Chapter 2: Budgeting Basics
Now that you’ve listed all your expenses and marked each one as a need or a want, it’s time to take things a step further and categorize them.
Breaking your spending into categories gives you a clear snapshot of where your money goes each month. You’ll be able to see exactly how much you spend on different parts of your life, spot areas where you could cut back, and make sure your spending lines up with your financial goals. It’s one of the easiest ways to get a handle on your money and make confident choices about where it should go.
How you choose to categorize your expenses is completely up to you — and it’s something you can tweak over time as your lifestyle or priorities change. To help you get started, below are some common categories people use in their budgets, along with examples of what might fall into each:
Housing
Rent or mortgage payments, property taxes, home or renter’s insurance, and any maintenance or repairs for your home.
Utilities
Electricity, water, gas, heating, cooling, garbage collection, and sewer services. You can also include internet and phone bills here if that makes sense for you.
Shopping
Clothing, shoes, beauty products, jewelry, and other personal items.
Transportation
Car payments, gas, public transportation fares, parking fees, car insurance, registration fees, and maintenance costs.
Entertainment
Dining out, movies, concerts, vacations, hobbies, streaming subscriptions, and other leisure activities.
Gifts
Birthday presents, holiday gifts, housewarming gifts, Valentine’s Day, and other special occasions.
Food
Groceries, restaurant meals, takeout, coffee shops, and snacks.
Savings
Money set aside for your future, such as an emergency fund, retirement accounts (TFSA, RRSP, 401(k), IRA), investments, or other financial goals.
Other
Anything that doesn’t quite fit into the above categories, like work uniforms, home décor, or one-off purchases.
By sorting your expenses into categories, you make your budget easier to read, easier to stick to, and much more useful for making real changes. Once you know where your money’s going, you can make sure it’s going where you actually want it to.
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