11 essential budget categories every family should consider

We’re all on a personal financial journey. Creating a monthly budget is one of the best ways to stay on track. The first step is figuring out where your money goes. 

Building a budget helps you save, pay off debt, control your spending habits, and ultimately reach your financial goals. To build a budget, you’ll need to categorize your expenses. That’s where budget categories come in. This guide covers 11 essential budget categories to help you build a system that actually works for your family.

What are budget categories?

Budget categories group similar expenses together so it’s easier to track your spending. Depending on your budget method, your priorities, and what your family spends money on, your budget categories may be different from someone else's. Most of us have some standard overlap though, like housing costs and food. 

There is no “right” way to group your expenses. It depends on your family, your financial goals, and how you like to budget. If you’re new to budgeting,  here are some common budget approaches to explore:

• The 50/30/20 rule. A simple way to group expenses into needs (50%), wants (30%), and savings (20%).

• The 50/15/5 rule. This method emphasizes savings by suggesting 15% go to retirement and 5% to short-term savings.

• Zero-based budgeting.Every dollar gets assigned a job, so you’ll need more detailed categories to track where each one goes.

• Reverse budgeting. You start by allocating money to savings, then spend what’s left, so savings becomes a top category by design.

Whichever method you use, your categories should match your real life and help you stick to the goals that matter.

11 budget categories to keep your family on track

Let’s take a look at 11 different budget categories that are useful for most families. Remember, these might not be perfect for your family so you can adjust it as you see fit.

1. Housing

For most of us, keeping a roof over our family’s head is our biggest, most important expense. That makes it the perfect place to start when considering budget categories. 

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The housing budget category can include your mortgage payment or rent, HOA fees, property taxes, homeowners or renters insurance, maintenance, and other housing costs.

2. Transportation

Whether you rely on public transportation and Uber or your family has multiple cars, we all have to get places, and that costs money. Some typical transportation costs include:

• Car or lease payments

• Auto insurance

• Gas or EV charging

• Repairs and maintenance

• License and registration renewals

• Public transit or rideshares

• Parking fees and tolls

While some of that is predictable and easy to budget for, sometimes unexpected accidents and repairs can pop up. How do you budget for those? One way is to average what past repairs have cost you monthly. Otherwise, it may have to come out of your emergency fund or another part of the budget. 

3. Utilities 

Utilities is the budget category where you put the bills you have to pay for home services. These are expenses like: 

• Electricity

• Gas

• Water

• Sewer

• Internet service

• Streaming services

• Cell phone plans

While these aren’t bills most of us can choose to eliminate, monitoring your household usage of resources and regularly comparing service providers can sometimes lower your utility bills. And if your teen is learning to manage money, this is a great example of fixed costs they’ll encounter in the real world.

4. Groceries and food

We all need to eat, but how much we spend on food depends on a lot of factors: how many people we’re feeding, whether we cook at home or dine out, and even where we live. Want to know how your grocery bill compares to others? Here’s a breakdown of average grocery costs by family size.

While this category seems pretty straightforward, it can get blurry when eating out overlaps with your entertainment budget. If you go out for a weekly date night or grab a hot dog at a baseball game, is that groceries or entertainment money?

There’s no hard rule. What matters is that you decide where it fits best in your budget and stay consistent.  

Another wrinkle: You might buy things like shampoo or laundry detergent during your grocery run. Should those count toward your food budget? Maybe, maybe not. Some families track household supplies in a separate category, while others just include everything in the grocery line item. Choose what makes the most sense for your budget.

5. Healthcare

Your family’s health is precious. Maintaining that health is not always as inexpensive as we’d like it to be. Depending on your personal situation, healthcare could be a small or big part of your budget. Usually, healthcare will include:

• Health insurance premiums

• Copays

• Prescriptions

• Over-the-counter medication

• Vitamins

• Gym memberships

This is one category where costs can fluctuate every month, so it’s helpful to create a buffer in your budget.

6. Debt repayment

When carrying debt from credit cards, student loans, personal loans, etc., it's often recommended that you keep your required payments to under 15% of your gross pay (not including your mortgage). This is also known as your debt-to-income ratio. 

However, If you carry any of those types of debt, you may be stretching your budget to pay high interest and fees. The quicker you can get your debt paid off, the sooner you can reclaim that money for saving or improving your family’s quality of life.

7. Savings and investments

One of the biggest benefits of budgets is getting your monthly expenses under control so you’re able to put extra money aside. Saving money and investing part of your monthly income allows you to be more stable and prepared. This category includes:

• Retirement fund contributions 

• Traditional savings

• An emergency fund

• Investing in the stock market

• Life insurance premiums

This is a great budget category to talk about with your kids. If your family uses Greenlight, kids can set savings goals, track progress, and learn to invest (with your approval). You can even set up parent-paid interest so your kids get an extra boost and motivation to keep saving.

8. Personal and discretionary 

This budget category is for flexible spending; the things that make life enjoyable but aren’t exactly essential. Some typical discretionary expenses may include:

• Dining out

• Subscriptions

• Entertainment

• Clothing

• Haircuts or spa visits

These are the areas you could cut back on if money ever becomes tight.

9. Charitable giving

You can also budget your generosity. If there are charities, churches, or nonprofits you want to support, you can add a charitable giving category. Making the decision of who to give to and how much to give is a valuable family activity too. Even younger kids can get involved! Greenlight has a “Give” feature where they can choose charities to support and set aside money from their own allowance to give back.

10. Child care and education

Raising kids certainly changes the budget, but how it changes can be different for all of us. If you have one or more kids enrolled in daycare or private school, this category might be a more substantial part of your budget.

This category will change as your kids grow: daycare today, paying for college tomorrow. And don’t forget to add school supplies, tutoring, extracurricular fees, and paying for babysitters in this category.

11. Miscellaneous 

This is your catch-all for surprise expenses and irregular spending, like birthday gifts or holiday travel.

But the real power of the miscellaneous category is that it gives you a little room to play. For instance, if your food budget goes a little over one month, you can take some from your miscellaneous budget. Just make a note that you need to be a bit more strict with your miscellaneous spending that month.

How to personalize your budget

You might have noticed that there is a lot of room for adjustments. You should feel free to add and remove budget categories or change how you categorize your expenses. Customization is key to helping you build a budget that works for you.  If you’re ready to get started personalizing your budget, here are four steps to get you started:

1. Start with your income. Calculate how much money you take home each month after taxes.

2.  Review past spending. Gather past bills, bank statements, and credit card statements, and think about any other spending habits you have that aren’t reflected in those bills and statements. 

3. Build your budget categories. Choose the categories that make sense for your family and make a list of the specific expenses that will fall under each one (this will help you stay consistent every month!) 

4. Adjust monthly. Monitor your progress each month and adjust as needed. It might take a few months to really dial it in. That’s OK! The important thing is you took a big step on your personal finance journey.

Budgeting is for kids too

A personal budget gives you a clear picture of where your money is going so you can reach your financial goals with ease. While many people don’t learn how to use budget categories until well into adulthood, your kids don’t have to wait. 

Greenlight,  the #1 family finance and safety app, gives you the tools to teach your kids important money skills like budgeting, saving, and even investing. With our app and debit card (and your help), they’ll get real-world experience with these concepts.

Teach smart budgeting early. Set spending controls and savings goals, and teach kids how to manage money with Greenlight. Try Greenlight, one month, risk-free.†