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Building a Line Item Budget

February 24, 2020 · 7 minute read

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Building a Line Item Budget

We’ve all been there. It’s payday and the direct deposit just hit your bank account. You’re feeling flush with cash, so when your friends text alerting you that your favorite band is in town in a few months and tickets are going on sale today you don’t even think about it—you click “add to cart” closely followed by “check out.” What’s life if you’re not living it (and by living we mean rocking out with your fave musicians)?

But spending a little bit too freely can be problematic. Not having a clear idea of how much money is coming in every month and how much money is being spent, could potentially lead to overspending. And if you’re consistently spending more than you make, you can fall into credit card debt, which can be tricky to pay off.

So, if you find yourself scrimping pennies at months end, maybe it’s time to look at your spending habits and tweak (or create) a budget. Having a budget you can actually stick to could eliminate your need to Google “cheap rent week dinners” every month.

Budgeting: Is It Worth It?

Budgeting can seem tedious. After a long day (or week) at work, the last thing you want to do is spend more time in front of a screen plugging in data and recording how much you’ve spent.

But tracking your money can be a really powerful tool. Tracking your spending can give you visibility into your habits and when you understand where your money is going, you can feel empowered to make adjustments.

Being intimately aware of where you are spending money means you can change the habits you aren’t happy with. Perhaps you notice you’re spending way more than you thought you were on exercise classes and you still have a monthly gym membership that you use just a couple times a month. Can you eliminate one option or opt for another exercise?

One way that might help you get excited about budgeting? Changing your mindset. Instead of thinking of it as a series of spending restrictions, you could think of it as a tool you can use to give you the freedom to spend money on what is most important to you.

Setting financial goals can provide a structure to help you build out your budget and plan for the future. So, whether it be saving for retirement, planning a wedding, or jetting off on a trip overseas, having and sticking to a well-crafted budget can help you get there.

It’s also worth noting that your budget is a living document. It’s okay to make changes. As you adjust your goals or experience changes in your income or lifestyle, you can make tweaks and changes to your budget. Your life isn’t stagnant and your budget shouldn’t be either.

What Is a Line Item Budget?

Depending on where you look, you’ll find a variety of budgeting insight and advice. Some tout the benefits of the 50-20-30 rule. Using this theory, 50% of a person’s income is put toward necessities, 20% goes toward saving for the future, and 30% can be used for other discretionary expenses.

While this can offer flexibility and provide a solid structure for your budget, if you’re looking for specific insights, it could be worth starting with a different approach that offers more granular detail into your expenses and spending habits.

If that’s the case, one option to consider is a line item budget. Typically, line item budgets are used by small businesses. One of the biggest pros of this kind of budget is the ease with which they can be created.

With a few clicks of a spreadsheet you can establish a basic structure and begin to fill in the data that needs to be recorded. Businesses often use line item budgets to compare expenses from year to year since they can be neatly created in a spreadsheet.

Essentially, line item budgets function by grouping related costs together. They also track both income and expenses. This type of budget can be useful for businesses because it lends itself well to financial analysis so business owners can easily target areas of their business where there may be potential to reduce costs.

On the other hand, business owners may be able to glean where there’s room to grow an income source for the business.

Using a Line Item Budget for Personal Finance

While businesses typically have different needs from households or other personal budgets, there are cases when creating a line item budget could possibly be helpful for personal finances, too.

Just as they give small businesses insight into opportunities to grow the business or reduce expenses, the same could be said for using a line item budget to manage your personal expenses.

Adapting the concept to household income and expenses could provide similar insight into areas where you could reduce your spending. On the other hand, if there aren’t as many opportunities to cut back on your spending, you could potentially consider finding an additional source of income. The insights you gather and the changes you make will depend on your personal goals and overall financial situation.

Deciding What to Include

Deciding to create a line item budget is just the first step. Next, consider which categories are most important for you to include. A personal budget is just that—personal.

Everyone’s financial situation is different, so this list is not the end-all-be-all solution, but here are a few suggestions with a few subcategories you may want to consider including, depending on your expenses.

Bills and Utilities

This category is fairly self explanatory—after all, everyone’s got bills, bills, bills to pay, right? Things worth listing in this category might include water and electricity bills; cable, internet, or phone bills; or any other monthly bill you have on your expense list.


If you are currently attending school, or have kids, you’ll likely want to consider including things like tuition and fees, the cost of books and other supplies, and any other expenses directly related to education costs.


This one is a little broader and can be highly customized depending on personal spending habits. Do you have a subscription to a streaming service? Do you have an annual subscription to a magazine?

Tickets to the movies, museums, or a concert could also be included in this category. Depending on your hobbies and interests you may find you can expand with additional detail. Avid knitter? You may want to include the cost of your yarn and other supplies.


Record all of the fees charged to your accounts. Late fee on a delayed credit card payment? ATM fees? Add ՚em here. You could add HOA fees and others to this category as well.


Depending on your eating habits you could split this up even further into categories like groceries vs. dining out.


Think of things like your rent or mortgage as well as expenses for maintenance and upkeep of your home.


Expenses for medications, health, dental, or vision insurance, and co-pays can all be included under this category.

Personal Care

Things like toiletries, vitamins, and beauty supplies would fit into this category. Hair cuts, trips to the nail salon, and massages could be included under this heading, too. If desired, you could also include the cost of other self-care practices, like a subscription to a meditation app or exercise classes.


Do you pay for any regular services? Depending on your spending you could include things like dry cleaning services, the cost of having a housekeeper, or the fee you pay your babysitter for a night out in this category.


Heading to the mall? Shopping expenses like clothing and toys could be added into this category.


Everybody’s gotta pay taxes at some point. If you’re a full-time employee, be sure to note the taxes being taken out of your paycheck. If you are a freelancer or independent contractor, note quarterly taxes.

Auto and Transportation

This is a catch-all category for things like your monthly metro pass, gas, car insurance, auto loan payment, and general maintenance on your vehicle.


Add all costs associated with your next great trip to this category. Things like hotels or lodging, air travel, taxis, travel insurance, and tickets and admission for excursions and seeing the sights.

If you’re road-tripping, you could include the cost of gas and other car-related expenses for the trip here too. Also worth including is the cost of food on the road.


You’ll probably want to include all sources of income, not just your regular 9 to 5. If you’re budgeting as a couple, you can include income for both partners. Add income earned from any side jobs or passive income opportunities, too.


Add your contributions to all investment accounts including a 401(k), IRA, 529 accounts, or other brokerage accounts.


A miscellaneous category for expenses that don’t quite fit anywhere else.

Putting It All Together

A list that long can seem overwhelming. Take it one step at a time and, if needed, you could break the work up into a few days. On one, gather all of the relevant documents (tax returns, paychecks, credit card statements, etc) and create the skeleton of your line item budget.

On the second day, you could aim to make it through recording your income and investments, and say, half of your expenses. On the third day, you could finish adding data and add any finishing touches or edits.

After creating this line-item budget, you should have a bird’s-eye view into your spending habits. Take a close look at the information and decide if you are happy with what you see. Now is the time to be honest with yourself and make the changes you feel are necessary.

Want to make cuts to your monthly expenses? Now you know exactly how much money is being spent in each category and where you could stand to save some money.

Can you negotiate a less expensive car insurance fee? Experiment with meal planning to see if you can be intentional about your food spending and potentially cut your grocery bill?

Adjust the thermostat setting while you’re asleep or away from your home to cut your energy bill?

Getting hit with fees on late payments? You might want to add an alert to your calendar or a monthly notification to your phone to remind you when payments are due. Another possible option is to enroll in autopay so you never miss a payment.

Payment history accounts for nearly 35% of your credit score. So making payments on-time consistently could not only eliminate those pesky late fees from your budget but it could also potentially help improve your credit score in the long-term.

Staying on top of Your Budget With SoFi Money

Creating a line item budget can be useful when determining your spending habits, but it’s not always flexible, and if you don’t have the document on hand it could be more difficult to make changes or check-in while you’re busy living.

Enter SoFi Money®, a cash management account, which offers the ability to review your weekly spending in your dashboard within the SoFi app. You can save, spend, and earn all in one product.

SoFi Money can help give you valuable insights into your spending. Learn more.

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