What To Include in a Budget | Top 25 Most Common Expenses 

While we’d all probably love to achieve all of our financial goals without budget limitations, that’s a luxury compared to only a very small segment of the population. Almost all of us, at least to some degree or at different times in our lives, have had to budget. 

But where to start, how to prioritize, and how to stay organized?

Let’s start with essential budget categories: 

1. Housing
   • Mortgage payment or rent
   • Property taxes and home insurance
2. Food
   • Groceries
   • Dining out
3. Utilities
   • Utility bills (electricity, water, gas, internet)
4. Transportation
   • Car payments
   • Fuel
   • Maintenance
   • public transport
5. Insurance
   • Health insurance
   • Auto insurance
   • Life insurance
6. Debt Obligations
   • Student loans
   • credit card payments
   • other debt repayment
7. Child and Dependent Care
   • Child care
   • Elder care
   • Other dependent care costs
8. Education Expenses
   • Tuition fees, textbooks, and other school-related costs
   • Continuing education or professional development courses
9. Personal Care
   • Toiletries, haircuts, and other grooming expenses
   • Gym memberships and fitness classes
10. Entertainment and Recreation
    • Subscriptions for streaming services, cable
    • Costs for hobbies, sports, and other leisure activities
11. Clothing and Apparel
    • Regular clothing purchases
    • Work attire and seasonal clothing
12. Technology and Gadgets
    • Upgrades for personal electronics like smartphones, laptops
    • Software subscriptions or app purchases
13. Gifts and Donations
    • Money set aside for gifts for birthdays, holidays
    • Charitable donations and tithes
14. Travel Expenses
    • Savings for vacations and travel
    • Travel insurance and related costs
15. Professional Services
    • Legal fees, financial advisor costs
    • Housekeeping, landscaping, and other domestic services
16. Pet Care
    • Food, grooming, and veterinary costs for pets
    • Pet insurance or emergency care savings
17. Medical and Healthcare
    • Out-of-pocket medical expenses
    • Prescription medications and over-the-counter drugs
18. Taxes
    • Preparation for annual taxes or quarterly estimated tax payments
    • Property tax or vehicle tax expenses if not included in mortgage or auto loan payments
19. Home Maintenance and Repairs
    • Routine home maintenance
    • Savings for unexpected home repairs
20. Office Supplies and Equipment
    • Necessary supplies for a home office
    • Replacement of equipment or furniture
21. Miscellaneous Expenses
    • Unexpected costs that don't fit neatly into other categories
    • Small indulgences or spontaneous purchases
22. Savings Account Contributions
    • Regular contributions to savings for future goals
    • Emergency fund allocations
23. Investments and Retirement Savings
    • Contributions to retirement accounts like 401(k)s or IRAs
    • Investment into stocks, bonds, or other financial instruments
24. Large Expenses and Irregular Expenses
    • Planning for big-ticket items or annual payments
    • Setting aside funds for irregular but predictable costs, such as a car repair or job loss
25. Personal Development and Self-Improvement
    • Books, courses, seminars related to personal growth
    • Activities that contribute to mental and physical well-being

Now that we understand the general expense categories, it’s time to tailor these categories to support your long-term financial and lifestyle goals.

How to Create A Monthly Budget

As you create your budget, don’t get overwhelmed with all the possibilities and the idea that you may have forgotten something. Stick to the basics and keep your process fluid.

Step 1. Calculate your income

Start with your take home pay, which is what is left after taxes and other payroll deductions. 

Step 2. List all your expenses

Using the categories above, audit all of your monthly expenses using your bank and credit card statements and/or receipts. Make sure to include all other expenses you pay quarterly, annually or one-time basis. 

Step 3. Subtract your expenses from your income

Add up the total of all your monthly expenses and subtract that total from your monthly income. That tells you how much you’ll have left after all your planned expenses to spend on other things, such as debt reduction.

If your expenses are higher than your income, determine which expense categories you can cut back on. Start with small changes, then go on to bigger changes as necessary. 

Step 4. Create your budget, track it on a monthly basis, and commit to it!

Consider creating a budget spreadsheet as an important step in taking control of your finances. And always make your budget right for you.

Step 5. Review and adjust constantly.

As your expense requirements and income changes. Life changes such as moving, a new job or expanding your family can have a major impact on your budget. 

If you’re still having trouble making your current income cover your expenses, it may be time to consider a part-time job to get back on track. 

And if a traditional budgeting method isn’t your cup of tea, there are other methods to consider, such as zero-based budgeting.

It’s also helpful to think about common budgeting mistakes to avoid if you want your budget to be effective for your goals. 

So why is budgeting so important? For one thing, you’re telling yourself you are in charge of your money – and your life – because you’re deciding where your money will go.

Further, it’s just about the only way to make your life goals happen while watching your progress along the way. In the end, it’s one of the most important things you can control to make all of life’s endless possibilities happen.