How Many Categories Should You Have in Your Budget App? (Monarch Money)

If you’ve just started using Monarch Money or any other budgeting app, you’ve probably noticed something – the default categories can be overwhelming. Housing, utilities, entertainment, groceries… and before you know it, you have 50 categories, endless transactions to sort, and zero clarity about your spending. 

This raises one of the most common questions we get from clients:
“How many categories should you have in your budget app?” 

The answer might surprise you – less is more. 

Whether you’re new to personal finance or a seasoned spreadsheet user migrating to Monarch Money, having the right number of categories will make all the difference in how easy and effective budgeting feels. In this guide, you’ll learn exactly how to categorize expenses in Monarch Money, explore common budget categories, see how to create family budget categories, and get practical advice for budgeting for couples. 

And most importantly, you’ll see how a simplified budget system saves time, reduces stress, and keeps you focused on your real money goals. 

In this guide, we’ll cover: 

• How to categorize expenses effectively 
• Common budget categories that work for most people 
• Family budget categories and how to adapt them for couples 
• Pro tips to simplify your budgeting process 
• Why working with a professional can make a difference 

Why Budget Categories Matter 

Your budget categories are the foundation of your budgeting app. Whether you’re using Monarch Money, YNAB, or another tool, strong category design allows you to: 

• Track essential bills and payments 
• Monitor spending habits you want to change or maintain 
• Make better lifestyle and financial decisions 
• Save time by reducing transaction clutter 

If your categories aren’t designed well, your budget becomes harder to maintain, which can cause missed bill payments, overspending in certain areas, or neglecting savings goals. 

How Many Categories Should You Have in Your Budget App? 

While there’s no “one-size-fits-all” number, most people overcomplicate their setup.  From my experience coaching clients, I recommend: 

• 3 to 6 groups with sub-categories for those who want a simple, high-level view. (Example of a Group: A “Recurring Bills” group would include categories like Mortgage, debt, utilities, subscriptions, internet, phone, etc. ) 
• Around 3-12 categories per group of categories for people who want more detail without creating clutter 
• Avoid going beyond 15 categories per group unless you have a specific tracking reason 

A leaner category list means less manual recategorization and more automation through your budgeting app’s rules. If you need finer detail for short periods (e.g., wedding expenses, moving costs), you can always use tags instead of creating a permanent category. 

How to Categorize Expenses 

When figuring out how to categorize expenses in your budget app, focus on these four purposes (borrowed directly from successful financial coaching approaches): 

1. Track Fixed Bills and Due Dates
   Examples: rent/mortgage, insurance, utilities, subscriptions. 
2. Monitor Spending Habits
   If you want to reduce coffee shop visits, create a “Coffee” category. If not, you can merge it into “Dining Out.” 
3. Watch Spending Trends
   Track areas like travel, dining out, or grocery spending to see seasonal or lifestyle patterns. This kind of tracking expenses regularly will give you actionable insights to adjust your budget. 
4. Spend Guilt-Free
   Set aside a “Fun Money” or “Entertainment” category with a set monthly allowance you can spend without worry. 

Common Budget Categories That Work 

If you want a proven, easy-to-maintain structure, try starting with these common budget categories: 

• Fixed Expenses (Housing, Utilities, Insurance, Debt Payments) 
• Variable Lifestyle Costs (Groceries, Dining Out, Entertainment, Shopping) 
• Transportation (Fuel, Public Transit, Car Maintenance) 
• Healthcare (Medical, Fitness) 
• Seasonal/Annual Expenses (Holidays, Vacations, Taxes) 
• Savings and Investments (Retirement, Emergency Fund, Short-term Goals) 

The key is to group similar expenses and avoid splitting them too much — for example, you don’t need separate categories for “Fast Food,” “Date Night,” and “Restaurants” unless it supports a financial goal. 

Family Budget Categories 

When budgeting for a family, simplicity becomes even more important. Here’s how to adapt your budget categories for family budgeting: 

• Combine similar spending areas to avoid clutter (e.g., “Entertainment” instead of splitting “Concerts” and “Movies,” unless needed for analysis). 
• Track shared bills under fixed expenses so everyone knows they’re covered. 
• Use savings categories for big family goals like vacations, education, or buying a home. 

Well-structured family budget categories make it easier to see where the money is going and ensure you’re working toward shared goals. 

Budgeting for Couples 

Budgeting for couples often requires extra flexibility. There are two main approaches: 

1. Fully Combined Categories – All spending falls into shared categories (e.g., “Groceries” includes all shopping by both partners). 
2. Personal Allowance Categories – Each partner has a set “Partner 1 Spending” and “Partner 2 Spending” budget for discretionary purchases. 

If one person cares more about tracking certain purchases in detail, you can create personal subcategories under their set monthly spend. And remember — tags can be especially useful for one-off purchases or irregular expenses. 

Pro Tips for Optimizing Categories in Monarch Money 

• Start small, expand if needed – Begin with broad categories and add detail only if you have a real purpose. 
• Use tags liberally – Tags are perfect for tracking special events without bloating your category list. 
• Review quarterly – Spending habits change. Remove stale categories. 
• Automate with rules – Monarch Money’s transaction rules save time and ensure consistency. 

Why Work With a Budget Coach 

Even with a great budgeting app, setting the right categories and habits can be challenging. That’s where working with an online financial coach can make all the difference. 

At Evolving Money Coaching, we help individuals, couples, and families: 

• Simplify their budgets for clarity and results 
• Get personal budgeting help tailored to their lifestyle 
• Learn tracking expenses efficiently
• Build a stress-free savings strategy that sticks

FAQs 

1. How many categories should I have in my budget?
   Most people do well with 20-25 categories, grouped into broad sections like fixed expenses, lifestyle, savings, and annual costs. But the number doesn’t really matter. Every category should have meaning to you and you should use them all fairly frequently. 
2. What categories should be in a family budget?
   Essential family budget categories include housing, utilities, groceries, transportation, healthcare, savings, and fun/entertainment. I also recommend separating out kid’s activities and expenses from your regular spending if possible. 
3. How should couples handle budgeting categories?
   Couples can opt for either fully combined categories or personal allowances to track individual spending while working toward shared goals.

Final Word: 

In Monarch Money, the right category setup can mean the difference between frustration and clarity. Keep it simple, keep it intentional, and review it regularly. 

If you want a custom budget plan designed for your lifestyle, expert personal budgeting help, and step-by-step support from an online financial coach who understands tracking expenses for maximum results, join the Sustainable Budget Program today and take control of your finances with confidence.