Got The Right Categories In Your Budget? Use Budget Categories The Right Way! | Clever Girl Finance

so one of the keys to having a budget that works is ensuring that you have the right budget categories in your budget so how do you break down your own budget cies keep watching that's what we're going to be talking about in this video hi everyone my name is Bola shumi I'm the founder and CEO of clever girl Finance I'm also the author of the clevergirl finance book series and my most recent book choosing to prosper welcome to clevergirl finance [Music] TV so in today's video we're going to go over four simple budgeting categories to help you create a budget that works for you category number one is finances for your future self so your future self is impacted by what you do today and it's really important that you have a category in your budget that's dedicated to your future self and this category will include things like retirement account contributions for example your 401k 403b or IRA contributions non-retirement Investing For example investing in index funds Health saving accounts accounts emergency fund credit card payoffs student loan payoffs and other loan payoffs and these are all things that you may want to assign in that category for your future self so that you can designate money in your budget towards accomplishing those goals putting that money aside paying off that debt for your future self category number two your essential so your Essentials are things that you can't remove from your budget these are the things that you need to survive and so you want to ensure that you have this as part of your budget categories and your Essentials would include things like like your mortgage payments or your rent utilities for example water electricity internet your groceries and food budget your transportation costs or your car payments renters insurance if you rent your home homeowners insurance if you own your home property taxes health insurance a insurance life insurance disability insurance Dental Care child care costs pet food and any necessary Personal Care items category number three is the things that are Associated to your life goals so you may have goals that you want to accomplish outside of saving for retirement right so these are things that are not going to be Associated to uh that retirement savings but just a separate category where you're saving for your life goals for things that matter to you and this category could include things like tuition savings for a child's college education if you choose to pay for your child's college education uh certifications or training to help with your career aspirations saving to start a business saving to move to a new city or country a home down payment if you're looking to buy your first home or a new home home repairs and projects and donations to Charities that you believe in and then category number four is everything else and this category is not associated to those life goals it's not associated to finances for your future self this is basically um a category that is for you to enjoy life it's not associated to your Essentials and this category for everything else essentially includes everything else for example it includes things like entertainment so concert tickets going to the movies your gym membership eating out vacations gifts cable subscriptions streaming services your hobbies and also your self-care so those are the four main categories you want to have set up in your budget at a minimum as I mentioned category one is finances for your future self category two is your Essentials category three is your life goals and then category 4 is everything else by the way if you're enjoying this video i' would love for you to hit the like button below and subscribe to this Channel and tell your best girlfriends about clevergirl Finance also stop by our website at clevergirl finance.com we have over 30 plus completely free courses over 40 plus completely free worksheets the blog gets updated every single day you can also listen to our podcast the clever girls know podcast everywhere you tune into to your podcast episodes okay let's get back to this video so now that you are aware of those four main budget categories here are some tips to help you be successful with building your budget number one is it is okay for your budget categories to change so you may have built out those four um main categories into your budget and you may have broken them down into various subcategories which I went over but life happens goals change things change and if you need to adjust those subcategories that is perfectly fine if you need to add a whole new category a fifth category or even eliminate one category from your budget categories that is perfectly fine but these four main ones are typically the standard because ideally you always want to be planning for your future self you always want to have uh money put aside for your Essentials you always want to have your life goals put in place you might decide to adjust or cut down on the everything else category or you may find that you want to add an entirely new category or two and that is fine your budget is meant to be customized specific to your unique financial situation and to support your needs and help you plan your finances accordingly so it is okay if you have to adjust your budget categories or subcategories number two it's a good idea to use use percentages for each of your main categories and this just B basically helps you make it easier to manage your budget and track how you divy up your money according to your budget categories so for example you may decide to put 20% of your income towards your future self uh you may decide to put 50% towards your Essentials you may decide to put 15% towards um your life goals and then the final 15% towards everything else these categories are these percentages I mean are up to you to decide how you want to break them down so for example if you're really focused on saving for your future self right now you might want to increase that percentage because that's where your focus is however if you're trying to focus on life goals like for example saving for a home down payment you may want to cut down on that everything else percentage and put that extra money towards saving for that life goal which is buying a home for example um also for example let's say you want to pay off debt really quickly right and that is your focus that falls under your future self category you may decide again to cut down on that everything else category to put that extra money towards your debt payment subcategory under that future goals um future self main category and as I just mentioned Point number three if you have debt you may choose to focus on accelerating your debt payoff by adjusting those categories and so you may still have those four main categories in place you can still even still add additional categories but you want to make sure that you are prioritizing that debt payoff since that is your top goal so you may decide that you know