Having a carefully categorized budget is great if you know exactly what you want to spend money on each month. If you need a bit more flexibility, however, try a spending plan instead.
As personal finance blog Becoming Minimalist explains, a spending plan differs from a budget in that the only thing you categorise are your essential bills. Rent, utilities, groceries, and yes, savings. Everything else, however, is completely up to you.
After you have determined your monthly income and your monthly fixed costs, you can easily recognise your monthly discretionary income (the money that you have left over to spend as you desire). Simply subtract your monthly fixed costs (Step 2) from your monthly net income (Step 1). For example, if you have $500 per month left over after paying your fixed costs, you have $500 in discretionary income. The spending plan now allows you the opportunity to spend that $500 as you desire: golf clubs, cinnamon rolls, travel, entertainment, extra savings, or an 8.0 MP Underwater Video Camera. The choice is yours.
The obvious benefit to this plan is that it saves you the trouble of needlessly categorising things you don't really need to sort anyway. Does it really matter if you separate your entertainment budget from your eating out budget as long as all the essentials are taken care of? More importantly, it gives you more of a sense of freedom and flexibility about your budget. As long as your bills are paid and you're saving for the future, you don't need to feel guilty about every purchase.