Why you should only track 3 categories when budgeting

Why you should only track 3 categories when budgeting

author: Sarah Neate

By Sarah Neate

With budgeting, it can be easy to overcomplicate things. If you want to do some smart and effective budgeting, have a go at tracking just these three groups.

What categories should I track?   

Most of your expenses should fall into these three brackets 

  • essentials 
  • variable essentials  
  • non-essentials.  

If you use multiple categories it can become difficult to keep track of. More importantly, it can become difficult to spot the areas where cuts can be made.  


Essential expenses are your priority bills. This includes your mortgage or rent, home insurance, car payments and so on.  

Essential expenses are usually the largest outgoings we have and can make up approximately 50% of our monthly spending. Theyre also the expenses that are the most difficult to cut back on. This is why its good to group them all under one category, as it gives you a clear overview of what you will have left each month, after these items are paid 

Variable essentials  

Variable essentials  are also necessities, but the amount you spend on them can vary from month to month. Examples of these would be food shopping, utility bills, car maintenance and fuel 

This isn’t necessarily your first port of call when looking to cut costs, but you know that if you were really struggling there would be room to make some small savings. For example, you could start buying unbranded food items or reduce the amount you have the heating on to save a bit of cash  


Non-essential basically means anything that we don’t need. This is the area we could save the most money 

It usually includes things such as online shopping, takeaways and alcohol etc. If you tend to do a lot of online shoppingread on here to learn about how to stop impulse buying.  

This section can also include your savings. This could be your savings for things such as holidays, or a new car. You could also be putting money away for emergency savings. 

If you have unpaid debts such as credit cards or student loans, you should consider cutting your spending in this category and use what you save to pay off your debts 

How can I track them?  

  1. Get a spreadsheet or piece of paper, and create three columns – essentials, variables, non-essentials. 
  2. In the essential's column, write down all your fixed payments - total them up so you can see the full monthly cost. 
  3. For the rest of the month, track all your other spending - put them into the appropriate column with what you spent. 
  4. At the end of the month, you’ll be able to see exactly where your money has gone.  

Once you have documented your income and expenditure, you’ll be equipped to set up an estimated budget based on what you’ve been tracking. 

If your non-essentials column has totalled up quite high, then you could set yourself a monthly cap to make sure you're saving some money.   

How can I budget for each category?  

Your budget should revolve around your income, any debts you have and how much you need to spend on fixed payments.  

You may have heard that the perfect balance for a budget is a 50/30/20 splitYou can apply this method to your three category budget. You should delegate approximately 50% of your income to your essentials, 30% to your variable-essentials and 20% to your non-essentials.  

However, it’s important to make sure this fits your personal circumstances and lifestyle. By tracking how much you spend in three categories, you’ll be able to see what your disposable income is and where you could save.  

To learn how to make your financial goals achievable, keep reading here.

Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.

Why you should only track 3 categories when budgeting Why you should only track 3 categories when budgeting