I think that we should allocate our money into 5 categories.
1. Necessary expenses. I am talking electricity bills, food, school fees (if you are studying or have children), housing, healthcare, and transportation. I believe this group is where most of our money goes because we basically can't survive without these things.
2. Emergency fund. In cases of emergency, we should be able to get some money for it. Especially in countries where healthcare is not free, we should be prepared to pay if ever we get into accidents or we get sick though hopefully it never happens but still we have to be always prepared either way.
3. Savings. Some people save up for specific things like buying a better house, a better car, getting your kid into a better school among other things. Some people may just save for the sake of having money to pull for emergencies. I think emergency money and money I want to use into building a new home should be separate.
4. Investment. Aside from our day jobs where we get most of our money to pay for our necessary expenses, we should invest in assets to make our money grow. This could be gold, real estate or cryptocurrencies.
5. Luxury. When I mean luxury, I do not actually mean it has to be expensive. But I say luxury because there are things that we do not need but still want to have or experience like traveling or eating at a good restaurant. I believe that even though we should be smart in finances this does not mean we have to completely deprive ourselves of enjoyment.
You should include this one.
6. Leisure This talks about travel, going outside with your family, an other things on which this would be that out of the budget.
7. WantsWe do have our own wishes in life specially on buying up gadgets, cars and other wants on which you should be that also putting up some budget allocation too.
We do know that there's something that would be that totally be those things that we do spend out on which it would be that resulting into that out of budget.
This is why its important that you do always allocate something for you not to get over dropped or would be that out of budget. It all matters about on how you do handle things
accordingly on which it will be that ended up for you to have that shortage of funds. It all matters about money management because if you dont have these things then you would be having
that problem later on.
Good list by the OP and two good additions. With time most of us are able
to figure out what the important things are in life and what we need to fucus our
efforts on, Food, shelter and the future - the future being savings and investments
for a comfortable and healthy life.
In time we also realise that the "wants" are mostly depreciating assets and in terms
of investments are not great options, fancy cars and fancy watches etc. which dont
actually enhance our life.