![]() This is because debts are obligations that must be paid and therefore go into the household operations group. While the only debts included in this example are mortgage and car loans, any other debts would also go here. They are necessary parts of being a human in your household. These are the things that you can't compromise on. The household operations group often contains these budget categories: Setting up automated recurring transfers into your investment and retirement accounts (including 529 accounts) is the best way to keep your household budget predictable while keeping your investment plan on track. Use your travel and vacation account to pay for vacations so it never hits your household budget. This helps you keep your household budget consistent and predictable while building up a travel and vacation budget. Then, save a regular monthly amount into this account. Set up a separate bank account for travel and vacations. You want to avoid big variations in cash flow as much as possible. This helps you keep your household budget running smoothly and consistently. I recommend setting up separate accounts for anything that is a larger irregular expense. It's very common for vacations to destroy a budget because it was paid in chunks out of cash flow (or worse, put on a credit card with no plan for paying it off). ![]() One thing that trips many people up is the lack of consistency regarding these things, especially travel. The life goals group often contains these budget categories:īuilding up short-term savings, long-term retirement savings, and kids' college savings are all pretty important life goals common to many of us. Let's see a template of what these categories might look like. This includes mortgage or rent, food, utilities, transportation, and other things that are necessities.įinally, "discretionary spending" is for the things that we want and enjoy, but aren't mission-critical to run the household. Next is "household operations" which is contains everything we need to keep the household running. Because we tend to overlook long-term goals, I like to place the "life goals" group at the top. It's important to keep things like retirement savings front and center. Technically, life goals are also discretionary but I think it's essential to place them into a distinct category because they are often forgotten or placed on the back burner. Discretionary spending is for things that we want but don't necessarily need. The "household operations" group is for "must haves" to operate the household. Life goals are for big-picture things we value highly, such as planning for the future. Why these three? They are designed to be functional without getting too in the weeds. When organizing your budget, it can be helpful to group your categories in a way that helps you see broad priorities.
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