Categorizing your expenses as essential or non-essential is a key first step toward making more intentional spending decisions.
Some essential costs — like utilities and groceries — can often be trimmed with small changes.
Cutting back on non-essentials, like dining out or streaming subscriptions, can help free up room in your budget.
Not all expenses are created equal — and whether you’re living on a tight budget or just trying to be more intentional with your spending, it’s important to know which ones should take priority.
In this guide, you’ll learn how to categorize your spending and build a system that supports your real-life needs.
Even if money is tight, some bills simply can’t be skipped. These are the core expenses that keep your life running — the non-negotiables. But even within these categories, there may be ways to cut back to find savings. Here’s what to include:
Housing. This includes rent or mortgage payments, property taxes and insurance (homeowner’s or renter’s). These are usually your biggest monthly expenses — and top priority. If your housing costs are eating up more than 30 percent of your income, consider ways to downsize, refinance or explore housing assistance options in your area.
Utilities. Think electricity, water, gas, trash collection and, yes, internet, especially if you work from home. When it comes to these bills, the tried-and-true method for spending less is to use less: Turn down the thermostat a few degrees, unplug unused electronics or compare providers to see if you can switch to a cheaper internet plan.
Groceries. Food is essential, but that doesn’t mean you can’t find ways to save. Grocery bills have skyrocketed in recent years — with an increase of over 18 percent since 2022 — so look for ways to save by buying in bulk, choosing generic brands, planning meals around what’s on sale and limiting food waste.
Healthcare. Health insurance, medications and routine visits should stay in your budget. Not only are these good for your health, but skipping them could cost you more in the long run. If premiums or copays are high, look into community health clinics or savings programs for prescriptions.
Transportation. Whether you drive or take public transit, getting to work or school is a must. Essential costs here include car payments, insurance, gas and maintenance, or transit passes if you don’t own a vehicle. Look for ways to share rides, use transit more often or opt for a more fuel-efficient car.
Childcare. If you have children, you’ll need to budget for basics like food, clothing, medical care and school expenses. These costs can add up fast, but there may be local programs or tax credits that can help ease the burden.
Debt payments. Staying on top of your credit card, loan or student debt payments helps protect your credit score and avoid costly late fees. Even if you can’t pay more than the minimum, keeping up with those payments is crucial.
While essential expenses keep things running, it’s often the non-essential ones that sneak up and derail your budget. By scaling back in these areas — even just a little — you can free up cash for what really matters and start building more financial stability.
Dining out. Ordering takeout or hitting up your favorite restaurant might be convenient, but it’s one of the fastest drains on your paycheck. You wouldn’t be alone in dialing it back: nearly half of Americans say they’ve started cooking more meals at home since 2024.
Entertainment. From streaming subscriptions and video games to concerts, sporting events and movies, entertainment expenses add up quickly. Take stock of what you’re actually using and enjoying. Can you pause a subscription? Skip a few ticketed events? Setting a monthly cap can help keep your spending in check without cutting out all the fun.
Charitable donations. Giving to causes you care about is important. But if your budget is struggling, it’s okay to scale back temporarily. Once you’ve found firmer financial footing, you can resume donations.
Some spending doesn’t fall neatly into either the “essential” or “non-essential” categories. These in-between expenses might not be mission-critical, but they can serve a real purpose — whether it’s convenience, personal well-being or long-term goals. The key is to evaluate them honestly and decide what’s worth keeping in your current budget.
Retirement contributions. Saving for the future is always important, but if you’re in a short-term financial crunch, it’s okay to pause contributions temporarily. Just be sure to get back on track as soon as your income allows.
Supplemental education costs. Tutoring, online courses and test prep for you or your children can be helpful investments, but they are not always essential. Look into low-cost or free resources like local libraries, school-sponsored programs or study groups before paying out of pocket.
Clothing. Of course, you need clothes that fit, are seasonally appropriate and make you feel confident. But trend-hopping or impulse purchases? That’s where spending can spiral. More people are embracing a “low-buy” mindset in 2025—focusing on fewer, better quality pieces and shopping their own closets first.
Personal care and grooming. Haircuts, skincare and personal hygiene matter — but they can often be reduced or spaced out more. This is also where fitness costs may live: gym memberships, workout classes and wellness apps can chip away at your budget. Look for free or lower-cost alternatives like online workouts, outdoor exercise or basic equipment for home use.
Travel. Family vacations, weekend getaways or holiday travel can be very meaningful. They can also be very expensive. To keep much-needed down-time in your budget, consider staycations, road trips or planning far in advance to score better deals.
If you’ve already trimmed extra expenses and cut back on those “maybe” purchases but still find yourself hunting for extra cash, it might be time to get creative. Here are a few next steps to consider:
If cutting back isn’t enough, consider whether you can temporarily bring in more income. That might mean picking up a freelance gig, babysitting, delivering groceries or selling unused items online.
Call your internet or phone provider and ask if they have lower-cost plans or promotional rates. You can also ask your utility company about budget billing or hardship programs that smooth out seasonal spikes or reduce costs for lower-income households.
If you’re struggling with debt payments, reach out before you fall behind. Many lenders offer hardship programs, reduced interest rates or payment plans. The Consumer Financial Protection Bureau recommends the following:
Get the facts. Debt collectors are required to send you written details of the debt, including who you owe and how much.
Make a realistic plan. Take a close look at your income and spending to calculate how much you can reasonably put toward debt each month.
Put it in writing. If your creditor agrees to new terms, get the agreement documents.
Local nonprofits, organizations or community centers often offer emergency support for essentials like food, transportation or medical expenses. The United Way’s 211.org is a great starting point for finding help near you.
Discover five money-saving tips to boost your savings.
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