This article includes tips, suggestions, and general information. We recommend that you always do your own research and consider getting independent tax, financial, and legal advice before making any important decision.
Key takeaways:
Building a money management plan with smart budget categories helps people track where money goes, from subscription services and happy hour hangouts to healthcare appointments and weekly takeout.
Budgeting categories help create personalized savings goals that work with any lifestyle, whether budgeting biweekly or monthly. Understanding the purpose of core budget categories can simplify decision-making and reduce financial stress.
We'll break down 15 essential categories to include in a personal budget, what to spend them on, and how much should go to each.
It's a good idea to budget for the most important expenses first, which is typically housing. Whether renting or buying a home, these monthly expenses should be 25–30% of the budget, including housing costs and home maintenance budgets.
It can be difficult to save money after buying a house, so a housing budget might be lower for new homeowners or those in a high-cost-of-living area.
Common household budget categories:
The next category to focus on is transportation. In a large city, this might mostly go toward public transit, but any vehicle expenses should factor into this category, taking up about 10–15% of monthly expenses.
This category should go toward any expense associated with traveling from point A to B, whether it's a bike to work or catching a taxi to a coveted dinner reservation.
Common transportation and vehicle expenses:
Stocking up on snacks, takeout, and home-cooked meals can add up. To help keep finances in check, the food and beverage budget should be 10–15% of a person’s income.
Get the most out of this spending category with strategies like meal planning or using cards that offer cash back on groceries.
Common food and beverage costs:
Any bills that are absolute necessities belong in this common budgeting category. It can include electricity, internet, cable, or any other regular bills, and should ideally take up 5–10% of total expenses.
The tricky thing about utilities is that they can vary seasonally. For example, the water bill might increase in spring and summer as the gardening season begins.
Everyday utility bills to include:
Insurance is vital for protecting family, pets, and assets — and is often a requirement for vehicles or housing. Insurance payments typically make up 5–10% of the total budget.
Common types of insurance to consider:
Although insurance covers some medical costs, it's a good idea to create a budget for out-of-pocket expenses like medication or urgent care visits. We recommend putting aside 2–5% of income to ensure the household has protection.
Common medical expenses to budget for:
It's common to forget about household expenses and wonder why finances seem out of sorts if the supply run happened earlier in the month. Dedicate 2–5% of the budget to household necessities like cleaning supplies or laundering services.
Common household expenses:
Personal expenses are another overlooked, yet common spending category. Any self-care expenses, from a spa day to a gym session, go here. Individuals can automate their personal finances and dedicate 5–10% of the budget to this category to stay on track for financial goals.
Common personal budget categories:
A family budget is essential for individuals with kids or dependents. Whether it's saving for back-to-school supplies or trying to set up a college fund, about 5–10% of the budget should go to this category.
Common family budget categories:
Budgeting for debt payments is key to achieving financial independence. Plan to spend 5–10% of the monthly budget to pay down debts and always make at least the minimum payment for each loan or credit card.
Common types of debt:
Most people look forward to free time in their later years, but that might not be possible without a savings plan for retirement. Dedicate 5–15% of the monthly income to retirement savings. Consider any employee benefits, such as a 401(k) match, and remember that saving for retirement early maximizes any returns.
Common retirement plans to save for:
General savings can include anything from general emergency savings to a vacation budget. A budgeter may want to set aside 10–15% of the budget for personal savings, using a savings account or sinking fund, depending on an individual's specific needs.
Common savings funds:
Gifting is one of the most overlooked categories for a budget, but last-minute gifts can sneak up. Save 1–5% of the budget throughout the year for gifting to build a solid holiday budget or funds for birthdays, housewarmings, or any other occasions.
Common gifting expenses to budget for:
Whether that extra family member has fur, scales, feathers, or anything in between, 1–5% of the budget can go toward their expenses. This can go towards vet visits, new toys, or other daily pet expenses.
Common pet expenses to budget for:
The last personal budget category to consider is a catch-all category for any forgotten expenses. Once all the other budget categories are covered, put any unused income in this category. For those who budget with an irregular income, this amount might vary as individuals prioritize other categories.
Miscellaneous costs:
Smart money management starts with a clear plan. Not everyone has the same income, responsibilities, or needs, so a cookie-cutter budget might not be effective. Budget categories and financial tools like PayPal help solve this issue, with adaptable savings plans for any budget calendar, high-yield savings accounts, and customizable financial goals.
Get the necessary support, whether it's a savings account that earns interest as you budget or a financial tool that provides a snapshot of your accounts.
Start saving with a PayPal Savings account and set up personalized savings goals that fit seamlessly into your life.
It's your do-it-all digital wallet. Load up on cash back offers before you shop. Track your packages. And manage it all on the go.