The Most Typical Household Budget Categories List

Without a budget, you're gambling with the certainty of your financial future. You risk getting into major debt and stressing yourself out unnecessarily. Every dollar unaccounted for puts you one step closer to financial chaos. Budgeting is the only way to ensure control of your finances.

Organizing expenses into categories helps you understand where your money goes and identify areas of overspending. Creating budget categories also helps you track your spending, adjust as needed, and prioritize your financial goals.

To get you started, we've outlined the most common household budget categories to help you create a simplified budget that you regularly use.

Why Categorizing Expenses Matters

The average consumer spends $281.75 per month on impulse buys. That equals $3,381 a year and a whopping $33,810 every ten years. When you categorize your budget categories, you can identify where you overspend and change your habits, which can result in the following benefits:

• Know where your money goes: Not tracking spending categories only tells you how much you spend overall, but you won't know why you can't reach your financial goals. Knowing where your money goes can help you change your habits and reel in your spending.
• Avoid overspending: Tracking budget categories shows you exactly where your money goes. For example, maybe you spend more eating out than you realized or your shopping habits take up more of your budget than they should.
• Save effectively: Tracking your budget categories ensures you have all the proper categories, including savings. Knowing how much money you must budget for each category allows you to prioritize your financial goals and reach them faster.

The Most Typical Household Budget Categories

Every household has different spending categories, but here are the most common household budget categories to give you a framework.

Housing

Whether you rent or own a home, you have housing expenses. You even have them if you live with your parents but are responsible for a portion of the expenses. Housing expenses include:

• Rent or mortgage payments
• Property taxes
• Homeowners' or renters insurance
• Utilities
• Maintenance and repairs
• HOA fees

Transportation

Whether you walk everywhere you need to go, take the bus, or own a car, there are transportation costs you'll incur that you should include in your typical home budget categories. These expenses include:

• Car payments
• Insurance
• Gas
• Maintenance
• Rideshare costs
• Parking
• Public transportation
• Bike or scooter rental

Food

We all need food to survive, so food should be an important part of your budget. However, pay close attention to the money spent eating out or on special occasions. Consider setting up two categories: a grocery budget for the essentials and an eating out/delivery budget to help you keep track of where you spend money on food. Don't forget those elevated delivery fees for services like Uber Eats or DoorDash.

Savings and Investments

You might not think savings and investments belong in your budget, but they are one of the most important categories to include. When you create line items for savings and investments, you are more likely to pay yourself first rather than spending first and waiting to see what is left at the end of the month.

If you're just starting, focus on the following:

• Emergency fund to cover three to six months of expenses
• Retirement fund contributions to get your employer's match

As you get more comfortable with your household budget categories, you can include categories such as:

• Taxable investments, such as stocks or bonds
• Savings goals for things like buying a house or car or taking a vacation

Debt Payments

If you have a lot of consumer debt, prioritizing debt payoff is an important part of your family budget. High interest rates reduce what you could save for other, more important financial goals or can even make it hard to make ends meet.

Consumer debt covers a lot of territory, but the most common categories include:

• Credit card debt
• Student loan debt
• Personal loans

Health Expenses

It's important to prioritize your health when creating your household expense categories. This includes healthcare expenses, such as copays and deductibles, as well as the cost of health and life insurance premiums. If you carry a high deductible health insurance plan, you may also be eligible for a Health Savings Account, which is a tax-advantaged account you can use specifically for healthcare expenses.

Your health expense budget categories may include:

• Health insurance premiums
• Insurance deductibles
• Copays when visiting the doctor
• Out-of-pocket healthcare costs
• Cost of prescriptions and medical devices
• Contributions to an HSA
• Life insurance premiums

Entertainment and Leisure

Everyone needs room for fun in their life, so typical home budget categories should include room for fun. If you don't budget for it, you'll likely overspend in other categories, making it challenging to reach your financial goals.

Common categories for entertainment and leisure include:

• Streaming services
• Club memberships
• Sporting events
• Concert tickets
• Hobbies
• Group outings
• Movie tickets

Education

Whether you are going back to school, went to school, or have children who will attend one day, education expenses can take up a large part of your budget. The average student graduates with $37,853 in debt, but saving for education expenses long before you incur them can minimize these costs.

When creating your education budget, consider the following:

• Tuition
• Books and computers
• Room and board
• Dining
• Loan expenses

Miscellaneous Expenses

Not every expense will fall neatly into one of the above home budget categories. It's important to evaluate your lifestyle and typical expenses to ensure you cover your bases. Here are some common miscellaneous expenses to consider:

• Personal care, such as hair and nail appointments
• Pet expenses
• Holiday and birthday gifts
• Costs to entertain as a host
• Subscriptions

How to Prioritize Categories in Your Budget

There isn't a right or wrong way to prioritize your household budget categories, but here are some simple steps to point you in the right direction:

1. Start with the basics: Focus on the things you need to survive, such as housing, food, healthcare, and transportation.
2. Debt payoff: Pay down high-interest debt as quickly as possible so you have more funds for other budget categories.
3. Savings: Make your emergency fund a priority, with retirement and other savings accounts close behind.
4. Discretionary spending: After ensuring you cover all the basics and emergency funds, you can focus the extra funds on other spending categories that aren't necessary but make life more enjoyable.

If you prefer a specific guide to follow, consider the 50/30/20 budget. This budget allocates 50% of your budget to needs, 30% to wants, and 20% to savings. It ensures you cover all your bases while still allowing plenty of room for fun.

No matter which budget you follow, the key is to be flexible, give yourself grace, and regularly review your household expense categories and spending. It can take a few months (or longer) to get into the habit of meeting your financial goals while you learn where you need to cut back or where you can spend more.

Tools and Resources for Budgeting

You don't need fancy or expensive tools for budgeting, but having support may make you more likely to stick to your budgeting goals. Whether you are a pen-and-paper type person or prefer apps that do everything for you, there are resources for everyone.

Here are a few of our favorites:

• Spreadsheets: If you prefer to make your own budgeting spreadsheet, Excel or Google Sheets offers many functions that make budgeting a cinch. You can also download premade budgeting templates in both programs.
• FTC Budget worksheet: If you prefer to print and write your worksheets by hand, check out the free FTC budget worksheet.
• Apps: Several apps, including YNAB (You Need a Budget), EveryDollar, and Monarch Money, require a paid subscription to try but are effective in helping consumers budget.

The key is to choose the resource you will use regularly and track your spending in real time so you can make smart financial decisions and reach your goals.

Final Thoughts

Creating a budget using your top household budget categories is the best way to stick to a budget and finally reach those financial goals. Tracking your personal expenses is eye-opening and the best way to see where your money goes.

Without tracking your expenses, you may not realize where you overspend and what you can change to have more money for important things like retirement, buying a house, or taking that dream vacation with your spouse.

Your budget will likely change over time, so it's important to stay on top of your spending daily. Don't beat yourself up if you make a mistake and go over budget; instead, use it as a lesson on how to proceed moving forward so you can make your financial goals a reality.