How to categorise expenses so the data is actually useful

Categories are what turn a list of payments into an answer. Choosing them well makes every later report more useful.

1. Start with ten or so

Rent, groceries, transport, bills, eating out, shopping, health, entertainment, education, and other. You can add more later when a real need appears.

2. Categorise by purpose, not by merchant

A purchase at a supermarket might be groceries or household supplies. What it was for decides the category.

3. Keep fixed and flexible apart

Separating bills you cannot change from spending you can control shows where your choices actually are.

4. Be consistent

The same kind of spending should always land in the same place. Consistency matters more than perfect labels.

5. Review the 'other' bucket

If it grows large, something deserves its own category.