Start with twelve
If you want the answer without the list, this is it. Twelve categories, covering everything, few enough to maintain:
- Housing, rent or mortgage, and anything that comes with it
- Utilities, power, water, gas, internet, phone
- Groceries
- Transport, car payment, fuel, insurance, transit, servicing
- Debt payments, everything above minimums lives here
- Insurance, health, life, renters, anything not vehicle
- Subscriptions, every recurring charge in one line
- Eating out
- Shopping, clothes, household, the general category
- Health, medical, dental, pharmacy
- Savings and goals
- Everything else
That twelfth one is not laziness. A category for the genuinely uncategorisable stops you inventing a new category for every unusual purchase, which is how a list of twelve becomes a list of forty-five.
The full list, by group
If you would rather build your own, here is the complete set to pick from.
Housing
Rent, mortgage, property tax, home insurance, HOA fees, maintenance and repairs, furniture, homeware, lawn and garden, pest control, security.
Utilities
Electricity, gas, water, sewer, rubbish, internet, mobile phone, landline, streaming (or file under subscriptions).
Food
Groceries, eating out, coffee, takeaway, work lunches, alcohol.
Transport
Car payment, fuel, car insurance, registration, servicing, repairs, tyres, parking, tolls, public transport, taxis and rideshare.
Debt
Credit card minimums, extra card payments, student loans, personal loans, medical debt, anything owed to family.
Insurance and health
Health premiums, dental, vision, life insurance, disability, prescriptions, doctor visits, therapy, gym.
Personal
Clothing, shoes, haircuts, toiletries, cosmetics, dry cleaning.
Family
Childcare, school fees, supplies, activities, child support, pet food, vet, pet insurance, elder care.
Entertainment
Streaming, music, games, books, cinema, concerts, hobbies, sport.
Financial
Savings, emergency fund, retirement, investments, sinking funds, bank fees, tax preparation, professional fees.
Occasional
Gifts, Christmas, birthdays, travel, holidays, weddings, charity, tax bills.
Which to cut
The list above is a menu, not a prescription. Working through the whole thing produces a budget nobody maintains past week three.
Cut anything under about 2% of your spending. A category for $9 a month costs more attention than it returns. Fold it into a bigger one.
Combine anything you never decide between. If you have never once chosen between “toiletries” and “cosmetics”, that is one category.
Cut anything you have never overspent. Categories exist to catch overspending. If a category has never caught anything, it is filing, not budgeting.
Never split a category you cannot observe. If your supermarket receipt covers groceries, cleaning products and a birthday card, do not keep three categories that one transaction has to be split across. You will stop within a month.
The two that actually matter
Almost every household overspends in the same two places: eating out and general shopping.
Housing does not vary. Utilities barely vary. The car payment is the car payment. The variance, and therefore the whole point of tracking, lives in the discretionary categories.
Which suggests a strategy: be detailed where you have a decision to make, and be lazy everywhere else. One line for “Utilities” is fine forever. “Eating out” might be worth splitting into work lunches and going out, because those are different habits with different fixes.
Categories are not the only way
Worth saying on a site that does it differently.
Categories answer “where did the money go”. That is a good question and not the only one. The other is “how much is left until I am paid again”, and it needs no categories at all: what has to come out before the next payday, subtracted from what you have.
Cashrou is built on the second question. It has categories, and they are not what the app is about. If your problem is running out before payday rather than overspending on a particular thing, the category list is not where the fix is.
If your problem genuinely is that you spend too much on eating out, a proper category system will serve you better than a payday plan, and that is a fine reason to use one.
The short version
- Start with twelve, not forty
- Cut anything under 2% of spending
- Cut anything you have never overspent
- Never split a category one receipt has to be divided across
- Detail where you make decisions, lazy everywhere else
- If the question is “will I make it to payday”, categories are the wrong tool