In the first step of creating a budget, we discussed putting together all of your financial information and figuring out your expenses.

The next step is to organize that information. Putting the numbers in the right place will help you to cut expenses and stay accountable to your budget in the future. Here are some tips for how to list your expenses so that you can keep better track of your spending.


Use Categories When Starting Your Budget

Take all of your expenses from the last step and, using them as a guide, create categories. Start with big categories (for example: housing). Under a category like housing, include your rent or mortgage, your maintenance costs, your utilities, furniture costs, and anything else that relates to where you live.

Do the same for each of your expenses. Every little thing you’ve bought in the last few months should fit into a category. That way you know you’ve created all the categories you might need.

Next you can divide into subcategories. In the housing category, a subcategory might be maintenance, and there you can put all of the projects that fit into the maintenance subcategory.

Depending on your family’s priorities, you can also create categories for things you want to spend money on but perhaps do not right now. For example, you can create a category for savings, even if you don’t save much money right now, and a category for giving, even if you don’t currently donate money to anything.

Why have categories at all?


    1. When you figure out a category for each of your expenses, you get a better feel for where all of your money is going.
    2. Categories allow you to divide up your income in an organized way to prevent over-spending (keep reading for more info on that).



Divide Up Your Income By Category

When you have all of your expenses placed into categories, you can then divide up your income to keep yourself on track.


    • Take the money allotted for each section and put it in a labelled envelope or small file box divided up by your categories.
    • You may have 100 envelopes or just a few, depending on the categories you created. As long as it’s organized and you can find everything, it doesn’t matter how many categories you have.
    • Only use the money for the correct category. That means every time you want to go to the movies, you have to take the cash out of your entertainment envelope. If the envelope is empty, you can’t take it from anywhere else.
    • If your expenses exceed your income, prioritize your categories. You may need to put money into your housing and transportation envelopes first, for example, and entertainment may need to come last.
    • If you have trouble prioritizing your costs or paying your priority expenses first, you might be able to set up an automatic program where your housing costs are taken out of your bank account each month. This can have advantages and disadvantages. If your income is irregular, it may not be a wise option; but if it is regular, at least for now, having a program set up for your regular bills can keep you on track.
    • If you have money budgeted for savings, have the bank put it there automatically. Your bank teller can help you get that set up.


What you’ll find in using categories is that some of your expenses are more important than others, but they may not be the ones where you’re money has been going. In general, families often overspend on entertainment and underspend on bills, food and other important categories.

It is extremely common to re-organize your expenses after seeing how they look divided into categories. We’ll be talking about that in a later section.

In the meantime, if your expenses are too much for you to handle, or if paying your bills is starting to feel more and more impossible, we may be able to help. If you are in a copious amount of debt, credit collectors are harassing you, or you are being threatened with a lawsuit, you should call a top liquidation lawyer Memphis, TN has to offer for further advice. Talk with one of our Memphis area attorneys to see what options you have for handling your debt and getting some relief.