A budget is really just a plan for your money. A solid budget can help you take control of your finances and use your money with real purpose, so you have enough to pay your bills, grow your savings, and still enjoy life today.
The first step involves breaking down your regular expenses into budget categories to get a clear picture of your spending patterns (including areas where you tend to overspend). Once you’ve identified your basic budget categories, you can start allocating your spending based on your own individual financial circ*mstances.
This guide reviews a list of budget categories found in a basic household budget. It also offers suggestions for how much of your income you can contribute to each category.
Assembling your home budget categories
All monthly budgets start with your disposable income — the amount of money you take home from your paycheck after taxes, retirement savings, and other deductions.
According to the US Bureau of Labor, the current American salary in 2024 is $53,490 per year, but that’s before taxes.
Now, some states don’t have income tax. Others can be steep. For people who live in California, your actual take-home pay is about $42,768 after taxes, or $3,564 per month.
If you live anywhere else, you’ll have a bit more to work with, but we’ll use that as our average.
The essential budget categories
Here’s a list of essential home budget categories based on an average budget of $3,564 per month. You can adjust up or down to fit your actual take-home pay. Ready? Let’s do this!
1. Housing (25-35 percent)
Amount per month: $891 to $1,247
The amount you pay to have a roof over your head constitutes a housing cost. This includes everything from rent or mortgage payments to property taxes, HOA dues, and home maintenance costs. For most budgeters, this category is by far the biggest.
2. Transportation (10-15 percent)
Amount per month: $356 to $535
Regardless of your location or lifestyle, everyone needs to get from point A to point B. Typically, this budget category includes car payments, registration and DMV fees, gas, maintenance, parking, tolls, ridesharing costs, and public transit.
3. Food (10-15 percent)
Amount per month: $356 to $535
Whether you’re grocery shopping and cooking at home or sampling the local culinary scene, you’ll need to account for food expenses. Many budgeters include grocery shopping and dining out in this category (e.g., restaurant meals, work lunches, food delivery, etc.)
If this is a bigger part of your budget than the national average, you might want to put some of your non-essential food expenses (like gourmet foods or wine) into one of the non-essential categories below.
4. Utilities (5-10 percent)
Amount per month: $178 to $356
This category covers all the expenses that keep your essential household services up and running. Utilities generally include your gas, electricity, water, and sewage bills. Households may also factor in their “connectivity” expenses, like cell phone bills and internet expenses.
When you’re setting your budget, remember that the costs of heating and air conditioning vary a lot depending on the season and where you live. A household in Syracuse, NY, will have a bigger heating bill in the winter than a home in Austin, TX, but that same household will probably pay less in the summer.
5. Insurance (10-25 percent)
Amount per month: $356 to $891
If you want to include insurance as one of your basic budget categories, be sure to add up all your insurance payments, such as:
- Health insurance (only what’s not deducted pre-tax by your employer)
- Homeowner’s or renter’s insurance
- Home warranties or protection plans
- Auto insurance
- Life insurance
- Disability insurance
However, many budgeters categorize insurance with the thing they’re insuring. Health insurance, for example, would fall under “Healthcare.” The insurance on your vehicle would fall under “Transportation.”
You can break insurance out or include it with other categories — both are perfectly valid. Do whatever helps you feel most organized.
6. Medical & Healthcare (5-10 percent)
Amount per month: $178 to $356
As the adage goes, “health is wealth,” so be sure to include enough in your budget to cover these costs. If you plan for essential medical care such as yearly physicals, dental appointments, and even mental health care, you’re much more likely to live a long, healthy life.
Here are some of the kinds of things you’ll want to consider when you build your medical and healthcare budget category:
- Out-of-pocket costs for primary care
- Specialty care (dermatologists, psychologists, etc.)
- Dental care
- Urgent care
- Prescriptions and OTC medications
- Supplements and vitamins
- Medical devices and supplies
If you don’t have a separate budget category for insurance, remember to include your health insurance premiums here, too.
7. Saving, Investing, & Debt Payments (10-20 percent)
Amount per month: $356 to $713
This often-overlooked (or dare we say, underfunded?) home budget category is arguably the most important — it can really set you up for financial health down the road.
Ideally, you’ll want to build an emergency fund that’s earmarked for unexpected expenses, as well as saving in a retirement account such as a 401(k) or IRA.
This budget category can also be used to pay off any high-interest debt you’re carrying, such as credit card bills, personal loans, or even student loans.
If you’re saving a full 20 percent of your income and you still aren’t making a significant dent in your debt, you’ll need to start cutting back in other areas, starting with your non-essential spending categories.
The non-essential budget categories
Once you’ve budgeted for your family’s essential needs, the money you have left for non-essentials is called your discretionary income — money you can use for things like personal care, recreation, and gifts.
Non-essential expenses tend to vary from month to month, depending on your spending habits. They’re also the easiest expenses to cut back on — especially if you want to pay down debt or build your savings more quickly.
8. Personal Spending (5-10 percent)
Amount per month: $178 to $356
This category is a catch-all for anything that could be considered a personal care or “lifestyle” expense. Personal spending includes things like:
- Gym memberships
- Clothes and shoes
- Home decor and furnishings
- Gifts
Because some personal care products are essential, such as soap and laundry detergent, you might want to include those in your food budget category. After all, you probably buy those with your other groceries.
9. Recreation & Entertainment (5-10 percent)
Amount per month: $178 to $356
For most of us, carving out time for fun (and the money to afford it) is essential to maintaining a healthy work-life balance. This budget category can include things like:
- Concert tickets
- Sporting events
- Family activities & vacations
- Cable, streaming services, and other subscriptions (e.g., Hulu and Netflix)
- Restaurants (if you didn’t include this under “Food”)
- Video games
- Hobbies
In other words, this home budget category includes all your fun and entertainment. Enjoy it however you want to — you’ve earned it!
10. Miscellaneous (5-10 percent)
Amount per month: $178 to $356
This home budget category is reserved for anything that isn’t covered in the rest of your basic budget categories. It can also be used as an “overflow” category when you need a little extra somewhere else.
For example, if you have a larger family, you probably spend substantial amounts on clothes and haircuts for your kids. If you’ve maxed out your personal spending category, you could account for those under Miscellaneous.
Have you started going back to school to work toward a degree? You could categorize expenses like your tuition and textbooks under Miscellaneous too. Or create a special category for education.
Remember, these categories are just a starting point. Tweak your budget as much as you need to until it fits your unique needs.
Still having a hard time making ends meet?
If you’re struggling to cover your bases financially, know that you’re not alone — making ends meet can be tough. Start by cutting back on non-essential expenses. If holding off on that new pair of shoes helps you build your emergency fund, consider making that move.
It’s also a good idea to pay off high-interest debt wherever you can — high credit card balances can really contribute to the squeeze. Slowly but surely, with careful planning, you can start to ease the strain.
Your budget categories & percentages: Putting it all together
If building a household budget sounds like a lot of work, you’re not wrong — especially since you have to keep up with your spending every day.
To make it easier, consider using the Quicken Simplifi app. It comes complete with every one of these categories, along with several others — plus sub-categories so you can get a detailed picture of your spending without all the work:
- Gifts & Donations
- Kids
- Pets
- Travel
- Education
- Financial
- Taxes
- Business Services
But the best thing about Simplifi is that you can choose how you want to budget. You can plan every dime, or you can just check out what you’ll have left after your monthly bills and savings — and spend that cash however you want.
Simplifi calculates it for you and keeps up with what you have left, automatically. So go ahead, buy those shoes — welcome to guilt-free spending.
