How many categories should you have in your budget?

The correct answer emphasizes the flexibility required in budgeting based on individual circumstances. A budget should effectively reflect a person's financial situation, goals, and spending habits. This means that the number of categories can vary widely from one individual to another.

Some people may need additional categories to track unique expenses more accurately, such as subscriptions, medical expenses, or irregular purchases like gifts or travel. Having a tailored budget that includes all relevant categories allows for better tracking of income and expenses, facilitating more informed financial decisions.

Thus, setting a rigid limit on the number of categories could hinder one's ability to monitor and manage finances effectively. The key is to create a budget that captures all necessary aspects of personal finance, providing a clear picture of financial health.