Keep Your Budget Simple by Sticking to Three Categories

You can spend hours trying to develop a flexible system for categorizing and labeling all of your expenses, but that won’t necessarily help you. Instead, stick to a three-tier budget to keep things simple.

As the personal finance site Beating Broke explains, virtually all of your expenses fall into three broad categories: fixed expenses, variable expenses, and unnecessary expenses. Fixed costs include rent, which remains the same every month. Variable costs include things like your utility bills or food. Everything except your living expenses and recurring bills falls into the unnecessary category.

Categorizing even further than that tends to over complicate matters. Your budget doesn’t really care if that $ 20 is spent on a movie or book. It doesn’t matter if $ 3 spent on soda at a gas station counts as “gas and fuel” or “groceries.” He cares if you have enough money to cover your expenses. So don’t strain yourself trying to fit everything neatly into the box unless you really need to. If you see one category is too high, you can analyze it to see where you can cut back, but if you’re just trying to come up with a basic monthly budget, keep it simple and put your money where it should go first.

Why You Should Only Use Three Categories To Budget Expenses | Defeating Bankruptcy Through Rockstar Finance

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