9 ways to categorize your budget (2024)

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Creating a budget is the first step to financial stability, but creating a budget isn't only about tracking your expenses. It's also understanding your larger financial picture so that you can adjust your plan to make sure you're meeting your financial goals. Using percentages allows you to create a budget that flexes with your income and prioritizes your spending. When you divide your budget into categories, you begin to understand what could be eating up too much of your budget and what you could change.

Depending on your circ*mstances, you may need to add categories (debt repayment, childcare, health care costs, etc.) or adjust others. It may take some time to find the right balance, but no matter how you slice it, a percentage-based spending plan can help you stay on track toward financial wellness.

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9 ways to categorize your budget (2024)

FAQs

How to categorize budgets? ›

The essential budget categories
  1. Housing (25-35 percent)
  2. Transportation (10-15 percent)
  3. Food (10-15 percent)
  4. Utilities (5-10 percent)
  5. Insurance (10-25 percent)
  6. Medical & Healthcare (5-10 percent)
  7. Saving, Investing, & Debt Payments (10-20 percent)
  8. Personal Spending (5-10 percent)
Feb 23, 2024

What is the 10 rule budget? ›

The 60/30/10 budgeting method says you should put 60% of your monthly income toward your needs, 30% towards your wants and 10% towards your savings. It's trending as an alternative to the longer-standing 50/30/20 method. Experts warn that putting just 10% of your income into savings may not be enough.

How many categories should you have in your budget responses? ›

How many categories should you have in your budget? No limit; use as many as you need to keep your budget accurate!

What are the 7 types of budgets? ›

The 7 different types of budgeting used by companies are strategic plan budget, cash budget, master budget, labor budget, capital budget, financial budget, operating budget. You can read about the Union Budget 2021-22 Summary in the given link.

How do I categorize my expenses? ›

Budgeting 101: Personal Budget Categories
  1. A list of recommended personal budget categories is a great place to start when creating a budget. Here are two ways you can get the most out of the list:
  2. Housing.
  3. Transportation.
  4. Food.
  5. Utilities.
  6. Clothing.
  7. Medical/Healthcare.
  8. Insurance.

What is the 60 10 10 10 10 rule? ›

This formula involves spending 60% of your gross income on your regular monthly expenses (rent or mortgage payment, food, utilities, transportation, and even Internet access), 10% on retirement savings, 10% on long-term savings or debt reduction, 10% on short-term savings (for expenses such as gifts and car repairs), ...

What is the 70 10 10 10 rule? ›

This principle says for each dollar you earn or are given, you should save 10%, share 10%, invest 10% and spend 70%. A key part of this formula is “paying yourself first” which means the first 30% of your earnings are paid to you, for your benefit … for your retirement, for emergencies, and for sharing with others.

What is the #1 rule of budgeting? ›

Oh My Dollar! From the radio vaults, we bring you a short episode about the #1 most important thing in your budget: your values. You can't avoid looking at your budget without considering your values – no one else's budget will work for you.

What are the 5 basics to any budget? ›

What Are the 5 Basic Elements of a Budget?
  • Income. The first place that you should start when thinking about your budget is your income. ...
  • Fixed Expenses. ...
  • Debt. ...
  • Flexible and Unplanned Expenses. ...
  • Savings.

What are 4 methods of budgeting? ›

There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based. These four budgeting methods each have their own advantages and disadvantages, which will be discussed in more detail in this guide. Source: CFI's Budgeting & Forecasting Course.

How to budget 101? ›

Try the 50/30/20 rule as a simple budgeting framework. Allow up to 50% of your income for needs, including debt minimums. Leave 30% of your income for wants. Commit 20% of your income to savings and debt repayment beyond minimums.

Is a millionaire's best friend? ›

A Millionaire's Best Friend: Compound Growth

Here's a little secret: Compound growth, also called compound interest, is a millionaire's best friend. It's the money your money makes.

What are the four types of expenses? ›

What are the 4 types of expenses? Broadly speaking, you can split monthly expenses into four different categories: fixed, variable, intermittent and discretionary. Fixed expenses: These remain the same each month. Mortgage payments and auto insurance premiums are examples of fixed expenses.

How do you classify budgets? ›

The classification of budget according to functions generally include : Sales budget, production budget, cost of production budget, purchase budget, personnel budget, research budget, capital expenditure budget, cash budget and master budget.

How should my budget be divided? ›

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

What is the best way to organize a budget? ›

How to Make a Budget in 5 Steps
  1. Step 1: List Your Income. ...
  2. Step 2: List Your Expenses. ...
  3. Step 3: Subtract Expenses From Income. ...
  4. Step 4: Track Your Transactions (All Month Long) ...
  5. Step 5: Make a New Budget Before the Month Begins.
Jan 4, 2024

What are the 3 main types of budgets? ›

According to the government, the budget is of three types:
  • Balanced budget.
  • Surplus budget.
  • Deficit budget.

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