Rachel Cruze Shares Her Top 11 Categories To Consider When Creating Your Monthly Budget

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When creating your monthly budget, it’s a good idea to separate your expenses into different categories rather than lump them all together. Not only can this help you achieve a better understanding of where your money is going every month, but it can also make it easier to stay on track financially with your other goals.

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Rachel Cruze, a financial expert and the host of “The Rachel Cruze Show,” shared some insight into what she considers the most important categories that should go into your personal budget. It’s important to remember that everyone’s financial situation and goals are different, so some of these categories may be more — or less — important to you than others.

With that in mind, here’s how you might want to separate and prioritize your monthly budget, according to Cruze.

Generous Giving

When creating your household budget, Cruze believe you should prioritize around 10% of your monthly income toward giving. For Christian folks, this is better known as tithing, but it is not solely a religious thing.

Not only can this make you feel more grateful for what you have, but it also promotes generosity and kindness for others. It can also help you create a healthier mindset about your own money and its value for others.

Debt Payoff and Savings

For this next category, you can split it into two main sub-categories: debt payoff and savings.

To begin with, if you don’t have an emergency fund with at least 3-6 months’ worth of living expenses set aside, start by dedicating a portion of your monthly income to this. If you’re in debt, you can start small with $1,000 and build from there. Not only can this give you more peace of mind, but it can also help you avoid having to take on more debt in the future.

Once you have at least $1,000, you might want to put a pause on savings and start prioritizing debt payoff. This can include many types of consumer debts, including credit cards and consumer loans. After you’ve paid off your debts, you can reallocate some of your budget to your emergency fund until it’s maxed out.

The second sub-category here is savings. Now that you have an emergency fund and have eliminated most or all of your debt, you can focus on building your retirement savings. “Start prepping for your future by investing 15% of your income,” Cruze wrote. If that’s not quite manageable at this point, set aside an amount that’s more reasonable based on your income, expenses and goals.

Groceries and Dining Out

Food is a necessary part of life, and so it should be a key part of any monthly budget. Cruze separated food into two categories: groceries and dining out (or restaurants).

Groceries should come first as this is a basic necessity of life, whereas dining out is a luxury. Once you’ve got a grocery budget going, you can then switch over to restaurant expenses. Cutting back on dining out is also a great way to free up room in your budget for other things — like debt payoff, utilities or savings.

Utilities

Another core expense that should be part of your budget is utilities. This includes any required service for your home, like electricity, water, internet, phone, gas and trash. It may also include monthly home security system subscriptions and similar services.

When it comes to utilities, err on the side of caution and allocate a higher amount of your budget to them than you think you’ll actually need. This can give you some wiggle room in case your utility bills end up being higher than expected, or your service provider suddenly ups the monthly price for something. If you end up having money left over each month, you can put it toward other areas that need attention.

Housing

While you should definitely have a budget for rent or mortgage payments, you also need to include other fees associated with housing. This may include your HOA fees, property taxes, and homeowners or renter’s insurance. Try to keep these costs at or below 25% of your take-home pay.

Insurance

Aside from homeowners or renter’s insurance, you should also have a category for other types of insurance policies you might have. Calculate your monthly premiums and make a budget around those.

Common types of insurance policies include health insurance, term life insurance, disability or long-term care insurance, and identity theft insurance. For those with a high net worth, you may also need to pay a monthly umbrella policy premium.

Car Upkeep and Transportation

Although it might feel necessary, not everyone needs a car. Whether you have a vehicle or not, it’s important to designate a portion of your budget to transportation-related expenses. This can include gas, regular maintenance, and even auto insurance. If you have an auto loan, this would count as well.

For those without a car, a portion of your budget should still go toward public transportation and related costs. And remember, transportation costs can fluctuate, so try to estimate how much you need on the higher end so that you’re prepared for any changes.

Recreation and Discretionary Costs

Whether it’s for recreational activities — like going to a concert or sports event — or a small, fun purchase, you should have a category in your budget that covers entertainment and fun. That way, you’ll still be able to enjoy spending money on these things without feeling guilty or going over budget.

This category can also include other non-essential things, like monthly subscriptions to Netflix or Amazon Prime. It can also cover impulse buys.

If you’re still in debt or building your emergency fund, you might only have a small amount of money for this category. But that’s okay — prioritize what you need to first and make adjustments to your budget as you go.

Household Goods

While some people might add household items to their food or grocery budget, Cruze suggested creating a separate budget for these things. Common household goods may include paper towels, shampoo, soap, hairbrushes, toilet paper — the list goes on.

Health-Related Items or Services

Another important category is things related to your health. This can include prescription medication costs that are paid out of pocket, over-the-counter medicines, vitamins, and health-related equipment. It can also include gym memberships or therapeutic treatment. If you’re on a tight budget, try to minimize non-essential purchases here for the time being, while still focusing on having a healthy life.

Everything Else

Last but not least, Cruze suggested creating a miscellaneous category in your monthly budget. Within this category can be anything you might have forgotten, or that only comes up once in a while — like a kid’s birthday party or a hair appointment. By having a separate category for this, you’ll be much less likely to stress yourself out or dip into your savings or emergency fund when something comes up.

Other things that might fit into this category include pest control services, monthly or annual membership fees or dues, home maintenance costs, gifts, and property or income taxes.

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