A Budget Book can be a powerful tool for better personal finances. Make sure to include the right Budget Book Categories to get the most out of it.
The squeaking felt pen was moving faster and faster while I scratched out what was supposed to be a budget book. I felt the heat in my cheeks while a little voice told me I should give up. It doesn’t make sense to create a budget book when you earn just as much as you need to get by, right?
Looking at the messy sheet of paper I felt as empty as the wallet before me. Thinking of my credit card debts my heart beats faster. It was sitting there and making me pay interest month after month while we barely made it.
Give up, this is ridiculous. A have-not doesn’t need a budget book. Right??
I sat up straight. Wrong, because I want it to make sense. I don’t want to be a have-not for the rest of my life.
But how do you know which categories you need to pick up to create a powerful budget book?
Years of trial and error followed.
My First Budget Book
I set up my first budget when living in Morocco.
My husband earned a salary of about 650 Dollar (working six days a week). 500 Dollar was our rent. (Yes, that IS a lot. But I wanted to live in a decent place.)
Other expenses were 10 t0 20 Dollar for electricity and water. Then 250 Dollar debt payments and interests. A new piece of clothes here and there, some stuff for personal care, cleaning supplies, and transportation.
That’s it. We didn’t have a car or ANY insurance. We didn’t put money into savings. I didn’t have enough for a plane ride to see my parents in Germany.
Things were simple. I needed to make up the gap between my husband’s income and our expenses. We wouldn’t have food on the table otherwise. That’s why I worked for Textbroker.
Psst.. be smarter than me and earn real money as a stay-at-home mom following these 4 side hustle ideas of Rosemarie the Busy Budgeter that made her 3000 Dollar a month.
Why I have a Budget Book
Things got more complicated once we were back in Germany. All of a sudden expenses, big and small, would sum up. We had a larger income to plan with and paid less for rent.
However, when our little one was born we had like 8 Dollars in savings and still some debts.
I started tracking expenses to find out where our money really goes. And how much I spent on life’s little pleasures like Frappuccino to go.
For the first time ever I found out about how much margin we have and put some cash into savings each month. No matter what, I put something into my saving account each month.
We have no credit card debts or overdraft loans any longer AND we have a small amount in savings as an emergency fund.
You can have that, too. By monitoring your spending and tweaking it if necessary. At the bottom of this post, I will share some printable and digital worksheets for setting up a powerful budget book.
What Is The Type of Budget Book You Want
First, you will have to decide what exactly it is that you want to get out of your budget book categories.
Can you afford to let some expenses slip out of your pocket without knowing exactly where they go? As an example, you could allocate some pocket money to members of your family and yourself and not track what this money was spent on. Or create a category named “transportation” and put expenses there no matter if they were spent on gas, on a bus ticket, or for taking a donkey cart.
However, if you are living in financial straits or you have ambitious saving goals, you would want a precise and detailed budget that helps you decide where you could save money. This kind of budget book will cost you more effort but will be a much more powerful asset for your personal finances, too.
Most people will end somewhere between super precise and sketchy. If you have been a lousy budgeter until now do not start ambitiously with a super exact setup. Develop stronger budgeting habits over time and choose a focus area each month. Get started with a super simple budget and find out how much money you have for spending each month.
So, the second step, if you haven’t already, learn how to setup up a super simple budget in three steps as described in this post. When you did this, you will know exactly how much money you have for variable expenses.
If you want to get serious with budgeting you will find free budget printables for a household budget or for an event you plan over at Freebie Finding Mom.
The Budget Margins
After creating your basic budget you have a strong foundation to get started with tracking expenses in a budget book like a pro. You now know how much of your family’s monthly income is needed for fixed expenses and how big the margin is for variable expenses. Good for you!
This is the money to make choices with each month, each week, each day. But remember that some variable expenses come each month and you will need a certain amount of money to pay for things that are absolutely necessary. You don’t have complete freedom of choice. That’s why it is all the more important to spend wisely what you can decide.
When to Work on the Family Budget Book Categories
You can work on your budget book daily to make sure you catch all expenses. If that seems cumbersome to you, then you can try a weekly session to track expenses. In that case, you need to make sure to have an organizing system in place to gather all receipts and a place to note down little cash expenses. Determine a certain day of the week to be the budget book day.
Main Budget Book Categories
Finally, find the right budget book categories.
Main budget categories summarize different expenses and are typically included in most budgets. They can be split up into budget subcategories.
Main Categories are:
- Debt Payment
- Personal Care
- Entertainment and Eating Out
- Special Events (Celebrations, Vacation, Holidays,..)
- Miscellaneous (everything that does not fit into a main category)
Please keep in mind that “Income” would be another main category. But we deal with expenses in this post and you have already created your basic budget which includes all incoming money of your family.
All of your expenses fall into one of these budget book categories. In some cases, you will have to decide where to put expenses that fit into more than one category, for example car insurance.
You could stop right here and still create an effective budget book. However, if you want to really understand your spending habits, find margin to save money, or catch billing errors, then you should break down your main budget book categories into subcategories. At least, break down those that consume large chunks of your money, have shown to be error-prone, or seem to have more potential for saving than others.
Go Crazy with Budget Categories
You can adjust and tweak the guts out of your budget if you want. Every family has different preferences. If you know you can’t resist the nice magazines, the latte-to-go, or [insert-your-dirty-little-secret-expenses-here] then you might make that a category to find out how bad your spending habit is.
And maybe next time pass the magazine corner because you know you want those extra Dollars jingle in your savings box instead so you can buy something you fancy even more than the latest pics of flabby celebrities in bold beachwear.
Breaking Budget Categories Up into Subcategories
Now that you know why subcategories are powerful, let’s go through possible budget book subcategories.
Remember, these are suggestions. These budget book categories may or may not fit your needs. Don’t feel overwhelmed. Use the handy printable I share below and go through this at your own pace!
- Rent or mortgage
- Maintenance and repairs
- Fund for upcoming repairs
- Home Improvement
- Related Insurance
- Car Insurance
- Car Payment
- Repairs, maintainance, inspection
- Public Transportation
- Parking tickets
- Emergency Fund
- College Fund
- Special Occasions or goals
- Day Care
- Baby supplies
- Pocket money
- school trips
- Medicine and Prescription Costs
- Special medical supplies
- Lunch packs
- Sweets and treats
- Credit cards
- Student loans
- Other loans
- Bills and payment plans
- Health-related insurance
- Life insurance
- Car Insurance
- Insurance rel. to housing
- Laundry and cleaning supplies
- Clothing, shoes
- Gym Membership
- Massages, wellness treatments
Entertainment and Eating Out
- Eating out in restaurants
- Amusement parks
- School clothing
- Books, courses
Special Events (Celebrations, Vacation, Holidays,..)
- Celebrations, birthdays, marriage
- Vacations or trips
- Charitable money
- Pet supplies
- New household items
- Pay your friend’s coffee
- Home decor
Get Your Budget Book Categories Started Today
Don’t wait and let opportunities slip away. Start right now and create a family budget book that catches your expenses and helps you understand where your money is going.
Subscribe and grab the free printables and worksheets to make your budget book a powerful asset that lets you find margin to save.
Your Assignment – If You Choose To Take It
Download and print out the overview of possible budget categories in the free resource library for subscribers. Sit down with the sheet and take your favorite pens. Color all circles of the subcategories you will definitely include in red or pink. Then color categories you might want to have in another color.
Print out the blank budget book spreadsheet or access the spreadsheet in Google Docs and make a personal copy for you. Fill in the important red/pink categories first. Then put in the categories to test. Try to keep them in your budget book for three budgeting periods at least. If you track expenses on a monthly basis, keep them three months. If you track and sum up your expenses each week, then three weeks. (With this rule of three we determined outliers in the lab.)
After three budget sessions, decide how much insight you get from a category. Toss what has not been helpful or not used regularly and include those expenses in Miscellaneous.
Your budget book will get better and better over time. And the felt pen gets a break.
Subscribe to get access to the free personal finance worksheets and get started with your budget book today.
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