The 3 Budget Categories You Need to Stick to Your Simple Budget

The 3 Budget Categories You Need to Stick to Your Simple Budget

Do you know that your selected budget categories can determine your ability to stick to your simple budget? If you have struggled to stick to a budget plan, consider creating three major budget categories.

But what are the three budget categories to create? You will learn about them in this article. So, let’s dig in.

Budget categories are essential to your budget and help you manage your money.

If you intend to put your money to work without going into overspending gear, endeavor to create only realistic budget categories that will guide you throughout your journey to financial freedom.

Most people often create their budgeting categories based on their monthly expenses.

The 50-30-20 budget systems are the best budget categories you may want to consider. This 3-tier system is grouped as follows:

First Category: Needs

Needs are the basic expenses you must pay for your survival. Hence, you should make a greater budget to satisfy your essential needs within a specific period.

According to the 50-30-20 budget rule, you should spend 50% of your earnings to satisfy your needs. Expenses that fall under the need category include the following:

  • Insurance: This covers all insurance types, including house insurance, health insurance, life insurance, and health insurance.
  • Housing Costs: You should pay your housing costs biweekly or monthly, depending on your agreement with your landlord. Housing costs also include mortgages, home taxes, housing maintenance, or other fees that cover your home.
  • Transport: Whether you own a car or use public transport, you must provide your monthly transportation fee to cover your movement across your locality. If you work remotely, you can reduce your monthly transportation budget.
  • Groceries: This expense category includes food and drinks you purchase at the supermarket. Note that the bills you pay while eating at a restaurant should not be included in this category.
  • Utilities: Utilities include electricity bills, gas bills, water supply charges, internet charges, and so on. You cannot access the basic human needs in your home without paying for utilities. Hence, make an estimation that covers this section appropriately.
  • Household supplies: Household supplies such as dishwashing detergent, toilet paper, cosmetics, cleaning supplies, and so on should be added to this category.
  • Healthcare: The healthcare expense section covers your medical expenses.
  • Education: Whether paying for your kid’s school fees or your own program, endeavor to add all educational expenses to this category.

Second Category: Wants


Wants are all the fun expenses that are attractive but not essential for your survival. This implies that you can go about your daily activities without showing much concern for expenses that fall under this category.

However, some people have become addicted to spending money unnecessarily on fun activities. Keep in mind that you can willingly avoid expenses that are not essential for your survival, especially when experiencing financial worries.

According to the 50-30-20 budget category rule, 30 percent of your income should be used to satisfy your wants. Your “wants” include the following:

  • Entertainment: You can go about your daily activities without entertainment. But if you cannot avoid entertaining yourself, you may consider paying for the services to improve your mental health.

Expenses that fall under entertainment include gym subscription, TV cable subscription, Netflix subscription, and other related entertainment expenditures.

  • Vacations: You can survive without taking a vacation. Any expenses you intend to spend during the vacation should be added to this expense category.
  • Clothing: Clothing is one of the essential items you need for your survival. However, when you have enough clothes at home, you don’t necessarily have to purchase a new set of clothes for survival. But when you purchase new clothes when your old ones are still serving you, this may be considered a want.
  • Restaurants and bars: All expenses you incur in restaurants or bars should be added to this category. Keep in mind that you can always eat at home or bring your food out.
  • Other expenses: When you incur other expenses that are not essential to your survival, they should also be considered as wants. Some people prefer to buy any catchy items they come across in the supermarket or online stores.

If you intend to save money, you should consider avoiding purchasing items you think are non-essential to you and keep the money for another day.

Good Read :17 easy and practical budgeting tips for beginners

Third Category: Saving and Debt Repayment


According to the 50-30-20 budget rule, you should keep 20 percent of your income for your savings and debt repayment plan.

When debt-free, you can easily save 20 percent of your income or add the extra to another expense category with higher demands. Expenses that fall under this category include.

  • Building your savings: You have to save money for the future. Your savings will cover your retirement plans, vacations, investments, and other expenses that may arise in the future.
  • Paying your debt: If you have an outstanding debt to clear, you should find a means to clear off your debt with your monthly income. Note that when you pay a small percentage of the debt every month, you will find it easier to clear your debt faster and focus more energy on saving.
  • Creating your emergency fund: Emergency funds will take care of all emergencies that may arise. Since you cannot predict the future, endeavor to create emergency funds for the rainy day. You should create a separate account to save your emergency fund.


Creating budget categories will be challenging when you don’t have the necessary budgeting plans for your money. However, these 3 best budgeting categories have been created to help people stick to their simple budgets.

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