8 Budgeting Categories To Map Out Your Finances

Creating a high-quality personal budget can help you keep your finances in check and ensure you meet your short- and long-term financial goals. But to be successful, you need to break down all of your expenses into budget categories.

There are a number of common categories to include in your budget, including rent or mortgage, utilities, loan payments and more. Here is a comprehensive budgeting categories list to help you take control of your finances.

Recommended Budget Categories And Subcategories

1. Bills And Utilities (25%-35%)
   • Housing (20%-30%)
   • Utilities (5-10%)
2. Auto And Transport (10%-15%)
3. Groceries (10%-15%)
   • Home And Garden (5%-10%)
   • Pets (5%-10%)
4. Medical (5%-10%)
5. Health And Wellness (5%-10%)
   • Personal Care (5%-10%)
   • Family Care (5%-10%)
6. Loan Payment (10%-20%)
7. Dining And Drinks (5%-10%)
8. Recreation And Entertainment (5%-10%)
   • Shopping (5%-10%)
   • Travel And Vacation (5%-10%)

How Many Categories Should You Have In Your Budget?

There are different strategies you can use to categorize your budget. One popular strategy is the 50/30/20 rule is a budgeting method that breaks down your after-tax income into three spending categories: needs, wants and savings. This is a good jumping-off point if you’re new to budgeting or less likely to track every bill or purchase. The rule states that you should allocate 50% of your budget toward your needs, such as housing, utilities, groceries, etc., 20% of your budget toward wants like vacations and dining out and then the remaining 20% toward savings and paying down debt.

The envelope system is another budgeting method that allows you to track your spending across several categories by using cash set aside rather than using a credit or debit card. Use an envelope for each spending category and assign money to each one. The goal is to spend only what you put into each envelope and not overspend. This method may be less preferable as many people don’t carry cash anymore, but it can prove helpful as a mental exercise to think about your budget categories as “envelopes.”

You can also use the Rocket Money^SM app to create your own budget category on your phone.

Understanding Each Personal Budgeting Category

Creating a budgeting categories list can be confusing. Use the following guidelines to create your own spending categories.

1. Bills And Utilities — 25%-35%

Bills and utilities are the necessary bills you must pay to run your household. This includes everything from rent, mortgage, property taxes, HOA dues, home maintenance and utilities such as water, electricity, gas and more.

As a general rule, you shouldn’t spend more than 33% of your monthly gross income on housing. If you spend over this amount, you may fall short on other expenditures.

2. Auto And Transport — 10%-15%

Transportation is another common expenditure and includes car payments, car insurance or public transportation. Car loan payments average over $700 per month for a new vehicle and over $500 per month for a used car. This doesn’t include the cost of insurance, gas or regular car maintenance.

If you’re trying to cut back on spending, consider using public transportation or saving up money to purchase a car instead of taking out a loan.

3. Groceries — 10%-15%

Groceries, pet items and home and garden supplies are another big spending category. According to the U.S. Department of Agriculture, low-income households spent an average of $5,090 on food in 2022, representing 31.2% of income.

It’s also extremely easy to overspend on food and it ranks among the average American’s top five monthly expenditures. The best way to limit your spending and track your dollars is by creating a food budget based on your income, family size and where you live.

4. Medical — 5%-10%

Millions of Americans deal with medical bills or other medical-related expenses. Most people get their health insurance through an employer, but if you’re self-employed or your employer doesn’t contribute to health insurance, then you’ll need to pay out-of-pocket.

If you have substantial health care costs, you may need to allocate more of your monthly income toward medical costs. In a recent Commonwealth Fund Health Care Affordability Survey, 57% of working-aged adults reported that 10% or more of their monthly budget goes toward health care costs.

5. Health And Wellness — 5%-10%

Health and wellness, personal care and family care can include other expenses like health insurance, yearly physicals and dental appointments. This can also include supplements and vitamins, exercise equipment, gym membership and more. While health and wellness can eat into your monthly budget, it could help reduce future medical costs.

6. Loan Payment — 10%-20%

Most households have some type of loan payment. Total household debt rose by $16 billion, reaching $17.06 trillion in the second quarter of 2023, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit.

Timely loan payments are a must. A late payment can negatively affect your credit score, and if you don’t make a payment within 30 days, loan servicers can report the delinquency to the three major credit bureaus.

7. Dining And Drinks — 5%-10%

If you have money left over after covering your essential needs, you can use your discretionary income for dining out and getting drinks. However, people typically spend more than they should when dining out at restaurants or ordering take-out.

A 2023 American Dining Habits survey revealed that the average person dines out three times per month and orders delivery 4.5 times per month, mostly from fast food chains or casual dining restaurants. This adds up to a monthly average of $166 per person to dine out.

8. Recreation And Entertainment — 5%-10%

Another nonessential — but often necessary — spending category for your budgeting categories list is recreation and entertainment. This category includes how much you’ll spend on leisure activities and going out. It can include things like concert tickets, vacations, shopping, hobbies, streaming services and more.

Again, be careful not to overspend. It’s easy to sign up for several streaming services and forget about them while the bill goes through automatically every month.

The Bottom Line

Barron’s reports that about 65% of working Americans say they frequently live paycheck to paycheck. Budgeting is one solution, and it’s easier to take control of your finances once you have your budgeting categories list. Don’t forget to personalize your list based on your needs and wants. It could take some trial and error in the beginning. Also, if you feel like your budget categories aren’t working for you, don’t hesitate to make necessary adjustments.

Need help automating your budget? Check out the Rocket Money app!