There are basically two common budgeting philosophies: budget vaguely or budget specifically.
Most people with a budget probably budget somewhat vaguely. By that I mean you would account for your all your expenses, but everything would fall into a few pretty general categories. It’s accurate, but vaguely accurate.
The alternative is creating a very specific, detailed budget that accounts for everything. It’s easy to see why this is a slightly less popular option – it seems like a lot more work. But the value of a highly detailed budget is in the flexibility and insight it provides. Breaking your expenses down into more specific categories makes adapting to sudden financial changes much easier by giving you a very clear understanding of where your money is going.
So what goes into a detail budget? Here are some of the potential categories you should consider making a mandatory part of your budgets going forward.
- Rent or Mortgage Payment – This is pretty much a given and the first thing most people figure into their budget.
- Home Equity/2nd Mortgage – It’s important to make sure any second, technically unconnected housing payment is separate on your budget.
- Home/Renter's Insurance
- Auto Insurance – All of your insurance costs should be separated on your budget.
- Child Support – Any regular, on-going, legally mandated financial obligations should have their own space on your budget.
- Monthly Debt Payments - This should include all of your credit card debt and any other unsecured debt you may have.
- Emergency Fund Savings
- Savings for Goals - Separating out your savings goals helps you focus your efforts, but also allows you to prioritize those goals.
- Food at Home (Groceries)
- Meals & Snacks on Job
- School Lunches
- Meals Out – The “food” portion of your budget is a great example of the value of specificity. If you threw all of your food –related purchases into one category, it would be very difficult to judge your spending properly, or come up with any easy ideas to reduce that spending if necessary. By breaking everything out into its own category, you can better understand where your money is really going.
- Water/Sewer/Garbage – How separate you to keep your utilities should be determined by how you’re billed. Things that are a flat rate can be lumped together (you can’t exactly not have water). But if you’re billed based on usage it may be to your benefit to keep certain utility expenses separate.
- Phone - Cellular
- Phone - Landline
- Internet – Of course, in many cases certain services are bundled together for the sake of “value.” It may be helpful, though, even if certain services are bundled together, to occasionally audit your usage and review your package to see if your current package is really the best value for you and your lifestyle.
- Bus Fares/Parking/Tolls
- Uniforms – It’s important to remember that certain work-related expenses, such as the care and maintenance of your uniform may be tax deductible.
- Dry Cleaning/Laundromat
- Cleaning Supplies
- Grooming & Personal Items – The amazing convenience of the modern grocery store means that we can get a lot of non-food items while shopping for yams. In a detailed budget, you should avoid including beauty and health purchases with your food expenses if possible.
- Children's Allowance
- Cigarettes/Tobacco/Alcohol – Again, you may include a lot of these items in with your groceries, but getting a truly accurate picture of your finances only works when you break out these kinds of expenses, especially since they can end up being fairly costly.
- Entertainment – This is basically any means of entertaining yourself that isn’t covered anywhere else. This includes going to movies, maintaining a Netflix subscription, buying museum tickets, etc.
- Doctor/Dentist Visits
- Medicine – Be sure to account for any ongoing prescription medication costs.
- Personal Administration – Most people are their own secretaries. Do you need stamps? Paper? Ink for your printer (ink is crazy expensive)? Make sure you don’t forget those kinds of “little” costs when working out your detailed budget.
- Back to School
- Car Repairs/Tires – It’s hard to know what maintaining your car will cost you, but a handy rule of thumb is that it’s going to cost you what it cost last year, plus a likely 5 to 10 percent increase.
- Gifts/Holiday – Gift giving is one of the most flexible budget categories. It might not even hurt to break this category down into specific gift-giving occasions.
- Home Maintenance/Repair
How thorough is your budget? If you’ve been struggling to get your finances in order, consider putting together a new, detailed budget. If you need help sorting out your income and expenses our debt and budget counselors are always here to help!