Realistic Budget Categories

Your goal in budgeting should be something along the lines of a plan that helps you spend your money how you want to rather than sacrificing it to passing whims. Making a budget that succeeds can be daunting, but one way to make it easier is by creating budget categories that make sense. Budget categories are the sections of your budget into which you divide your money, such as "groceries," "mortgage payment," or "entertainment." For the organizationally minded or those who wish they were––and if you're making a budget, that probably means you––it can be incredibly tempting to overcomplicate a new budget. Resist the temptation!

For example, it's unnecessary to have a separate category for each item you buy ('heads of lettuce', 'shoelaces,' and so on). Almost certainly such a minute budget would consist of hundreds of categories and require immense stretches of planning time. In addition to being a pain to create, such a budget would tie down your finances and take away your flexibility, which is another way of setting yourself up for failure.

It's more useful to create general categories that are not too broad, but not too narrow. Rather than setting exact and specific expectations at the level of the product (I will spend four dollars and fifty-three cents on hamburger, and not one penny more), try setting your goal according to your needs and resources (I need food to last me through the next three weeks, and I can spend about a hundred dollars).

One useful idea for finding a happy medium between being a slave either to your budget or your cravings is to give everything that comes in the form of a bill (mortgage payments, car payments, school tuition, etc.) its own category, but to create general categories for smaller things with uncertain prices. The larger, set expenses will give your budget a sense of stability and detail without you spending hours hunched over your figures and receipts. Finding the middle ground that works for you may take some experimentation, but that's okay. Don't be discouraged if it takes a few tries. Make your budget a well-oiled machine rather than a hunk of junk, and remember, once a budget becomes a burden, it's destined for failure.