Setting Up Your Expense Categories


Michael and I started a new series within the Michael & Marnie series that focuses on Budgeting.  If you missed the first video, take a look at it here.  This week, we decided to narrow in on what we feel is a key feature of a good budget-setting up our expense categories.  Grab a cup of coffee and a snack, because this is a LONG post!

To review, here’s what we’ve covered so far:

When we say all, we mean all…from your daily Starbucks fix to the newspaper you pick up on Sundays, write it down.  Go over old credit card statements, bank account statements, and figure out exactly where every penny went for as far back as you can go, ideally a full calendar year, if not longer.  You’re going to use these numbers later to look for patterns and figure out how to plan what goes where in the budget.  Don’t worry about how much you’re actually spending, just focus on WHERE the money has gone.

This is the fun part-figuring out where everything fits into the big jigsaw puzzle called Your Budget.  Again, at this point we’re not going to get critical about the actual amounts.  We just need to figure out where to “file” each line item.  For us, we refer to the 3 buckets: MQA, Credit Card Purchases, and Cash Items.

BUCKET #1: “MQA”-otherwise known as Monthly, Quarterly, Annual Expenses
This is the biggest bucket, both in the sheer percentage of your allotted budget, and categories.  The expenses in this bucket are usually paid by check (either the actual paper kind or virtually by bank draft or electronic check).  It’s best to imagine this as an escrow account or holding account for bills or expenses that are not unexpected.  We know how much these amounts generally are and have already set aside the money to pay for them in this bucket.  Michael and I also have a “Bill Pay” account, or operating account, that we use to actually pay the bills.  We don’t keep money in this account, but transfer what we need out of the MQA account into this account to pay the bills.  To make it easier for you to picture, I’ve included a breakdown of the categories we have in our budget, as well as basic PDF spreadsheets for Monthly and Quarterly/Annual for you to reference.  When you view the PDF, the categories run across the top of the table, and the months run down the side.  Inside each box are two places to fill in numbers: “reserve” is for how much you’ve set aside for that month’s payment, and “paid” is what was actually paid.  That’s another great tool to see how accurate your budgeting turned out to be.  To download an editable version, click Monthly-Excel or Quarterly/Annual-Excel.

Monthly Categories:

  • Utility bills (water, gas, electric)
  • Health club or other club dues
  • Phone bill (can include mobile bill as well, ours are separate line items)
  • Cable/Internet
  • Car payment
  • Landscaper
  • Pool maintenance
  • Car Insurance
  • Health Insurance
  • Homeowners Insurance

Quarterly Categories:

  • Congregational dues (or tithing if you belong to a church)
  • Life insurance
  • Pest Control
  • Home Security/Alarm System
  • Recycling/Trash
  • Property Owners Association
  • Vision (Contact Lenses)
  • Home Maintenance (we set aside a certain amount that we expect to pay for routine stuff, like checking the AC units, plumbing, etc)
  • Federal Income Tax

Annual Categories:

  • Property Taxes
  • Homeowners Association

As much as we like to pay for things by check or cash, sometimes it just isn’t feasible for us.  Using a credit card is sometimes a more secure option, and who doesn’t like the points?  So here are some categories that we file under this bucket for our budget:

  • Gas for the vehicles
  • Groceries
  • Prescriptions
  • School lunches
  • Haircuts

I should add that while we use a credit card to purchase the above mentioned things, the amount charged is immediately transferred from our bank account to the credit card company THE DAY WE MAKE THE PURCHASE.  We do not advocate carrying a balance on the card.  To ensure that money is set aside for this purpose, we have a second bank account (escrow account) for this bucket.

Some people think it’s old-fashioned, but Michael and I still like to pay in actual paper money for certain things.  Generally, we use cash for the budget items that are the hardest for us to keep to a budget, like eating out and clothing. So we use an envelope system-at the beginning of each month, we fill up the “envelope” with the allotted amount (sometimes it’s a real envelope, other times it’s really just a savings account set up for that specific category), and once it’s empty, it doesn’t get filled up again until the beginning of the next month.  If you have a hard time sticking to a budget, I highly recommend this method!!  Here are the categories we include in this bucket:

  • Cleaning service
  • School supplies/extracurricular kids’ expenses (sports gear, tutoring, etc)
  • Entertainment (eating out, movies, family outings)
  • Car repairs (oil changes, routine items)
  • Dog expenses (vet, boarding, grooming, food)
  • Vacation (we set aside a certain amount each month in a virtual envelope to use toward a family vacation)

This is just how we set it up-if it makes more sense for you to move some of these categories into the MQA bucket, go for it.

So for those of you that are following along, here’s your homework assignment for next week: now that you have all your expenses, try to put each one into the above buckets.  Then you’ll be ready for the next step-how to figure out how much money to allot for each bucket/category!

Can’t wait to see you next Monday with the next installment of the Michael & Marnie Monday Budgeting Series!

Similar Posts


  1. Just watched the video and clicked through to your blog and want to thank both you and Michael. These videos have been a huge help to both my husband and I over here in the UK as we review our finances and I am so grateful for the time and effort you have both put in. I also wanted to say that I am greatly heartened to observe such a loving and caring committed relationship between you and Michael, as evident in your videos. I am sure that having such accountability and control over your finances plays a part in that. I am inspired by your example! Thanks again, Steph x

    1. Thank you, Steph! I’m so pleased that we could be of help! I can definitely say that since we’re on the same page with finances, we don’t have very much to fight about! 🙂

  2. I use basically this exact system already but I do have all of my utilities, cell phones, etc auto paid to my credit card to get the points and then pay them from my operating account.

  3. I also mentioned this to my husband. It’s a big help. I too still use the envelope method. Love these mini financial series.

  4. I’m all about budgeting and already have three accounts, so this will work great for me.

    I’m from Texas and you two make me laugh because you’re a true Texas couple by your actions toward each other.

    Can’t wait till the next video!

  5. I love that you two are talking about this so honestly and openly. I think this topic has always been so taboo and maybe even considered inappropriate to discuss but I think that just isn’t true! I think managing money is something that most people don’t learn until it’s too late and they’re in financial crisis. Thank you for taking the time to talk about this and get the conversation around finances going!

  6. Thanks for explaining this. I love your videos with Michael! I’m wondering where do things like clothes, makeup, jewelry, sporting equipment, electronics, etc. go in the budget? Do you and Michael have separate accounts for these?

    1. We don’t have separate accounts, but we do have separate line items for those. That would be in Bucket #2 or #3, depending on how you wanted to pay for those things. For us it’s mostly in Bucket #3.

  7. My daughter is starting her 3rd year of college and I’m trying to get her to use the envelop system. I spoil her way too mu ch by monitoring her account and making sure she always has money . This year there money is not going to magically appear whenever she needs it. She is very conservative, but I want her to learn to live within a budget. She’ll be an engineer so she’ll make good money and I want her to manage it wisely. Thanks for this series. You guys are really helping people out.

  8. Thank you so much Marnie and Michael for putting these budgeting videos up!! My daughter and I are really enjoying them. We follow Dave Ramsey pretty much, but it is always nice to get another perspective. I was hoping you could help elaborate on where we set up these different accounts. I know the big banks have a lot of fees if you transfer to many times a month etc. Can you give us some insight as to how you do that. Thank you so much for being so open and willing to share!!! Budgeting is always a hard topic to discuss with others. Love you two!!!!

    1. We use Bank of America and we don’t have any fees. I’d shop around and see who can give you the best options.

  9. Made too the end Monday video !love videos love your remodeling video of your bathroom and it exactly what I want for my bathroom someday when we get our house! I love your Hanukkah video with a potato latkes I’m going to try that next time I make them we celebrate Hanukkah and Christmas and all of the holidays well all the Hanukkah Christmas holidays!!!! I am Jewish my kids are Jewish my mother is Jewish and my family except for my father and my husband so we celebrate Hanukkah Christmas and all the Jewish holidays for the most part and and a little bit of
    Easter mostly just the candy and egg hunt part and dressing up!

  10. hi Marnie & Michael just started following you & watched your budget videos. thank you.
    wanted to clarify something for me & please forgive me if you already answered or covered.
    so basically, you guys have 4 bank accounts?
    1. MQA – checking account
    2. Credit Card – checking account??
    3. Cash- savings account??
    4. Bill paying account- checking account?
    so everytime you need to pay an MQA expense, you transfer that amount to the bill paying account & pay it off that way?
    the credit card & cash expenses, you pay out of those accounts directly? without transferring to the bill pay accounts?
    is the money for income taxes being held in the MQA account?

  11. Just found these u tube tutorials. I have always wanted to know how to set up a budget. Thank you so much. This will be a big help. I cannot wait to start the process.
    I also love your makeup videos. I do also have a love for cosmetics and beauty. Thanjavur you.

Leave a Reply

Your email address will not be published. Required fields are marked *