5 must have personal budget categories

July 24, 2020

5 Must-Have Personal Budget Categories For Stress-Free Management of Personal Finances

When setting up your budget for the first time, it can be really overwhelming to see lists over 100+ different personal budget categories for all the things in your life.

The truth is though, that over-doing these categories can complicate the whole system just as much as not having categories at all.

We believe that the goal of having a budget should not be to live so frugally that you give up your favourite things, but rather to bring awareness to your finances so you can make informed and empowered decisions.

Understanding these 5 categories will allow you to pay off debt, save an emergency fund/safety net and save for your future investments or retirement.

In this blog, I’m going to walk you through the 5 Must-Have Personal Budget Categories that should never be ignored when setting up your own personal or family budget. We’ll go through what they are, why they’re important and how to use them.

Remember to also grab the free budget categories printable with a full reference list and worksheet for establishing your personal budget categories based on these 5 categories.

The screenshots in the blog and the downloadable workbook is a section taken from the Simple Start Budget System Excel Spreadsheet and E-Course.

Personal Budget Categories

1. Income

All sources of Income will be lumped into one big main category – ‘Income’.

Whether you’re on a set salary or wages, you earn an income you earn from your investments (e.g. rental income from properties), etc. all your incoming finances should be lumped into ‘income’.

Of course, within your budget it is a good idea to separate this income into different streams to help you keep a clear track of where exactly your money is coming from.

E.g. your wages and your spouse’s wages would be on separate lines on the budget.

Screenshot from the Simple Start Budget System displaying the Income Personal Budget Category while starting your Excel Budget Spreadsheet.
Screenshot of Personal Budget Category for Income – Simple Start Budget System

2. Vital Costs

Vital costs are what would be considered absolutely fundamental for everyday living.

These costs would include things like electricity, rent/mortgage repayments, groceries, taxes and loan repayments.

It’s also a really good idea to include a minimum of 10% for future investments as a vital cost.

3. Important Costs

To maintain a standard of living, we need to also take into consideration any important costs in our budget.

This includes things like basic clothing, haircuts, home insurance, health insurance, school expenses, etc.

While they aren’t completely crucial for day-to-day living, they are the next level of necessities to achieve a basic level of comfort.

4. Lifestyle Costs

Lifestyle expenses generally add quality of life to the mix.

These costs are made up of things like alcohol, fashion clothing, beauty treatments, dining out, pay TV, gambling, hobbies, holidays, etc.

These are the kinds of expenses that you can live without but they simply make your life more enjoyable.

It’s important that we include these lifestyle costs and add them into our budget.

By having money set aside for these lifestyle costs each month. It means we can dine out, take an art class, buy that new dress or whatever it might be without feeling guilty or stressing about paying our bills later.

5. Goal Costs

Goal costs are all about planning for your future.

These might be things like a new car, a new house, an around the world trip, starting your own business, your college or retirement fund.

For example, if your goal is for a round-the-world vacation with your family and you booked your flights, the cost of those flights would be allocated to ‘goal costs’.

Example of expenses in personal budget excel spreadsheet
Entering different expenses into the five main personal budget categories. Monthly expenses, etc. are automatically calculated within the SSBS spreadsheet.

The Simple Start Budget System then automatically creates a visual breakdown of where your money is being allocated.

If you’re setting up your budget for the first time, this can sometimes be a little eye-opening. But, it helps you easily identify areas where you’re overspending and not even realising it.

automated breakdown of personal budget categories and where you rmoney is being spent
Example Breakdown of personal budget categories automatically created with the Simple Start Budget System

The Benefits Of Using These Five Personal Budget Categories

Understanding where your expenses fall, from absolutely vital to lifestyle and goals. This will help you determine how much you actually need to survive.

As a result, it gives you a benchmark for saving up an emergency fund (safety net).

It also helps you easily identify areas where you might be able to cut back on spending if you wish to add more to your investment account, or if your aim is to reach your financial goals sooner such as a vacation etc.

Keeping a spreadsheet for your budget so you can keep track of your income, expenses and allocations is an absolute necessity to keep on top of your personal finances.

If setting up your own budget spreadsheet is a little overwhelming for you, I recommend you check out the Simple Start Budget System.

It has everything you need to set and achieve your goals and gives you absolute clarity around the management of your money.

If you found this blog helpful, remember to save this pin to your budgeting or personal finance boards on Pinterest or share it with a friend who is also looking to get better control of their money.

how to remove the overwhelm of personal budget categories

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