How To Create A Simple Five Category Budget

how to create a five category budget

Making a budget is the best way to make sure that you’re handling your spending. However, most people struggle because they don’t know how to get started. The thought of creating a budget from scratch can be pretty overwhelming at times. Fortunately, you can start with something simple. 

Today, we’re going to introduce you to a basic five category budget that you can use to get your spending under wraps and ensure that you’re prepared for anything. This is the kind of budget you’ll need to use if you’re going beyond the 50/30/20 budget where you’re putting 20% into savings, 30% into your wallet, and 50% into your bills. 

The five category budget gives you a little bit of extra structure to work with so you can see where your money is going every month. 


One of the most important budget categories involves looking at what you spend on the place where you live. In an ideal world, your housing shouldn’t account for more than about 40% of your take-home income. However, there are cases when you might need to go beyond this, particularly if you’re living in an area where real estate isn’t cheap. 

If you’re struggling with trimming your housing costs when it comes to things like mortgage and rent bills, look into other expenses to do with the house that you can trim, such as utility bills from expensive vendors, and costs for things like cable and insurance. Remember, if you do have a mortgage, you can always look into refinancing every so often to see if you can bring the pricing down a little. 


The next expense to think about is transportation. However, this shouldn’t take up mor than around 15% of your income ideally. If you can, keep transportation costs down to 10%, which means that you shouldn’t be spending a fortune on not just your car maintenance, but your gas bills, and even the loan that you used to get your car in the first place. 

Remember, transportation costs go beyond your basic car payments. The costs of transportation include everything, from gasoline and oil changes, to car washes, tune-ups car repairs and similar expenses that you might forget about from time to time. Your transportation costs might even include the amount you spend for parking when you go to work each day. 

Other living expenses

Living expenses beyond your car and your home are usually discretionary expenses, and they shouldn’t take up more than 20% of your income if possible. Living expenses like recreational activities, entertainment, and even paying for streaming services that you use at home shouldn’t be taking up a huge portion of your money every month. If you think that these miscellaneous expenses are costing you too much, then you might need to find ways to cut down. 

Beyond what we’ve covered so far, other living expenses might include things like paying for your cell contract or dealing with things like paying for clothes and other items that you need around the home from time to time. The standard “food” bill should be part of your home bills, not something that you put into your extra expenses. 


The saying that you should always pay yourself first is a good motto, although it’s often difficult for people to stick to. With each paycheck, it’s important that you put at least 10% of your income away to savings. You could even think about setting up a separate account that you can’t access as frequently, so you’re less tempted to spend this money. 

Consider putting your cash in a savings account that you don’t have a card for or look for something that allows you to earn interest whenever you make sure that you don’t remove money from your reserves for a while. This will eventually give you some extra money in your pocket, and it will ensure that you can approach your goals faster. 

Debt payoff

Finally, remember that paying off your debts shouldn’t consume more than 15% of your income. This includes any student loans you have, and short term loans such as those offered by Omacl. You don’t have to worry about things like mortgage and auto payments in this sector because you’ve dealt with those in the other segments we’ve mentioned above. 

Ideally, once you get rid of debt completely, you should be able to put the money you have in this part of your account towards savings instead. 

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