Spend Categorization Definition

There are a number of ways to categorize spending. The most common method is by dividing spending into fixed and variable categories. Fixed expenses are those that remain the same each month, such as mortgage or rent payments, while variable expenses can fluctuate, such as utility bills.

Some experts also recommend creating a third category for discretionary spending. This includes items that are not essential, such as entertainment or dining out. Tracking discretionary spending can help you identify areas where you may be able to cut back if necessary.

Whatever method you use to categorize your spending, the goal is to get a clear picture of where your money is going each month. This can help you make informed decisions about how to best allocate your resources.