Expense Categories

Expense categories are where your money goes - everything from rent and groceries to entertainment and savings. Understanding how to organize and manage expense categories is key to successful budgeting with your partner.

What are Expense Categories?

Expense categories represent all the ways you spend or save money:

• Essential expenses (rent, utilities, groceries)
• Discretionary spending (entertainment, dining out)
• Debt payments (loans, credit cards)
• Savings goals (emergency fund, vacation)

In Balance, savings categories are treated as expense categories - you’re “spending” money on your future.

Types of Expense Categories

Fixed Expenses

Same amount every month.

Housing:

• Rent/Mortgage
• HOA Fees
• Property Tax (if monthly)

Insurance:

• Health Insurance
• Car Insurance
• Life Insurance
• Renters/Homeowners Insurance

Debt:

• Car Payment
• Student Loans
• Personal Loans
• Minimum Credit Card Payments

Subscriptions:

• Internet
• Phone Plan
• Streaming Services (Netflix, Spotify, etc.)
• Software Subscriptions
• Gym Membership

Budget These:

• Use exact monthly amount
• Set it and forget it
• Only adjust when rate changes

Variable Expenses

Amount changes each month.

Utilities:

• Electric & Gas
• Water/Sewer
• Trash

Food:

• Groceries
• Dining Out
• Coffee Shops
• Takeout

Transportation:

• Gas/Fuel
• Public Transit
• Parking
• Tolls

Personal Care:

• Haircuts
• Personal Hygiene Products
• Cosmetics

Budget These:

• Use 3-month average
• Add 10-15% buffer
• Adjust seasonally if needed

Irregular Expenses

Don’t happen every month.

Vehicle:

• Car Maintenance
• Car Registration
• Repairs

Home:

• Home Maintenance
• Home Repairs
• Lawn Care

Medical:

• Doctor Visits
• Prescriptions
• Dental
• Vision

Other:

• Gifts
• Holiday Shopping
• Pet Care
• Clothing

Budget These:

• Estimate annual cost
• Divide by 12
• Budget monthly even though not spent monthly

Example:

Car registration: $120/year
Monthly budget: $120 ÷ 12 = $10

This way, when renewal comes, you have $120 saved.

Discretionary Expenses

Want-based spending you control.

Entertainment:

• Date Nights
• Movies
• Concerts/Events
• Hobbies

Shopping:

• Clothing
• Electronics
• Home Decor
• Books

Fun:

• Vacations
• Weekend Activities
• Sports/Recreation
• Dining Out

Budget These:

• Based on priorities and values
• First categories to cut if needed
• Great for couple negotiations

Savings Categories

Money set aside for future use.

Emergency Savings:

• Emergency Fund (3-6 months expenses)
• Medical Emergency Fund
• Car Emergency Fund

Goal-Based Savings:

• House Down Payment
• Vacation Fund
• New Car Fund
• Home Renovation

Retirement:

• IRA Contributions
• Extra 401k (beyond payroll)

Budget These:

• Emergency Fund: $500-1,000/month until goal reached
• Goal Savings: Whatever you can afford
• Retirement: 15% of income is ideal

Organizing Your Categories

By Category Type

Essential Bills:

1. Rent
2. Electric & Gas
3. Water
4. Internet
5. Car Insurance

Food:

1. Groceries
2. Dining Out
3. Coffee

Transportation:

1. Car Payment
2. Gas
3. Maintenance

Personal:

1. Your Clothing
2. Partner’s Clothing
3. Your Personal Care
4. Partner’s Personal Care

Savings:

1. Emergency Fund
2. Vacation Fund
3. House Down Payment

By Priority

Must-Pay (Priority 1):

1. Rent/Mortgage
2. Utilities
3. Groceries
4. Insurance
5. Minimum Debt Payments

Important (Priority 2): 6. Transportation (gas, car) 7. Phone 8. Medical needs

Discretionary (Priority 3): 9. Entertainment 10. Dining Out 11. Hobbies

Savings (Priority 4): 12. Emergency Fund 13. Other savings goals

If money is tight, fund in priority order.

By Person (Couples)

Joint Expenses:

• Rent
• Utilities
• Groceries
• Date Nights

Your Personal:

• Your Clothing
• Your Personal Spending
• Your Hobbies

Partner’s Personal:

• Partner’s Clothing
• Partner’s Personal Spending
• Partner’s Hobbies

Reduces conflict - each person has autonomy in their categories.

Essential Categories

Minimum Budget Categories

If starting from scratch, begin with these 8-10 categories:

1. Housing - Rent/mortgage
2. Utilities - Electric, gas, water, internet
3. Groceries - Food shopping
4. Transportation - Gas, car payment, or transit
5. Insurance - Health, car, life
6. Debt Payments - All loans and credit cards
7. Dining Out - Restaurants and takeout
8. Personal Spending - Flexible spending money
9. Entertainment - Fun activities
10. Savings - Emergency fund or goals

You can always add more detail later.

Common Category Combinations

If you want fewer categories, combine:

“Utilities” includes:

• Electric
• Gas
• Water
• Internet
• Phone

“Food” includes:

• Groceries
• Dining Out
• Coffee

“Transportation” includes:

• Gas
• Car Payment
• Insurance
• Maintenance

“Subscriptions” includes:

• Netflix, Hulu, Disney+
• Spotify
• Cloud Storage
• Other recurring services

Choose the level of detail that works for you!

Discretionary vs. Essential

Understanding the difference helps when budget cuts are needed:

Essential (Needs)

Can’t eliminate without serious consequences:

• Housing
• Food (groceries)
• Utilities
• Transportation to work
• Insurance
• Minimum debt payments
• Basic clothing
• Medical care

Discretionary (Wants)

Could reduce or eliminate if necessary:

• Dining out
• Entertainment
• Cable/streaming services
• Gym membership
• Hobbies
• Vacations
• Shopping
• Upgraded phone plans

In financial difficulty: Cut discretionary first.

Setting Realistic Amounts

Look at Past Spending

Before setting budgets, review actual spending:

1. Go to Transactions tab
2. Look at 2-3 months of spending
3. Calculate averages per category
4. Use this as starting point

Common Category Ranges

Based on $5,000 monthly household income:

Adjust for your location and lifestyle!

Start Conservative

Better to budget higher amounts initially:

• Come in under budget
• Feel successful
• Gradually reduce amounts

Than to budget lower amounts:

• Constantly go over budget
• Feel like failures
• Give up on budgeting

Managing Seasonal Variation

Some categories fluctuate by season:

Utilities

Summer (AC):

• Electric: $180

Winter (Heat):

• Electric: $120
• Gas: $150

Solution:

• Calculate annual total
• Divide by 12
• Budget consistent amount monthly
• Money evens out over the year

Example:

Annual electric: $1,800
Monthly budget: $150
Some months over, some under, averages out

Activities

Summer:

• Entertainment: $400 (outdoor activities, travel)

Winter:

• Entertainment: $200 (stay home more)

Solution:

• Budget for higher amount year-round
• Extra savings in low months
• Covers high months

Categories for Couples

Individual Spending Money

Highly recommended: Give each partner no-questions-asked money.

- Personal Spending - You: $200/month
- Personal Spending - Partner: $200/month

Use for:

• Individual clothing
• Personal hobbies
• Gifts for each other
• Individual splurges

Reduces conflict: No need to justify purchases from your personal money.

Joint vs. Separate Decision Making

Joint Categories (discuss together):

• Rent/mortgage
• Utilities
• Groceries
• Insurance
• Debt payments
• Joint savings goals
• Shared entertainment

Individual Categories (personal decision):

• Personal spending money
• Individual hobbies
• Personal clothing
• Individual subscriptions

Proportional Budgeting

If you earn different amounts, consider proportional contribution:

Example:

You earn: $4,000 (60% of household)
Partner earns: $2,667 (40% of household)

Total household expenses: $6,000

Your contribution: $3,600 (60% of $6,000)
Partner contribution: $2,400 (40% of $6,000)

Each has remaining income for personal use

Or keep it simple and share 50/50. Discuss what feels fair!

Special Category Considerations

Gifts

Annual gift spending:

Birthdays: $300
Holidays: $600
Weddings: $200
Other: $100
Total: $1,200/year

Monthly Budget: $1,200 ÷ 12 = $100

Set aside $100/month so money is available when needed.

Pet Care

Monthly costs:

Food: $80
Supplies: $30
Vet (annual ÷ 12): $50
Emergency fund: $25
Total: $185/month

Childcare

If you have kids:

Daycare: $1,200/month
Diapers: $80
Formula/Food: $150
Clothes: $50
Activities: $100
Total: $1,580/month

Significant budget impact - plan ahead!

Troubleshooting

“I have too many categories”

Solution: Combine similar categories.

Instead of:

• Netflix: $15
• Hulu: $12
• Disney+: $8
• Spotify: $10

Use:

• Streaming Services: $45

“My grocery budget is always over”

Solutions:

1. Increase budget to realistic amount
2. Or actually track spending closely for 1 month
3. Find ways to reduce (meal planning, store brands, less waste)

“We disagree on discretionary spending”

Solution:

1. Agree on total amount for discretionary
2. Each person gets portion for personal use
3. Remaining is joint discretionary (both must agree)

Example:

Total Discretionary: $800
Your Personal: $250
Partner Personal: $250
Joint Activities: $300

“Our expenses exceed our income”

Solutions:

1. Increase income (side hustle, ask for raise)
2. Reduce expenses - identify cuts:
   • Cancel unused subscriptions
   • Reduce discretionary spending
   • Find cheaper alternatives
3. Combination approach - small income increase + modest expense cuts

Best Practices

1. Start Simple

Begin with 10-15 broad categories. Add detail later if needed.

2. Review Monthly

At month-end, compare budget vs. actual:

• What categories went over?
• What categories came in under?
• Adjust for next month

3. Build in Flexibility

Include a “Miscellaneous” or “Buffer” category for unexpected small expenses:

• $100-200/month
• Catches things that don’t fit elsewhere
• Reduces stress

4. Don’t Forget Annual Expenses

Convert to monthly:

• Car registration
• Insurance premiums
• Amazon Prime
• Holiday shopping

Budget monthly so money is there when needed.

5. Align with Values

Your budget categories reflect your priorities:

• Travel is important? Budget $300/month for vacation fund
• Fitness matters? Budget for gym and workout clothes
• Family connection? Budget for visits and calls

Your categories, your priorities!

Next Steps

Now that you understand expense categories:

1. Category Recommendations - Suggested category structures
2. Monthly Budget Reset - How budgets work month-to-month
3. Managing Your Budget - Advanced management
4. Budget Progress Tracking - Monitor spending

Need help? Contact our support team - we’re here to assist!