What are common expense categories?

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Common expense categories can be broken down into several primary types. Here's a useful categorization:

  1. Committed Expenses:

    • Rent or Mortgage
    • Utilities (electric, gas, water, trash)
    • Insurance (car, health)
    • Car payments
    • Internet and phone bills

  2. Non-Committed Expenses:

    • Groceries
    • Transportation (fuel, public transit)
    • Kids' activities and sports
    • Dining out
    • Entertainment

  3. Irregular but Predictable Expenses:

    • Vacation savings
    • Birthday and holiday gifts
    • Car maintenance
    • Annual and semi-annual insurance payments
    • Home repairs and maintenance

Managing these categories efficiently involves proactive budgeting to avoid surprises and ensure that all expenses are planned for in advance. For example, saving a little each month for predictable events like vacations and birthdays can help avoid financial strain when these expenses arise.1 2

Proactive Budgeting

Larry shares tips on how to be proactive with budgeting by setting a ceiling for expenses, categorizing expenses into committed and non-committed costs, and planning ahead for expected expenses like vacations and birthdays. Being proactive with budgeting helps make better buying decisions and ensures that expenses are accounted for.

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