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Building a Line Item Budget

By Krystal Etienne · December 20, 2021 · 10 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Building a Line Item Budget

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 could fall into credit card debt, which can be tricky to pay off.

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

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 and others swear by the envelope method. While these 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 — a line item budget.

Essentially, line item budgets function by grouping related costs together and creating a clearly organized flow of funds. They also track both income and expenses, giving a more complete and accurate financial picture.

What is Considered a Line Item?

A line item budget at its core is a list of expected income streams and pre-planned expenses expected over a specific period of time. A line item is simply one of the items on that list. For example, a line item budget that calculates income from a salaried job and a rental property, and expenses for a cell phone, car insurance and a music subscription would have a total of 5 line items. A line item budget can have as few or as many line items as needed, and they’re often categorized by type to help keep the budget organized.

What are the Advantages of Using a Line Item Budget?

One of the biggest pros of using this kind of budget is the ease with which they can be created. With just a few clicks on a spreadsheet you can establish a basic structure and begin to fill in the data that needs to be recorded. And as priorities change, the budget can be changed just as easily to meet those new needs.

Another major advantage is that it’s easy to understand. Creating a basic list of categorized income and expenses doesn’t require any specialized accounting degree to decipher. It provides an easy to read, at-a-glance view of what to expect from your expenses in a week’s, month’s or year’s time. And specific amounts are clearly displayed on each individual line. Those looking for budgeting for beginners tips may want to consider a line item budget for these two benefits.

What are some Downsides to Line Item Budgets?

Line item budgets rely on fixed and steady income and expenses for accuracy. They can work well for managing predictable finances, but if a budget contains line items that fluctuate, it may not balance properly and can provide inaccurate calculations. For instance, a budget with a line item for income from a candle business may be accurate if the same number of candles is sold each month, but if the candles are sold during the holiday at a discount, the income would not match the preset number on the line budget, and the final calculations would be incorrect.

Another disadvantage of line item budgets is that they are rigid. It’s not uncommon to change spending habits throughout the year to fit changing needs, but those changes aren’t automatically reflected in a line item budget. Spending adjustments may require extensive budget rewrites in order to accurately capture a new spending plan. Anytime financial goals change, with a line budget it requires reviewing and adjusting everything line-by-line in order to stay current.

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 powerful exercise. Tracking your spending can give you direct visibility into your habits and when you understand where your money is going, you can feel empowered to make adjustments.

One way that can help you get excited about budgeting? Changing your mindset. Instead of thinking of budgeting 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, and should, make adjustments and changes to fit your new needs. Your life isn’t stagnant and your budget shouldn’t be either.

Using a Line Item Budget for Personal Finance

Typically, line item budgets are used by small businesses to track their earnings and expenses, and compare them from year to year. They lend well to financial analysis, allowing business owners to easily target areas of their business where they may potentially reduce costs — and where there might be room to grow the company.

While businesses typically have different needs than households or other personal budgets, there are cases when creating a line item budget could be helpful in 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. Outlining each source of income and expense can reveal personal spending habits and opportunities to reduce expenses.

The specific insights you gather from a line item budget, and the changes you make, will ultimately depend on your personal goals and overall financial situation.

Deciding What to Include in a Line Item Budget

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 high-level categories you may want to consider.

Bills and Utilities

This category is fairly self explanatory — after all, everyone’s got 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.


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, snacks, and 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 as well. 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.


Heading to the mall? Shopping expenses like clothing and toys, and even gifts for others, could be added here.


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 here. 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 while 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.

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Putting It All Together

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

On day two you could aim to make it through recording your income and investments, and maybe half of your expenses. On day three 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 hold back.

Recommended: How to Cut Back on Spending

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.

Try adjusting 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.

Alternatives to a Line Item Budget

Though simple and intuitive in nature, line item budgets aren’t a perfect fit for everyone. However, there are many different budgeting methods to choose from to fit unique lifestyle needs. A few popular methods are:


Also known as a proportional budget, this type of budgeting focuses on splitting income into three buckets — needs, wants and savings. Instead of creating lists of expenditures, you instead commit to spending 50% of your income on things you need, 30% on things you want, and the remaining 20% is set aside for savings. Because spending isn’t tracked on a granular level, spend tracking apps and services can be used to help avoid overspending in any one category.

Envelope Method

The envelope method focuses on using physical envelopes and labeling each with a spending category such as food, bills, or entertainment. The envelopes are then filled with the maximum amount of money desired to be spent in each category, and spending throughout the month happens directly from those envelopes. Once an envelope is empty, no more spending can be done in that category, unless taken from another.

Zero Sum

Similar to the line item budget, this approach takes account of all income and expenses. The difference is that with this budget, the goal is to make sure that every incoming dollar is allocated to either a saving or a spending purpose, and to leave nothing left over. Automating finances with services like automatic bill-pay and pre-scheduled bank transfers can help with managing this style of budgeting.

The Takeaway

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 Checking and Savings®, a checking and savings 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 Checking and Savings can help give you valuable insights into your spending. Learn more.

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