The short answer
- Export your statement as CSV. Every bank has it; if yours hides it, the app support page knows where.
- Keep three columns: date, description, amount. Everything else is noise for this job.
- Start with eight to ten categories, not forty: housing, food, transport, subscriptions, utilities, health, fun, work, other. Renaming is cheap; maintaining a taxonomy is not.
- Categorize by vendor, not by row. One rule - 'this supermarket is food' - clears hundreds of rows at once.
- Collect the rows you cannot name into a question list instead of guessing. A category called 'maybe' is honest; a wrong category quietly corrupts every total after it.
The method, step by step
- Open the CSV next to a plain table with your category names across the top. Paper works; a spreadsheet works; a markdown file works.
- First pass: vendors you recognize instantly. Supermarket, landlord, phone company. This is usually half the rows and takes minutes.
- Second pass: recurring amounts on the same date each month. Those are subscriptions - mark them all the same and note them separately, because that list is worth money on its own.
- Third pass: the question list. Anything ambiguous gets its date, vendor and amount written down, and you answer the whole list at once with fresh eyes - not row by row.
- Total each category and stop. Do not budget yet. The first honest total is the whole win; the plan is a separate job that goes better with real numbers in hand.
What most people get wrong
- Too many categories. If a category needs explaining to your future self, it will be empty by March.
- Guessing ambiguous rows to 'finish'. One guessed row is a rounding error; fifty quietly change the answer.
- Categorizing every month from scratch. The second month should reuse the vendor rules from the first - that is the entire reason to keep them.
- Mixing the categorizing with the judging. Total first, feelings second. The numbers survive the feelings; not the reverse.
The free tool for this
The 50 / 30 / 20 split, on your own numbers - The 50 / 30 / 20 split, on your own numbers. It runs in the page, asks for your own numbers, and sends nothing anywhere.
If you would rather not build it yourself
Money OS does this by conversation: /import reads the bank CSV, works out the columns, categorizes the clear rows, and asks about the unclear ones instead of guessing. Plain markdown ledgers, no bank connection. Money OS is $34. See it on the shop, and there is a plain page about it here: what it holds.
Questions people actually ask
Should I use an app that connects to my bank instead?
If you are comfortable giving a third party read access to your account, they do the categorizing for you. This page is for people who are not - the CSV export keeps your numbers on your machine and no credential ever leaves your hand.
How long should the first month take?
With a fixed category set and vendor rules: twenty to thirty minutes the first time, under ten after that. If it takes much longer, the category list is too complicated.
Read next
How to find every subscription you forgot you had, The quarterly taxes checklist for a one-person business.