Always fun to pile on and compare notes like this.
My basic approach is to create groups around the high-level things I want to track, with some consideration of discretionary/non-discretionary. I’ve re-vamped this several times through the years and try to keep it as short and focused as possible. These also map fairly easily to various budgeting methods for occasional comparison analysis (e.g. 60% Solution, Balanced Money Formula, etc.). I’m mainly budgeting for myself; my partner and I each contribute to a shared budget which I keep separately (using many of the same Groups and Categories). My current Groups (alphabetically) are:
- Entertainment
- Food
- Home
- Household
- Incomes
- Life & Health
- Personal & Children
- Savings
- Transportation
- Utilities
Like others have noted, in each Group I create categories which I want to explicitly budget for (envelope style) or where I feel I need to monitor my spending (think about transparency or visibility, and what you really want to keep an eye on). Each category name starts with a Group prefix so I can easily identify which Group it is part of (i.e. in the Transactions list), and for easier sorting (see screen shot below). I found I would get confused which Group a category was in, so the prefix grounds me as I’m working through Transactions. I keep category changes to a minimum, and number things that are unlikely to change first. If there are too many categories in a group I consider breaking things out to another group.
What I often get from these kinds of reviews is that budgeting is very fluid and individual. Do what works best for you and if someone else’s idea sounds interesting plagiarize.
TL;DR, Here’s how I think about some of the groups and categories:
Some Entertainment items could be considered Utility-like (especially services). I view Utilities as non-discretionary where Entertainment is discretionary. For example, U.7 Mobile (cellular) is a Utility not Entertainment. E.1 Activities, Events, Hobbies is my catch all for going to movies, shows, household parties, and personal hobbies. E.2 Media, Services is for video, music, gaming and other “media” related subscriptions and services (think software and subscriptions, not hardware). E.3 Travel/Vacation gets all expenses for a trip or vacation. Each trip is unique enough that I don’t bother trying to project to the next one by analyzing the previous (e.g. camping vs. cruise).
For household non-food items from places like Target, Costco, etc. I use a general F.1 Groceries & Supplies and budget accordingly. If I get something like clothing, electronics, or patio furniture at Costco, that clearly is not household toiletries, dish soap, etc. and belongs in another category so I’ll split that out. For restaurants, if I’m paying a waiter’s tip for sit-down service on a special occasion (date night, birthday, family gathering), then that’s F.3 Dining Out (Special), though occasionally it could also be an E.1 Activities, Events, Hobbies expense (Bowling or Dave & Buster’s anyone?)
I don’t currently own a house, but I do break out Home expenses (the cost of having a place to live or as an asset) from Household (the costs to furnish it, clean the gutters, mow the lawn, buy tools, and I even toss pet care in this group for lack of a better place). My only “Miscellaneous” category lives in Household for when I can’t figure out where else to put a one-off expense. Hm.5 Improvements is for a new kitchen or roof, or any other items that add to or maintain the value of a home (think asset value for tax purposes). Light bulbs, consumables and other non-“fixture” items are H.1 Maintenance items.
Personal & Children gets a bunch of diverse categories. P.2 Personal Care includes things like gym memberships, spa, massage, haircuts. P.7 Reimbursable gets business reimbursable expenses or other things I expect to get paid back for. It is a placeholder category as I don’t ever budget money here.
In Savings, S.4 Down Payment could be for a house, car, or some other major purchase (I can keep track of those details elsewhere), and S.5 Education could be in Personal & Children, but has long term considerations such as 529 savings accounts so I decided to put it under Savings.
I decided to switch to “Transportation” instead of “Auto” or “Car” as a Group. I take a train to work, use Uber and Lyft occasionally, pay for electricity for my electric car, gas for my kids’ cars, parking fees, etc., and don’t need to see all those items broken down in my budget, so I use a generic T.1 Services & Consumables. I have T.5 Vehicle Purchase/Lease, which is the ongoing payment, vs S.4 Down Payment which would be saving up to buy.
For Utilities I want to easily track gas vs. electric (we currently have solar panels and an electric car), which is why I opted for Utilities as a Group with individual utility categories. I have a separate sheet to track and project each utility bill to help with budgeting. I mentioned a personal budget vs. a shared budget; some of my T.1 Services & Consumables is transferred to our shared U.1 Power category to pay the electricity for my car.
I budget on Gross income, and one issue I had to figure out is tracking payroll deductions. I have a payroll sheet that projects and breaks down each paycheck. Health insurance, HSA savings and company match, retirement contributions, commuter passes, even company meal plans, all pass through to a set of split transactions for each paycheck so those can be captured in my budget categories. Income and payroll taxes pass to a tax planning sheet so I can make sure my withholdings will align with my projected income taxes for the year. When I retire (eventually) all these expenses will be direct, so I felt it was important to get used to tracking and planning for them now.