Our goal at GLB Financial Group is to help our families become financially successful. As part of this goal, we have put together a weekly series, “Financial Planning Series” to provide information that help our families become successful.
Typical monthly expenses can be broken down into several basic categories for budgeting.
1. Home Expenses – Home expenses will include everything related to your home, including items such as:
- Your monthly rent or mortgage payment
- Utility bills such as electric, natural gas and water
- Maintenance costs such as landscaping or housecleaning help, replacement light bulbs, etc.
- Repair costs such as a need for a new vacuum, furnace, flooring, etc.
- Property tax payments (unless they’re collected with your house payment)
Some of these types of costs may fluctuate each month so you’ll need to keep that in mind when you create a monthly budget.
One good way to prepare for larger costs such as a new furnace would be to have a special savings account where you put money aside each month that is specifically designated for large home repairs in the future.
2. Food Expenses – Food expenses can include any costs you spend on eating, such as:
- Weekly and random grocery trips
- Money spent on school meals for your kids
- Drive thru runs or takeout meals
- Food costs associated with work, such as lunches, coffees, etc.
You may do things differently, but some people also add restaurant trips in this category. We put restaurant trips in the entertainment category unless we go purely for the reason that we need to eat and aren’t near home. In those cases, we add restaurant trips into our food category.
3. Child Related Expenses – Child related expenses can include anything related to the care of your child that’s not a part of your health care expenses, which I recommend tracking separately. Some ideas include:
- Day care expenses
- Extracurricular expenses such as hockey or dance
- New toys that aren’t gifts for a birthday or other holiday
I don’t add expenses such as health care expenses in this category; we’ll talk about those in another category.
4. Debt Obligations – Some people like to break debt payment obligations down into the individual categories they relate to, such as putting your car payment into the “transportation” category.
Others find it more helpful to keep ongoing, monthly debt obligations in a separate category. Debt obligations might include:
- House payments or home equity loan payments (I put my house payment into my housing category)
- Car payments
- Credit card payments
- Student loan payments
- Child support or alimony payments
However, you choose to categorize them is up to you, of course; just be sure you’re including them in your monthly expenses when working with a budget.
5. Health Care Expenses – Health care expenses are important to track because believe it or not, it’s possible to waste money in the area of health care just as it is with any other category.
One benefit of having a budget and tracking your expenditures each month is that you will more easily be able to recognize where you’re wasting money. In the case of health care, waste it can be as simple as choosing a name brand drug over a generic drug.
Here are some of the expenses you can put in your health care category.
- Payroll deductions for health care, dental and vision coverage
- Costs for monthly or occasional prescription and over-the-counter meds
- Payments for doctor and dentist bills
- Deductions for monthly savings going into an HSA (Health Savings Account)
Again, with healthcare expenses it can be helpful to save in advance if you’re expecting a big medical expense down the road such as a surgery, the birth of a child or braces for one of the kids. A health savings account is a great way to do that with extra tax advantages if you qualify for one.
6. Transportation Expenses – Transportation expenses can include any money you spend to get where you need to go, such as:
- Car payments (unless you’re putting them in the “debt obligations” category)
- Public transportation costs or ride-sharing costs
- Gasoline costs
- Vehicle maintenance and repair costs
- Monthly savings designated toward the future purchase of a new vehicle
Saving toward the future need for a replacement vehicle is important in order to avoid having to take out a loan when the need for a new vehicle arises. Trust me: you’ll LOVE the feeling of paying cash for your next car.
7. Personal Care Expenses – Personal care expenses include anything needed (or wanted) to take care of yourself, such as:
- Toiletries such as soaps, shampoos, toothpaste, shaving cream, razors, etc.
- Gym memberships
- Salon expenses for haircuts, manicures, etc.
And any other costs associated with care and maintenance of the people in your family.
8. Pet Care Expenses – Pet care expenses are any costs associate with having pets. Some ideas as to what to include in this category might be:
- Purchase of a pet and any coordinating care items
- Veterinary bills
- Pet grooming costs
- Food, toys and treats for pets
- Care for pets if you are away and they need to be cared for by someone else
Pets can be expensive and it’s a smart idea to consider monitoring what you spend on them to help ensure you can afford their care and upkeep.
9. Entertainment Expenses – Entertainment expenses include any type of money spent on having fun.
In your entertainment category you might include:
- Weekly date nights
- Trips to the movies
- Trips to museums or theme parks
- Vacation expenses
- Purchases you make just for fun, such as buying a new movie on DVD
- Restaurant trips that are just for fun
Any non-necessity expense you have for purposes of having fun will go into this category. Again, especially where vacations are concerned it’s helpful to save money ahead of time so you can pay cash for your vacation when the time comes.
10. Miscellaneous Expenses – Miscellaneous expenses would include any items that don’t fit into the above categories. Some ideas might include:
- Gifts for birthdays and other holidays
- Donations to charitable organizations
- Monthly miscellaneous spending for each spouse (Deacon likes to call it guy/girl money)
- Any other expenses that don’t fit in to other categories
In other words, if you can’t find another category that seems right for an expense, you can always add it into the “miscellaneous” category.