Categorize Expenses For The Best Budget!

To track where your money goes every month you can use a simple monthly budgeting tool and learn to categorize expenses.
If you already have a list of your expenses, you need to break them down into various expense categories. The reason for this categorization is to enable you to create a guideline for your monthly spending.

A budget is vital for a precise allocation of money for future expenses. However, a detailed budget will help you allocate funds for specific needs and make it easier for you to make a budget calendar to track your spending.

To make a realistic and precise budget, you need to be more detailed when creating spending categories. This is to give you a clear picture of what you are spending on every month.

You can categorize expenses in your budget in two ways.

1. You can either create a master expense category to cover a group of expenses, such as creating a “Utilities” category instead of dividing it into smaller categories like electricity, water, cell phone, gas, etc.
2. Or the second option is to break down each expense category into specific expenses and allocate money precisely to specific needs. For instance, you can create categories for “Groceries,” “Eating out,” and “Kids’ lunches” instead of just creating a “Food” category.

What are Fixed Expenses?

Fixed expenses are all those purchases you need to incur to live. In other words, these are necessary expenses. These expenses include:

1. Rent
2. Transportation
3. Groceries,
4. Home and utilities
5. Insurance,
6. Bills
7. Education
8. Health and personal care

What are Discretionary Expenses?

Discretionary expenses are those purchases that improve the quality of your overall lifestyle and these expenses include:

1. Shopping and entertainment
2. Food and dining
3. Travel
4. Memberships

Here you can find a comprehensive list of categories you can use to categorize expenses in your detailed budgeting plan: