Which categories a budget should have, and how to customize them

A budget needs one category for each spending decision you actually make, and no more, which for most people is ten to fifteen categories sorted into a handful of groups. Split a category only when its two halves would get different amounts or different treatment. Merge any category that stays too small to change a decision. The test of a category list is whether a change in a total tells you something about your behavior. A list of forty categories tells you forty small things and nothing.

Categories exist to make totals mean something

A category total is useful when it maps to something you can do. Dining out at $340 against a plan of $250 says cook two more nights a week. Miscellaneous at $600 says nothing, because it contains everything. The category list is the difference between the two.

There are two ways to get it wrong. Too coarse, and a single line called living expenses at $2,900 hides every decision inside it. Too fine, and coffee, tea, and bakery are three small numbers about one habit, each too noisy from month to month to compare. The right size is the size of a decision.

A starter list that fits most households

That is nineteen lines, more than most households keep, because the table shows every common decision. Drop the coffee line unless the stop is daily, collapse transportation to one or two lines without a car, and merge the fixed rows you never look at, and the count lands in the ten to fifteen the opening describes. Children, Pets, Education, and Travel are groups to add when they apply, each with one or two categories. Income gets a category or two of its own, such as paycheck and other income, and movements between your own accounts, such as card payments and transfers, get categories that are never counted as spending.

Split, merge, or rename

1. Split a category when its halves would get different amounts or different treatment. Groceries and dining out, yes: different amounts, different decisions, different fixes when they run over. Restaurants and fast food, usually no: both are the decision not to cook.
2. Merge a category when it stays under about 2% of spending for three months and its absence would change no decision. Tea merges into coffee shops. Tolls merge into parking.
3. Rename a category to what you say out loud. A budget you can read at a glance is one you will read.
4. Give fixed bills fewer categories than flexible spending. There is no decision inside the electric bill, so one utilities category is enough for four bills. Flexible spending holds the decisions and deserves the finer list.

A worked example, from 28 categories to 14

A first category list, built in a hurry, had 28 lines. After three months, the averages showed which ones were decisions and which were noise.

The remaining categories were already the size of a decision and stayed. The new list has 14 lines, dining out is one number that can be compared with last month's, and the $310 of miscellaneous turned out to be mostly household supplies and gifts, which now have amounts.

Keep the list stable

Change the list at most once a quarter. A category that means the same thing every month is worth more than a precise one that changed in March. The same merchant should land in the same category every time, so that a change in a total is a change in your behavior rather than in your filing.

Archive rather than delete. A category you stop using still has history, and the history is what makes last year comparable with this one.

Let groups do the summarizing. Food is groceries plus dining out; Home is rent plus utilities plus supplies. Grouped totals show the shape of your spending, housing against food against transportation, without any adding up, and the shape is what changes slowly and matters most.

Common mistakes

• Categories named after stores. A warehouse club sells groceries, tires, and a television in one receipt. The category is what was bought.
• One category per subscription. Twelve lines of $4 to $15 that never change and never get looked at. One subscriptions category, reviewed quarterly, does the job.
• A giant miscellaneous. If it holds more than a tenth of spending, it is hiding at least one real category.
• A category for a project that spans categories. A vacation is flights, hotels, meals, and gifts. It needs a label that cuts across categories, not a category of its own.
• Card payments and transfers as spending categories. They are movements between your own accounts, and counting them doubles the month.
• Reorganizing every month. The comparisons reset each time, and the budget never gets a chance to show a trend.

Common questions

How many categories is too many? Past about twenty for one household, the extra ones are usually stores, single subscriptions, or splits that would get the same amount anyway. Count the decisions you make about money in a month; that is roughly the right number of spending categories.

Should a store be a category? No. A store is where the money went, and the merchant view of your spending shows that on its own. A category is what the money bought, and one receipt from a superstore can belong to three of them.

Do I need income categories? One or two, such as paycheck and other income, so that the budget can compare what came in with what went out. Refunds and reimbursements are not income; they reduce the category of the original purchase.

Where does saving go? As a transfer to a savings account, which is a movement rather than spending, or as a savings line kept separate from the spending categories. What matters is that it is never mixed into a spending total, where it would look like money that left.

How do I track a vacation or a renovation? With a label that cuts across categories. The flights stay in travel, the meals in dining out, and the label adds them up, so the trip has a total without distorting the categories it touched.

Should groceries and household supplies be separate? Only if you would give them different amounts and change them for different reasons. In a household where both come from the same weekly shop, one category is honest and two are guesswork about the receipt.

How Zypper handles this

Zypper starts you with a default set and lets you reshape it. Each category has a name and an emoji and lives inside a category group, and a group has a color and a type, income, spending, savings, or transfer, that its categories share. The default groups include Home, Food, Dining Out, Utilities, Auto & Transportation, Shopping, Fun, and Health & Wellness, with a Transfer group for credit card payments and transfers so that movements never count as spending. In the categories settings you can create a category in any group, rename or restyle one, move a spending category to another spending group, archive a category you no longer use so that it leaves the pickers while its history stays intact, and delete one permanently with its transactions reassigned to a category of the same type that you choose. Changes flow through everywhere at once: the budget, the cash flow breakdowns, the filters, and the rules. Archiving applies to every month of the budget, past ones included, and a category that a rule assigns transactions to can't be archived until the rule changes. See Customizing categories and groups and Transaction rules for the details, or get started with Zypper to shape your own list.