How to Create a Detailed Budget

using a calculator and reviewing receipts

There are basically two common budgeting philosophies: a vague plan with broad categories or a hyper-detailed plan with every penny accounted for.

Most people keep their budgets fairly broad. They can account for all of their expenses, but most spending falls into a handful of large buckets. You may generally know how much you're spending on food, for example, but don't distinguish between trips to the grocery stores and Friday night Uber Eats orders.

The alternative is creating a very specific, detailed budget that accounts for absolutely 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. It's easier to identify spending cuts when you have a full picture of all of your expenses.

So what goes into a detailed budget? Here are some of the categories you should consider making a mandatory part of your budgets going forward.

Fixed expenses

Your fixed expenses are usually the easiest to track and understand, because they don't change much from month to month. That doesn't mean they can't be reduced in a pinch, so the more you know about them, the better.

Housing costs

  • Rent or Mortgage Payment
  • Home Equity/2nd Mortgage 
  • Property Taxes

Mortgage and rent are probably the first line item people think about when they start the budgeting process. If your property taxes aren't included in your mortgage payments, make sure they're accounted for in your budget.

Insurance costs

  • Home/Renter's Insurance
  • Auto Insurance
  • Health Insurance

Most of us have health insurance deducted straight from our paycheck, but if you're self-employed or otherwise need to purchase your health insurance directly, make sure that cost is represented. If you pay upfront for multiple months of coverage, break it down into the monthly cost.

Financial obligations

  • Child Support/Alimony
  • Monthly Debt Payments (including auto loans)

Any regular, on-going, legally mandated financial obligations should have their own space on your budget. This includes all of your credit card debt and any other unsecured debt (personal loans, car loans, etc.) you may have.

Automated savings

  • Emergency Fund Savings 
  • Savings for Goals

One helpful way to ensure that you're setting aside money for emergencies is to have a portion of each paycheck deposited into a savings account automatically. While you're keeping that money, it's still an expense (and one you may need to tweak if your budget gets tight), so add it as a line item. 

Separating out your savings goals helps you focus your efforts, but also allows you to prioritize those goals. Create as many "savings" categories as you want and make payments to yourself regularly.

Variable expenses

Variable expenses are regular costs that may change slightly from month to month (which may or may not be something you can control). It's the biggest and most complex section of the budget, but it's also the most flexible, so there's a lot of value in breaking things down.

Food

  • Groceries
  • Meals & Snacks Purchased at Work
  • School Lunches
  • Meal Boxes
  • Meals Out/Deliveries 

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.

If you were really going the extra mile, you could even break out convenience charges like delivery fees and tips.

Required Utilities

  • Electricity
  • Gas/Heating
  • Water/Sewer/Garbage 

There are certain utilities you just can't go without, and in some cases you may not be able to negotiate prices or shop around. You can consider these as required and separate them from the other "utilities."

Certain utilities may be fixed or included in your rent, in which case they can listed with your housing costs.

Lifestyle utilities

  • Phone (Cellular/Landline)
  • Cable/Satellite
  • Internet
  • Landscaping/Lawn Care

Internet and phone access aren't technically a requirement, but they're pretty close to it. However you define your telecommunication expenses, it's an area of the budget where you may be able to make reductions by changing your plan or negotiating a lower rate.

Transportation

  • Gasoline
  • Bus Fares/Parking/Tolls
  • Taxi/Rideshare Charges

Keep track of all the various costs associated with getting from place to place.   

Clothing

  • New Clothes
  • Uniforms 
  • Dry Cleaning/Laundromat

It’s important to remember that certain work-related expenses, such as the care and maintenance of your uniform may be tax deductible.

Household supplies

  • 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 cleaning and beauty purchases with your food expenses if possible.

Childcare costs

  • Allowance
  • Daycare/Babysitter
  • School/Tuition/Activities

Kids are wonderful and expensive in equal measure. Capture all of the recurring weekly/monthly costs in your budget.

Personal health and wellness

  • Doctor/Dentist Visits
  • Medicine (Prescription and Over-the-Counter) 
  • Gym
  • Therapy

Your mental and physical health needs should be accounted for, as well. Doctor visits may fall under periodic expenses depending on how often you have an appointment.

Entertainment

  • Streaming Subscriptions
  • News/Magazine Subscriptions
  • Movies (Theater and Rental)
  • Concerts
  • Museum/Amusement Park
  • Hobbies

Expenses in the entertainment are always optional and may be some of the first to go during a financial crisis. But it's important that you set aside money for fun when you're able. The point of budgeting is to maximize your ability to do that things that matter most to you, after all.

Misc.

  • Cigarettes/Vape Supplies
  • Alcohol 
  • Non-Work Training/Lessons
  • Personal Administration

Cigarettes are probably an easy budget item to remember, but what about stamps, pens, or that Rosetta Stone subscription so you can finally learn Italian? There will always be a few loose items, but do your best to get every expense accounted for.

Periodic expenses

Most periodic expenses are ones that will happen once or twice a year, though sometimes you can't really know when that will be. It's the trickiest category, because it doesn't fit cleanly into a monthly budget structure. But if you don't plan for these costs, you could be a lot of trouble when they do eventually show up.

Maintenance

  • Car Repairs
  • Oil Changes/Tune-up
  • Car Inspection
  • HVAC Maintenance
  • Pest Prevention
  • Plow Services

Your house and your car are two of your biggest investments, and they require regular (though not monthly) care and attention. Major repairs are the hardest thing to plan for, so you may be better off simply setting aside money for general savings, with the acknowledgement that this is how you'll fund any unexpected repairs.

Annual Events

  • Back to School
  • Birthdays
  • Christmas/Hanukkah/Winter Holidays
  • Thanksgiving
  • Summer Vacation

Do you like to spend big every Christmas? Do you have multiple kids in need of school supplies every August? Is a fun family vacation an annual tradition? Do yourself a favor and spread those costs out across the year by capturing these events in your budget. You can even create one of those specialized savings buckets to account for each major holiday. 

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 here to help 24/7!

Tagged in Budget tips, Reducing expenses

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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