Realistic Budget Categories

by Matthew Perry
(last updated February 21, 2009)

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.

Author Bio

Matthew Perry

MORE FROM MATTHEW

Forecasting Expenses

What does the future hold? It's hard to know for certain, but this tip can help you make some good predictions.

Discover More

Internet Banking

Banking without the bank. I like the sound of that.

Discover More

What about Interest-Only Loan Options?

What are they, and are they good for you? Brace yourself; you're about to find out.

Discover More
More Money Tips

Making Your Budget Work

A non-functioning budget is about as useful as a pre-eaten meal. If you are going to have a budget, make it a working one.

Discover More

Creating a Budget

Does your money slip away before you know it? Follow these easy steps to find out where it's going and keep it close.

Discover More

Sticking to a Budget

Bring out your budgets and dust 'em off. You're ready to budget again, and this time you're sticking to it.

Discover More
Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is three more than 8?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)


Videos

Subscribe to the Tips.Net channel:

Visit the Tips.Net channel on YouTube