You could spend hours trying to devise a flexible system to categorise and label every single expense you have, but it won’t necessarily help you. Instead, stick to a three-category budget to make things simple.
Photo by Hamza.
As personal finance site Beating Broke explains, virtually all of your expenses fall into three overall categories: Fixed expenses, variable expenses and non-necessities.
Fixed costs include your rent and insurance, which stay the same every month. Variable costs would include things like your utility bills or food. Everything besides your living expenses and regular bills fall into the non-necessities.
Categorising even further than this tends to over complicate things. Your budget doesn’t care much if that $25 you spent was on a movie or a book. It doesn’t care if the $4 you spent on soft drink at the petrol station counts as “Petrol & Fuel” or “Groceries”.
It cares if you have enough money to cover your expenses. So don’t stress yourself trying to fit everything carefully into a box unless you really need to. If you see that one category is too high, you can analyse it to see where you can cut, but if you’re just trying to put together a basic monthly budget, stick to simple and put your money where it needs to go first.
Why you Should only use Three Categories for Your Expenses Budget [Beating Broke via Rockstar Finance]