What are spending categories and how can they help?

Tracking your spending can help you understand your purchasing habits and assist with making an effective personal budget. That said, it’s not always easy to categorize your spending, especially if you’re tracking expenses manually.

Fortunately, Capital One offers different ways to help you keep track of your finances. Learn more about tools like the Capital One Mobile app; Eno, your Capital One virtual assistant; and Map Your Spend, a tool that helps you start thinking about where your money is going each month. 

Key takeaways

• Spending categories classify the expenses you incur on a regular basis, including food, housing, entertainment and more.
• Understanding your spending categories can help you pinpoint areas to cut back on as you work toward your financial goals.
• Digital tools from Capital One, like the Mobile app and Eno, are there to help you along the way. 
• Identifying your major spending categories can have additional benefits, like helping you choose a Capital One rewards credit card that suits your lifestyle.

Spending categories are a way of classifying how you spend your money. These categories may include essentials—like food, housing and medical care—as well as nonessentials, such as travel and entertainment. Defining these categories can help you better understand your spending habits and may even make budgeting more effective.

Take a closer look at some common essential and nonessential spending categories you may encounter.

Essential spending categories are the necessities. They form the foundation of your personal budget and may include:

• Rent/mortgage payments: This can include rent or mortgage payments on a house or apartment, property taxes, maintenance charges, homeowners association (HOA) fees and other associated expenses.
• Utilities: Utilities include basic services like gas, heat and water. You may also add cellphone and internet bills to this category.
• Food: While what you spend on food may vary depending on the month, having an average food budget can help you plan your trips to the grocery store. 
• Medical and health care: This category can include health insurance premiums, recurring medical bills, copays, prescription drugs and more. If you have access to a health savings account (HSA), you can include that in this category, too.
• Insurance: This category may cover auto insurance, life insurance, renters insurance, disability insurance and more.
• Child care: If you have children, you may need a category for child care. This could feature costs associated with day care, a nanny or the occasional babysitter.
• Transportation: Transportation costs can vary and may include fuel, Department of Motor Vehicle (DMV) fees, oil changes, public transportation and more.
• Debt: Whether for student loans, credit card bills or car payments, debt repayment is an essential part of any personal budget.

Nonessential spending categories typically describe wants versus needs. Sometimes called discretionary spending categories, these categories are less about your monthly necessities and more about fun and leisure. For instance, nonessential spending categories could include: 

• Travel and entertainment: The expenses in this category can range from streaming service subscriptions to vacation planning.
• Personal spending: This is a catchall for miscellaneous items, like on-the-go snacks or luxury purchases. Personal care, like gym memberships, may also fall into this category.
• Emergency fund: While not technically essential, an emergency fund can be useful for unexpected expenses and may be prioritized as you work toward your savings goals. How much you dedicate to your emergency fund will depend on your income and other categories.

Once you have a sense of your spending categories, you can start to track where your money is going. Here are some easy ways Capital One can help you get started.

The Capital One Mobile app can help you get a bird’s-eye view of your spending. Within the app, you can view your Capital One credit card transactions as well as your recurring bills and subscriptions to get a picture of how you spend your money. If you’re already a cardholder, you can download the app and create a profile to get started. 

If you have an eligible Capital One credit card, you can also enjoy the benefits of Eno, your Capital One virtual assistant. Among other features, Eno looks for duplicate charges on your credit card account and can notify you if something unusual is spotted. You can also chat with Eno online or in the Mobile app. For example, you can ask Eno for a list of recent transactions for an at-a-glance look at your spending.

Eno is free for Capital One cardholders. 

Map Your Spend from Capital One helps you better understand your spending habits and make adjustments as needed. You can pick from a list of spending categories—and even add your own for extra flexibility. You can then sort the categories into needs and wants and rank them by the level of importance. Next, you can estimate your monthly spending for each category. Map Your Spend will then calculate and break down your expenses.

Once you have your tools and sorted your expenses into categories, you can make a budget. There are plenty of strategies for budgeting—from the 50/30/20 method to the zero-based budgeting approach. 

Regardless of which method you choose, most budgeting strategies involve accounting for your monthly income and dividing it into certain categories. So if you’ve already got a clear picture of your expenses, you’re one step closer to building an effective personal budget.

Understanding spending categories offers another benefit: the opportunity to make the most of your expenses. For instance, you may be able to find a Capital One rewards card tailored to specific spending categories. 

For example, if you love to travel, you may want to consider the Capital One Venture or Venture X card. These cards let you earn miles on purchases, which you can then redeem for travel costs. Or, if you are focused on saving money and getting the most out of monthly must-haves, you could try out a cash-back card that offers money back on everyday spending, like groceries, gas and more.

Ready to start earning rewards on your monthly expenses? Compare credit cards and find the right one for you today.

Paying attention to how you spend your money can help you keep track of your finances and plan for your financial goals. Wherever you are in the process, Capital One has plenty of tools to help. Check out the Capital One Mobile app to get started.