on how to create a family budget, how to create a single person’s budget, and so on, read my tips below for budgeting help and tips on how to budget correctly. The below is pretty much a budget calculator and is really all you need. A budget does not need to be fancy and you don’t need a fancy budget calculator in order for it to work.

 

Add up your income when creating a budget.

Income can be from various sources. If your income varies from month to month, I would take an average of what you are used to making. I’ve heard of some people using their income before taxes, but I don’t recommend this unless you also have a budget category expense for taxes.

A recurring theme that you will find in this budget post is that you should be realistic about everything. Be realistic about what you make and what you spend. If your income or expenses fluctuate every month, or week-to-week, be sure to find a comfortable average for your budget and what you are looking for in your budget.

  • Day job – Is your income hourly or salary?
  • Rental income – Be very realistic with your rental income, and be sure to factor in expenses.
  • Side jobs – If you have side jobs, of course add that in also.
  • Passive income

 

I don’t usually think that you should count bonuses. Unless it’s a 100% fact that you will be receiving a bonus, then including them in your budge is not usually the best thing to do. Your budget should be realistic, not fairytale.

 

Add up your expenses when creating a budget.

Have you ever truly added up your expenses for the previous month? Many people estimate a lot of their budgeting categories, but you should be taking your realistic expenses and putting them in your budget. Making a budget category of $0 for fun/entertainment is most likely not very realistic.

  • House – This includes all housing expenses of course: house payment, maintenance, utilities, insurance, property taxes, etc.
  • Car – This includes all car expenses such as your monthly car payment, gas, maintenance, insurance license plate fees and so on.
  • Television, cable, cell phone, internet, and so on – all self explanatory.
  • Food – This includes all groceries. Seriously, sit down one day and add up your food expenses for the month before.
  • Clothing – We actually do not break clothing down in our budget, and just throw it into miscellaneous. However, we should change this. If you regularly spend money on clothes, then you should be realistic and make this a budget category.
  • Entertainment – Entertainment can include many things, such as going out to eat, going to the movies, going out for drinks, and so on. Make sure this is realistic in your budget!
  • Charity – If you regularly donate to charity, then this should definitely be a budget category.
  • Savings funds – This can be for your wedding, travel, something that you want such as a camera, or something else.
  • Taxes – If you are self-employed then taxes will most likely consist of a large part of your budget.
  • Miscellaneous – pet expenses (you might want to break this into it’s own category if your pet expenses are fairly high), any fees, childcare, gifts, etc.

 

Other categories that you might want to add might include school, health insurance, wedding, and so on.

 

Do you have a budget? What tips do you have for someone who is learning how to budget?

 

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77 Comments
Filed Under: Budget Tagged With: Budget

About Michelle Schroeder-Gardner

Michelle is the founder of Making Sense of Cents, a blog about personal finance and traveling. She discusses how her business has evolved in her side income series. She paid off $40,000 in student loans by the age of 24 mainly due to her freelancing side hustles. Click here to learn more about starting a blog!

Comments

  1. Thomas | Your Daily Finance says

    July 29, 2013 at 5:42 am

    One of the biggest problems I have found is that people don’t even have a budget for it to suck. They kind of wing it every month and just pay things as they come up. Its either that are they tend to have a lot of things that are not really needs but put them in the “I have to pay this” category. I like the “be realistic” approach. You know if you have been going out for the past 10 years every weekend you are not just going to stop cold turkey and do you really only spend a few dollars per month eating out? Simple is key.

    Reply
    • Michelle says

      July 29, 2013 at 7:20 am

      I agree Thomas! Thanks for stopping by.

      Reply
  2. John S @ Frugal Rules says

    July 29, 2013 at 6:07 am

    Nice breakdown Michelle! We’ve had a budget for years, and will likely always have some sort of budget. I think a big issue that many see with a budget is that so many use it as an excuse to overspend – which is definitely a problem. We use it to guide where are money is going and how it’s working for us. We’re realistic with ours and keep it simple, which helps us live within it.

    Reply
    • Michelle says

      July 29, 2013 at 7:21 am

      We use it as a guide as well, and like to keep it simple.

      Reply
  3. DC @ Young Adult Money says

    July 29, 2013 at 6:18 am

    I do budget. I think the best “starting point” by far is just simply listing your income and expenses, as you said, and bucketing them into categories. The more simplified a budget can be the better. I like how you said to be realistic about rental income, since there are many expenses that come along with it including the risk of not having a tenant for a certain period of time.

    Reply
    • Michelle says

      July 29, 2013 at 10:05 am

      I agree DC. I have a lot of categories above, and that is because so many people leave so many expenses out because they either forget about them or don’t realize that they have them.

      Reply
  4. Glen @ Monster Piggy Bank says

    July 29, 2013 at 6:19 am

    We used to budget fairly heavily, but now that we are almost debt free we don’t keep to it anywhere near as religiously as we used to. I think we have become so used to saving money here and there, that we no longer need an actual budget as we do it by second nature.

    Reply
  5. Holly@ClubThrifty says

    July 29, 2013 at 6:31 am

    We have a budget but we have been terrible about sticking closely to it this summer. I am soooooooooo ready to reign things in again and get serious.

    Reply
    • Michelle says

      July 29, 2013 at 10:05 am

      Hope you get serious soon 🙂

      Reply
      • Holly@ClubThrifty says

        July 29, 2013 at 10:17 am

        I am, I swear!

        Reply
  6. Liz says

    July 29, 2013 at 6:32 am

    Yes we budget! I actually really look forward to the end of the month where I run an “Income statement” to see how we did. I just think it is so interesting to analyze the way we spend and save. There is always room for improvement but overall it gives me a sense of control and that is what I like.

    Reply
    • Michelle says

      July 29, 2013 at 10:08 am

      I like seeing how we did as well. Sometimes it is scary and I don’t want to do it though haha

      Reply
  7. Pauline says

    July 29, 2013 at 6:39 am

    I find budgets tedious so don’t have one. But all my savings goals are automatically transferred on the 1st so the rest is ok to spend without categorizing.

    Reply
    • Michelle says

      July 29, 2013 at 10:09 am

      That’s great Pauline!

      Reply
  8. Taynia @ The Fiscal Flamingo says

    July 29, 2013 at 7:29 am

    I am a budget believer. I wouldn’t be enjoying a year-off from work without one!

    Reply
    • Michelle says

      July 29, 2013 at 10:10 am

      Great point Taynia 🙂

      Reply
  9. Ree Klein says

    July 29, 2013 at 7:54 am

    Hi Michelle,

    I’m a hybrid gal. I basically do three things:

    1. Have a plan for how much I want/need to save (by save I mean never spend) to achieve my long-term goals.
    2. Track every penny I spend and use that as a tool to help me decide where I want to scale back or spend more.
    3. Budget to have a litmus test for step #2.

    I follow other money rules, too, but those are the high-level things I do. And, to answer your question, I spend a pretty a pretty sizable portion of my budget on groceries and dining out. I enjoy those categories 🙂

    Reply
    • Michelle says

      July 29, 2013 at 10:11 am

      I do something pretty similar Ree. I do need to get better with tracking my money though!

      Reply
  10. Brian @ Luke1428 says

    July 29, 2013 at 8:00 am

    Budgets are huge and they are not always just about the numbers. For a married couple, it’s about getting on the same page with your goals and dreams. Our monthly budget helped move my relationship forward with my wife probably more than any other task we have undertaken. It forced us to communicate and understand what we each wanted in our financial life.

    Reply
    • Michelle says

      July 29, 2013 at 10:12 am

      That’s great Brian! 🙂

      Reply
  11. Connie @ Savvy With Saving says

    July 29, 2013 at 8:10 am

    I do budget because it helps me keep track of how much I’m actually spending (some months I can’t believe it myself!). At the same time, I find it difficult to keep track of all the miscellaneous things but I try not to get hung up over those little things.

    Reply
    • Michelle says

      July 29, 2013 at 10:13 am

      I try to not get hung up over those things as well. Sometimes it is hard!

      Reply
  12. debtfreeoneday says

    July 29, 2013 at 9:15 am

    I have a budget which has helped no end to identify where I can reduce spending. The problem I have is tracking daily expenses – something I really need to do! I For example, I go to the shop for bread and milk and come back with kitchen cleaner or something as well. I need to be more accurate with the ‘odds and sods’ budget I think.

    Reply
    • Michelle says

      July 29, 2013 at 10:14 am

      I do the same! I am bad with sticking to my list.

      Reply
  13. Donna O'Toole says

    July 29, 2013 at 9:17 am

    I started a budget last october for the first time and I love it!!! I would have some major bucks now if i had been doing this 20 years ago . I was working half the year 30 hours /week and the other half at 40 hours /week so i base my budget on the 30 hours and put the difference on my HELOC. Out of that 30 hours I take out all my fixed expenses that automatically come out of my checking, periodic expenses and an amount for my emergency fund, roth ira and a chunk towards my heloc again. Whatever is left is my weekly allowance for groceries, dog food, dining out, clothes, gas and whatever else i spend my money on. This makes me really ponder on what i spend my money on each week .
    I know i have to schedule my dog’s vet appt soon so I have an idea what that will cost for the visit and i start taking out a small amount each week to prepare for that visit. For some reason this has worked for me instead of having a clothing budget , entertainment budget, grocery budget , gas budget etc.

    Reply
    • Michelle says

      July 29, 2013 at 10:17 am

      I think that is a great way to pay for expenses. Sounds like you are doing great!

      Reply
  14. Budget and the Beach says

    July 29, 2013 at 9:25 am

    I do have a budget which I think is even more important to have as a freelancer. It does become a bit more complicated with variable income. It took me years of stopping and starting one though to finally make it stick.

    Reply
    • Michelle says

      July 29, 2013 at 10:18 am

      That is great! We are really working on lowering our expenses so that we can get ready for variable income.

      Reply
  15. Debt and the Girl says

    July 29, 2013 at 9:31 am

    I have a budget but it seems to change a lot. We really need to focus on sticking to it no matter what.

    Reply
    • Michelle says

      July 29, 2013 at 10:20 am

      Focus focus focus! 🙂

      Reply
  16. Leslie Beslie says

    July 29, 2013 at 11:07 am

    I actually would put eating out separate from entertainment either by itself completely or combined with grocery expenses under food.

    Reply
    • Michelle says

      July 29, 2013 at 6:56 pm

      There are definitely a lot of different ways to do it. Thanks Leslie!

      Reply
  17. Done by Forty says

    July 29, 2013 at 11:19 am

    Hi Michelle,

    This is a timely post, as we shared our budget for the first time today. We, too, still use and believe in a budget as a tool to set financial goals and adhere to them. I know others prefer a method of simply striving for paying as little as possible in each category. But we’re the kind of people who, like Zig Ziglar says, if we aim at nothing will hit it every time…

    Reply
    • Michelle says

      July 29, 2013 at 6:57 pm

      I’ll check out your budget now. Thanks!

      Reply
  18. jefferson @SDR says

    July 29, 2013 at 11:47 am

    The hardest part of budgeting for me has always been keeping track of the miscellaneous categories that add up over the course of the month (gas, food, etc). Once I found out a system for tracking those as well, we were well on our way.

    Reply
    • Michelle says

      July 29, 2013 at 7:00 pm

      Yes that’s always hard!

      Reply
  19. Little House says

    July 29, 2013 at 12:22 pm

    I think people have difficulty with budgeting because they really don’t know how much they spend. After figuring out an initial budget based on what they “think” they spend, they should track their expenses for a month or two then compare and tweak their budget. They might be surprised at how much they spend in one or two areas.

    Reply
    • Michelle says

      July 29, 2013 at 7:05 pm

      Yes, tracking definitely needs to be done!

      Reply
  20. Chris @ Stumble Forward says

    July 29, 2013 at 2:20 pm

    Sadly I use to be one of those people who didn’t believe in a budget because I thought I always had my finances under control. Then I build a house and things got tight and learned real fast that I was just lying to myself and that I really did need a budget. I think the other reason I hated having a budget was the fear to see that my finances were not doing so well.

    What’s kind of interesting about the fact that I have a budget now is that I’m getting family members asking me how to set one up for them like I’m some kind of authority on it. I can’t say that I really am because a budget is never done and is always an ongoing thing. Anyways love the post.

    Reply
    • Michelle says

      July 29, 2013 at 7:07 pm

      Thanks Chris!

      Reply
  21. Nick @ ayoungpro.com says

    July 29, 2013 at 3:00 pm

    We have a pretty loose budget. Like Pauline, most of our “budgeting” happens through automatic transfers, then we can spend whatever is left over.

    Reply
    • Michelle says

      July 29, 2013 at 7:09 pm

      Our budget is fairly loose as well.

      Reply
  22. BrokeMillennial says

    July 29, 2013 at 4:47 pm

    I do have a budget, but it’s pretty fast and loose. I just keep an eye on both my bank account and cash and don’t make many impulse buys. I like carrying cash because it helps me see the money leaving instead of mindlessly swiping a card. I do a quick overview of my inflow/outflow about once a week though. I also enjoy counting up my money so I’m a little nutty like that.

    Reply
    • Michelle says

      July 29, 2013 at 7:09 pm

      We do something very similar with our budget.

      Reply
  23. Madame says

    July 29, 2013 at 6:03 pm

    I don’t really budget in the conventional sense, but just basically try to keep my expenses to the dollar figure I am allowing myself every month while trying to meet my savings goals. Although, with me just buying a house, at least for the first year I will definitely be budgeting with spending limited in very specific categories.

    Reply
    • Michelle says

      July 29, 2013 at 7:14 pm

      Sounds like a great plan 🙂

      Reply
  24. E.M. says

    July 29, 2013 at 6:35 pm

    I mostly use my budget as a reference. I do track all my spending on it – I will look at my bank and credit card statement to see how much I spent and where, and then put the amounts into the appropriate category. This lets me know if I’m overspending in a certain area. My rent is definitely my biggest expense, followed by food and phone. For the most part, I am pretty comfortable with my spending, so I’m not very strict with my budget.

    Reply
    • Michelle says

      July 29, 2013 at 7:18 pm

      We’re not strict with our budget either. We have a buffer with almost everything but it allows us to see where we spend.

      Reply
  25. Michelle says

    July 29, 2013 at 6:53 pm

    Good luck! 🙂

    Reply
  26. Michelle says

    July 29, 2013 at 6:55 pm

    Very good reason!

    Reply
  27. Michelle says

    July 29, 2013 at 6:58 pm

    I definitely think net income should be used and not pretax, but if you are self employed then taxes also need to be budgeted in.

    Reply
  28. Michelle says

    July 29, 2013 at 7:02 pm

    Good for you Rita 🙂

    Reply
  29. Michelle says

    July 29, 2013 at 7:05 pm

    Different things work for different people. You have to do what’s good for you!

    Reply
  30. Michelle says

    July 29, 2013 at 7:06 pm

    We are the same way.

    Reply
  31. Michelle says

    July 29, 2013 at 7:06 pm

    Thanks Anna!

    Reply
  32. Michelle says

    July 29, 2013 at 7:08 pm

    Thank you!

    Reply
  33. Michelle says

    July 29, 2013 at 7:10 pm

    Sounds like you guys are doing great! 🙂

    Reply
  34. Alexa says

    July 29, 2013 at 8:30 pm

    I get paid weekly so I budget by the paycheck. As soon as I get my check I make a list of all of my expenses and divide the leftover money into other budget categories. It works well for me.

    Reply
    • Michelle says

      July 30, 2013 at 9:35 am

      Sounds like a great idea. Thanks Alexa!

      Reply
  35. Amanda says

    July 29, 2013 at 9:02 pm

    I really have to start budgeting and not just tracking my money. I’ve been procrastinating on this because I’ve been trying to find a new job, hopefully that pays better. But that’s been my excuse for almost 8 months now 🙂

    Reply
    • Michelle says

      July 30, 2013 at 9:36 am

      I hope you find something 🙂

      Reply
  36. femmefrugality says

    July 29, 2013 at 9:31 pm

    I’m so into budgeting; it’s been hard since I went to school since we had to rely solely on his income which is variable. So budgeting is pretty worthless in that situation. At least the way I’ve been doing it. It drives me crazy.

    Reply
    • Michelle says

      July 30, 2013 at 9:36 am

      I’m sorry 🙁

      Reply
  37. Morgan says

    July 29, 2013 at 11:01 pm

    My boyfriend and I have a budget, which is still a work in progress. At some point we’ll have to go over our categories and see what we should change (I know for example we’ll need to add one for when we need to take our taxes in so we don’t have to take it out of our general/extra category like we did this year). We currently have divided our bank account into about 27 categories that I keep track of in a spreadsheet, and every two weeks I take out money and put into about 5 more categories that I use envelopes for. We could do better at sticking to it (him more than me) but we’re working on it!

    Reply
    • Michelle says

      July 30, 2013 at 9:37 am

      Wow you two seem very detailed with your money! Good job.

      Reply
  38. C. the Romanian says

    July 30, 2013 at 1:29 am

    We just recently started to use a monthly budget and our first month was shocking: we found out that we actually spend a lot more than we thought we did, especially on things that could be easily cut off the purchase list. Although for our first month we gave us a pretty big budget, we still went over by a few hundred dollars. The second month we were a few hundred under budget. And all this just because we made that list and had a complete overview of our spendings. So yeah, I am 100% for budgeting now!

    Reply
    • Michelle says

      July 30, 2013 at 9:38 am

      Good job!

      Reply
  39. Canadian Budget Binder says

    July 30, 2013 at 2:16 am

    No, no budgets here haha!! Ya, we use a budget that we designed and are still working on improving since we’ve had many fans testing it out. I think a budget is what you make of it and customizing it will be the best way for anyone to bond with it on all levels. It becomes more personal that way in my opinon.

    Reply
    • Michelle says

      July 30, 2013 at 9:39 am

      I agree. Thank you!

      Reply
  40. Leona says

    July 30, 2013 at 9:18 am

    Leona@allmydollarsandcents.com

    In an effort to really achieve financial independence I started a budget and savings plan. It’s not always easy to stay within your budget but I do see progress.

    Good post!

    Reply
    • Michelle says

      July 30, 2013 at 9:40 am

      I hope you see lots of progress soon 🙂

      Reply
  41. Michelle says

    July 30, 2013 at 9:34 am

    Food is always something that we are trying to improve with! It is hard.

    Reply
  42. Michelle says

    July 30, 2013 at 9:40 am

    Good for you Demaish 🙂

    Reply
  43. SavvyFinancialLatina says

    July 30, 2013 at 4:21 pm

    I budget. It’s not super strict. Well, our savings goal is strict. But the money allocated to the budget can fluctuate between food, gas, shopping, entertainment, etc. Having a goal helps save money and control your budget. No doubt about it.

    Reply
  44. Miss Entrepreneurette says

    July 31, 2013 at 12:47 am

    We do budget. But do we follow it? Not currently. Back in February I had added up what we spent in December and January and I was appalled. We followed our budget for a few months and slowly started making excuses to “transfer a little more into the spending account” Oh geez. I’m working on our income vs expense totals for July and our budget for August. Wish me luck!

    Reply
  45. Marissa @ Thirty Six Months says

    July 31, 2013 at 1:46 am

    I completely agree with you, John. I do make a budget plan every week and although it’s difficult, I really try my best to stick with it.

    Reply
  46. Michael says

    August 7, 2013 at 11:22 am

    I have a budget that is done semi monthly accoridng to my pay and I try my damndest to stick to it. Unfortunately it never works. I use Mint.com to keep a generalized budget though.

    Reply

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My name is Michelle and I'm the author/owner of Making Sense of Cents. Learning how to save money and make more money changed my life. It allowed me to pay off $40,000 in student loans, start my own business, and I now travel full-time.

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