Guide · Method
How to Categorize Monthly Expenses
Seven categories solve 95% of cases. The other 50 only get in the way.
Almost every financial spreadsheet in Brazil starts with 25 categories. In the second month, they become 12. In the third, 5. In the fourth, abandoned. This pattern has a cause: too many categories increase the cognitive cost of each entry. Each purchase requires a decision. Too many decisions lead to abandonment.
The principle: granularity serves decision-making
A category exists to help you decide. If "bakery" and "restaurant" don’t generate different decisions, they are the same category. If "delivery" and "physical restaurant" do (you want to cut one and keep the other), they are separate.
The 7 base categories
| Category | What’s included |
|---|---|
| Housing | Rent, mortgage, condo fees, utilities, internet |
| Food | Groceries, bakery, delivery, restaurant, snack bar |
| Transportation | Fuel, Uber, public transport, parking, maintenance |
| Health | Health plan, pharmacy, therapy, gym, consultation |
| Leisure | Cinema, bar, travel, gifts, hobby, entertainment streaming |
| Debts | Loan, car financing, credit card installment |
| Subscriptions | Apps, technical streaming, antivirus, work tools |
Use case: the category that varies the most
For 80% of Monse users, "food" is the category that varies the most month to month. It makes sense to subdivide. The three useful sub-categories are usually: groceries (big purchase), delivery (daily decision), restaurant (relational leisure). Each has a different decision.
Common mistakes in categorization
- Creating 20 categories in the first month to "cover everything".
- Categorizing installments as the original category (a sofa installment becomes "home", "decoration", "furniture"... forgetting the decision was made months ago).
- Not having "Others", causing paralysis in ambiguous entries.
- Forgetting to mark internal transfers (they are not expenses, they are technical movements).
When to subdivide a category
Subdivide only when: (1) the parent category is above 25% of net income, (2) you are considering cutting a specific part of it, or (3) there is at least 3 months of history showing consistency.
Automatic categorization of my monthMonse categorizes in seconds based on the bank statement.