To me, categories are all about understanding how I can better understand where and how I’m spending money and learning how to control that. I also try to align my groups with accounts so that I can easily confirm that balances are correct. The key point is that categories should separate items by how I spend the money, how I think about spending the money, and how the money actually gets spent. It’s about how I interact with it.
I have 4 major groups: Savings, Regular Expenses, Irregular Expenses, and Discretionary. These line up with my savings account and checking account.
The regular expenses are for things like rent, utilities, payments, and any bills that I have set on a regular schedule. Everything I have on auto pilot or things I cannot live without. I have everything in this group roll over into a slush fund. The categories in this group are:
Monthly Pay In
The Irregular Expenses group is for things I cannot live without or am obligated to deal with, but that don’t happen regularly. These are things largely out of my control. I set up a savings category called Irregular expenses to put a small amount of money away for these emergencies. Everything I spend gets drawn from that fund and I pay it back when needed over time. Categories in this group are:
Irregular Expenses Fund
Finally I have a discretionary group, with everything that I might buy on a discretionary basis. These can be reoccurring expenses or not, but I tend to put everything that isn’t on auto pilot in here. These are expenses that I can easily minimize by simply spending less. I try to budget some amount for areas in this category to give me an idea of what I can afford each month, but then I try to stay below the target. Some months I’m more successful than others. The categories in this group are:
The TLDR here is that I try to split the group and categories up in such a way that it aligns with the way that I feel about the spending and the way that the spending decision gets made. If I am over spending on regular expenses or money is tight then I review all of the subscriptions and bills I have to see what I can live without. If discretionary spending is getting out of control then I look into the categories to see where that is happening. In the event that the irregular expenses are getting out of control, I might look into how I can better prevent emergencies from happening (ie more frequent car services to prevent breakdowns).