A Guide to Budget Categories for 2023

Many people associate budgeting with deprivation. But in fact, it is not all about restricting yourself from buying things you like to save money.

It's a way to teach yourself how to spend your money better, so you can live comfortably within your means.

You just need to find the right budget categories. If you distribute your earnings wisely, you might just have enough for everything you want and need.

To help you in this endeavor, we compiled a detailed budget categories list.

But first, let’s discuss some common ways of organizing your income and spending.

Fixed, Variable, Discretionary

To budget effectively, you need to understand the different types of spending—fixed, variable, and discretionary.

This categorization method accounts for unexpected and irregular expenses. You can use it to create a more resilient financial plan.

Fixed

Fixed expenses are those that don't change from month to month. You know what they are and how much they will set you back.

They include rent, mortgage, car payments, phone bills, tuition fees, etc.

There is usually no wiggle room with fixed expenses. You need to have the exact amount every month.

Variable

Next in the personal expense categories list come variable expenses. These are the spendings that can change a little from month to month.

Same as with fixed expenses, you know what they are and that you can’t avoid paying them. The difference is that you don't know how much exactly they will cost.

They may be things like groceries, gas, entertainment, healthcare expenses, home and car repairs, and so on.

With variable expenses, you have some wiggle room in your budget.

Discretionary

Discretionary expenses are those that are not essential.

Items in this budget category are often things you want, like travel, dining out, or clothes.

While you don’t need to cut them off completely, they’re not time-sensitive. There’s a lot of wiggle room in this type of spending.

Overall, this categorization method is a great way to account for irregular and unexpected expenses in your budget.

That said, it doesn't account for every penny of your salary, so it leaves a lot of gaps.

For example, you’ll need to budget separately for savings and investment. As such, it requires more discipline to stick to such a budget.

50/30/20 budgeting rule

The 50/30/20 budgeting rule is a guide to help you divide your income into different budgeting categories.

Unlike the previous method, it accounts for savings as well.

According to this rule, you need to categorize your spending into:

• Needs: Up to 50% of your salary should go to things like rent, groceries, utilities. These are the expenses that you can’t avoid.

• Wants: You can dedicate 30% of your income to “wants,” i.e., things that are not essential to your survival. These include entertainment, travel, cosmetics, etc.

• Savings: The remaining 20% of your budget should go to your savings. This could be your emergency fund, retirement account, or investments.

These budgeting categories are very broad and flexible. It’s convenient as a guideline, but it, too, requires discipline to follow through.

Dave Ramsey's Budget Percentages

A similar but more granular approach to dividing your personal expense into categories is Dave Ramsey’s budget percentages.

Like the 50/30/20 rule, it uses percentages to determine what part of your income goes where. However, it includes more categories, thus leaving less wiggle room.

Here’s a breakdown of the budget categories:

• Housing, 25%: Here fall not only rent or mortgage payments, but also property taxes and home insurance.

• Transportation, 10%: Transportation includes car payments, gas, and public transport.

• Food, 10%-15%: This category accounts for groceries, restaurants, and any other food-related expenses.

• Utilities, 5%-10%: These can be gas, electricity, water, trash, and phone bills.

• Health, 5%-10%: Health expenses are mainly medical bills and prescriptions.

• Insurance, 10%-25%: These percentages vary depending on the type of insurance you have—car, renters, life, disability, etc.
• Personal spending, 5%-10%: These are spending categories like clothes, entertainment, subscriptions, and hobbies.
• Giving, 10%: It includes all charitable donations, tithes, and other gifts.
• Saving, 10%: These are investments, retirement savings, and emergency funds.

• Miscellaneous, 5%-10%: This category includes anything that doesn’t fit into the other categories, e.g., pet expenses.

Even More Detailed Budget Categories

If you're one of those people that simply love spreadsheets, you can get even more granular.

Here are a few more ideas of budgeting categories to organize your spending.

• Childcare: diapers, toys, education fees, doctors, and many others. If you’re a parent, this will be a huge chunk of your salary. Check out our detailed guide for more help with managing household finances.
• Pets: Owning a pet is a huge expense too. You need to buy food, toys, medicine, not to mention the enormous vet bills.

• Debt payments: Debt could eat up your salary. A common piece of advice you’ll find in personal finance books is to get rid of your debt first, then save and invest your money.
• Investing: You could have different expense categories for stocks, bonds, crypto, or whatever it is you’re investing in.

• Gifts: Birthdays and holidays are not unexpected events. Still, we often forget to budget for them. So, you could write a monthly breakdown of such occasions and how much you’re planning to spend on presents.

• Work-related expenses: This category might include things like gifts for colleagues, a budget for parties, work-related travel, etc.

• Personal development: Do you often take courses, go to seminars, buy personal development books? Budget for it.

• Subscriptions: How many services have you subscribed to—Spotify, Netflix, Dropbox, McAfee? List all your subscription plans. Perhaps you can cancel some of them or find cheaper cloud storage or antivirus solutions.
• Household maintenance: There are some personal budget categories we can’t avoid but often forget about. Cleaning supplies are a huge expense. It’s also a good idea to have some money aside for house repairs or new furniture.

• Clothing: Spending money on clothes is inevitable, especially with the change in seasons. You might need a new coat or shoes for the winter, or a swimsuit for the summer.

There are also clothing expenses for different occasions. For example, you’ll need sportswear if you’re taking up a new sport, new clothes or equipment for skiing or hiking, formal attire for business trips or weddings, and so forth.

The list goes on, but you get the idea. Some of these expenses are predictable, although we often forget about them.

If you like to be prepared for everything, you could make a very detailed budget categories list.

Wrap Up

There are different ways to categorize your spending, depending on what you’re looking for.

You could create broad budget categories to use as a guideline. Alternatively, you could list all your expenses and group them into several subcategories.

Either way, the important thing is to find a system that works for you and stick to it.