One of the first orders of business when making a budget is to create a list of budget categories. It sounds pretty simple, but defining those categories can be tricky and lead to second-guessing:

💭 “How many categories should I have?”
💭 “How specific should my categories be?”
💭 “Should I group all bills & utilities in a single category?”
💭 “Should I track restaurants as food or entertainment?”
💭 “I must be forgetting something!”

Our advice? Take a deep breath —

Don’t worry about having a perfect list of categories when starting out. Instead, focus on some basic budget categories that can be refined over time. As you experiment and learn what works for you, you will be able to adjust your category setup!

So, where do we start?

Here is a list of general expense categories based on the average person’s spending habits to help you get started.

• Home, Auto
• Groceries
• Restaurants
• Gas, Transportation
• Entertainment
• Personal Care
• Shopping
• Gifts
• Travel
• Bank Fees

If you have children or pets, you might want to create separate categories for them as well:

• Childcare
• Pets

Using Lunch Money’s Default Categories

The Lunch Money onboarding process simplifies the category setup by providing a list of default categories that you can personalize with a few clicks:

You will notice that Lunch Money suggests having categories for income, withdrawals, and transfers (including credit card payments). You don’t budget for these like you do for expense categories. However, they organize your cash flow by giving a home to non-expense transactions. Having your income accounted for also sets a guideline for your spending budget.

Let’s take it to the next level!

Once you’ve set up your initial category list, you can begin creating more detailed categories. This allows you to better identify your spending habits, differentiate needs vs. wants, and set more precise spending limits.

When budgeting for essentials, such as “Home” or “Auto”, you may want to use a general category without subcategories, but creating groups with detailed categories, like “Home Maintenance”, “Furniture and Appliances”,”Rent”, or “Utilities”, will make it easier for you to find money-saving opportunities over time. This is especially helpful with discretionary categories, such as “Entertainment” or “Shopping”.

Here are some subcategories you might want to consider using, along with their suggested parent categories:

• Home, Auto: Home maintenance, Car maintenance, Furniture & Appliances, Rent, Utilities, Phone & Internet, Insurance
• Groceries: Groceries, Cleaning Supplies, Toiletries
• Restaurants: Restaurants, Bars & Pubs, Coffee Shops
• Gas, Transportation: Gasoline, Highway Tolls, Parking, Uber & Ridesharing, Public Transportation
• Entertainment: Hobbies, Gaming, Streaming Services
• Personal Care: Health insurance, Medical Services & Medication, Gym & Fitness, Haircuts, Pedicure & Manicures, Education
• Shopping: Clothing, Home Decor, Tools & Equipment, Construction Materials
• Gifts: Gifts, Donations, Greeting Cards
• Travel: Flights, Travel Transportation, Accommodation, Food, Tourist Attractions
• Bank Fees: Monthly fee, Overdraft fees, ATM fees, Cheques
• Childcare: Hygiene, Feeding, Babysitting, Education, Toys & Activities, Furnishings
• Pets: Pet Food, Pet Litter, Veterinary Expenses, Other Items

The Lunch Money onboarding process will allow you to create individual categories. If you decide to add subcategories, as mentioned above, the general categories would be referred to as category groups in Lunch Money, in contrast to the subcategories nested within them. Having category groups is helpful to view aggregate spending or budgets within a category group and running analytics or identifying stats/trends by category group.

You can have as many categories and group categories as you see fit, and adjust the general categories above in a way that works for you! For example, you may choose to replace the Home, Auto category with two separate group categories, one for Home and one for Auto:

Additionally, note that certain subcategories may fit in more than one general category. In that case, feel free to choose the placement based on what makes the most sense to you.

For example, a gym membership may fit under either “Personal Care” or “Entertainment”, depending on how you view it as part of your lifestyle. If you go to the gym for health reasons, you may regard it as a higher priority under “Personal Care”. Thinking of categories in groups defined by the level of necessity will help you budget smarter and adjust limits for essentials and non-essentials.

Personal vs. Business Spending

Do you own your own business? If so, you may want to track both your personal and business spending. With Lunch Money, you can do this without switching between two apps. Here are three ways to track your business expenses in Lunch Money:

• Option 1: Set up a general group category called “Business” that contains the individual expense categories (e.g., “Rent & Utilities,” “Office Expenses & Supplies,” “Payroll,” “Insurance,” etc.).
• Option 2: Set up multiple group categories for the business and add an identifier to differentiate them from the personal group categories (e.g., “Bills & Utilities (Biz)”, “Income (Biz)”, etc.).
• Option 3: Set up a separate budget account to manage your business expenses, and switch between your personal and business budget accounts. Lunch Money makes this easy by offering unlimited budget accounts at no additional cost!

Get Inspired by the Lunch Money Community

If you are still unsure about the category setup process, check out the Show-and-Tell channel on Lunch Money’s Discord server, where community members share their unique setups!

For example, check out this excellent setup by maxervo, who used a diamond emoji to identify group categories (🔸) and more descriptive emojis for the subcategories. Pay attention as well to the setup for the food and housing categories:

Another great example is this setup by harvest, who created group categories such as “Daily Necessities” and “Quality of Life” to track and budget for essential and discretionary expenses separately:

Lastly, Evan has an “Experiences” group category to help track and budget multiple discretionary spending, along with a “Utility” category group to track essential spending categories:

Spot Trends, Gain Insights, Adapt

You will begin spotting trends and spending habits as you stay on top of your finances and categorize your expenses. Lunch Money has dedicated pages for Stats and Trends to help you gain insights and learn from them! For example, on the Stats page, you can see top categories by amount spent and by number of transactions. On the Trends page, you can filter by any category to see the totals and counts.

Lunch Money also offers a powerful advanced Query Tool that allows you to set and filter any combination of categories, change periods and time granularity, and visualize the data in various ways, whether a data table, pie chart, or stacked bar chart!

Ultimately, approach your budgeting journey with an open mind, a willingness to learn about yourself, and a commitment to staying organized! To streamline your workflow, take advantage of Lunch Money’s automation features, such as automatic bank syncing, auto-categorization, and rules. Don’t worry about perfecting your category setup and budgeting strategy right away.

By staying organized and on top of your finances, you will be able to spot trends in your spending, identify bad habits, and apply those insights to improve your budgeting strategy and maximize your savings! 🙌