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How to establish budget categories.

What exactly is a budget?

Let's start with the basics…what is a budget? A budget is a plan for YOU to tell your money where to go…rather than your money bossing you around. In order for that to happen you need to establish a budget based on your income and your spending. Keep in mind…you can't spend more than you earn.

What are budget categories?

A category is basically a group of expenses within your budget. Groceries. Car Gas. Entertainment. Clothes. Utilities. Mortgage/Rent. Vacations. Savings. Emergency Fund. Postage. School lunches. Etc.

Woman with a calculator and a list. Another person with money in their hands | how to establish budget categories |Positively Jane

How do you even begin a budget?

To begin….keep track of all of your expenses for 30 days. ALL of your expenses. The cash ones, the credit card ones and the automatic payment ones. Assign a category for each expense. Check out this post: Benefits of Budgeting | How to Begin a Budget

How do you begin to establish your budget categories?

Grab all of the expenses that you kept track of from above.
Highlight like kinds….for example. Highlight car gas blue. Groceries pink. Utilities orange. Eating out green…you get the idea! This is a visual of where you spend your money every month and helps you in the next step.
Add up all of the expenses within the same categories. Meaning…add up all the groceries together. All of the eating out together. All of the kids activities together. Etc.
Add up all the categories. This will be your number for ALL of your expenses.
Add up your take home income (after tax income or ATI)
Subtract all of your expenses from your ATI
If you have money left over….this is where you begin with your budget. Because you are not spending more than you earn.
If your spending is greater than your ATI…you need to make some adjustments immediately. You can not establish a budget when you are spending too much. Cut back on something (or everything) so that your spending is = or < your take home pay

There are guidelines for your budget categories.

spreadsheets laid out on a table and someone with their phone | how to establish budget categories | Positively Jane

Once you establish your budget take a look at the guidelines below. These guidelines will ensure that you are not overspending in a particular area. If you are, make some adjustments so that you are back on track.

Please remember…a budget is not only for today, a budget will help you plan for your financial future.

1. Housing – 25-35%
Anything you spend towards keeping a roof over your head is considered a housing expense. This includes mortgage and rent payments, HOA dues, property taxes, homeowners/renters insurance and home maintenance costs.

2. Utilities – 5-10%
Your utilities include: water, trash, sewer, electric, gas. These are the musts. They can also include: internet, cable, phone and/or cell phone.

3. Transportation – 10-15%
Whether you drive, take a train or a bus…you need to get from A to B. This category also includes car payments, auto registration, DMV fees, parking, tolls, auto maintenance and auto insurance.

4. Groceries – 10-15%
This category includes food and eating out. Eating out less often will decrease your Grocery budget.

5. Giving – 10-15%
Give 10% of your gross income to a worthy charitable cause. Paying it forward is a great way to live.

6. Insurance – 10-25%
This category really depends on you. Your homeowners or renters can come under this category…or under Housing. Same with your auto insurance – it can be in this category or under transportation. It should definitely include your health insurance, life insurance, disability insurance or any other insurance policies that you have.

7. Medical/Health – 5-10%
This category includes any out-of-pocket money that you spend on your health. Deductibles, dental care, prescriptions, urgent care, hospital bills, and medical devices.

8. Savings – 10-15%
Save a minimum of 10% into your IRA or 401K. There are also other savings categories: Emergency Fund and Repair Funds.

9. Recreation – 5-10%
This category includes your lifestyle expenses. Gym membership. Kids activities. It also includes Netflix, Hulu, Discovery+, Disney Channel, baby sitters, or concert tickets…all the fun stuff!

10. Personal – 10-15%
This category is for anything personal. Clothes, hair cuts, manicures, home decorating or renovations.

Add an emergency fund and debt payment.

In addition to all of the above…every family needs an emergency fund. Money set aside for unexpected expenses…because life is full of the unexpected isn't it.

You also need to be paying down your debt. This will mean cutting back on any of the above categories of spending. So that you have the extra money to pay down your debt. Start with your non-essential categories: personal spending and recreation. If that is not enough you might need to make other changes. Selling your car and getting a less expensive one. Downsizing your home. Cutting back on cable and entertainment.

Benefits of Budgeting.

Not even sure why budgets are important? Please read ‘Benefits of Budgeting.‘ This will definitely help you out.

And, check out the following posts about Budgets & Money!

Now, sometimes life can get pretty overwhelming, right? Especially when your finances are out of control!

And sometimes, when you are overwhelmed, stress sets in.

And when stress sets in it is sometimes difficult to be happy or joyful. So, please don’t let stress have the last word!

Go on and take a look at the ‘Top 5 Stress Reducers’ (Action Plan included). So that you can eliminate what causes you stress and get on the path of living a joyful life.

What is Joyful Living all about?

Joyful Living is ALL about not letting let the circumstances of YOUR life determine who you really are. You learn to choose YOU instead! Not sure how to do that? Let me help!

To begin, go ahead and read:

What is Joyful Living?

5 Simple Steps to Choosing Joy

Finding Joy in All Things

What Does God Say About Joy?

Difference Between Happiness and Joy