When you enter a new transaction in the account register (The page in Money that displays all the transactions for one account, such as a checking, a credit card, or an investment account.) or review transactions downloaded from your bank, it's a good idea to assign a category (A group of income and expense transactions, used to track income and spending in Money reports.) , and sometimes a subcategory (A subset of an income or expense category. For example, Gasoline and Maintenance could be subcategories of Automobile expenses. ) , to each transaction, if Money hasn't done so already. Once a transaction has a category, Money can use this information to automatically create a budget and reports to track your income and spending patterns.

When you categorize transactions using the default settings, you see categories and subcategories combined in one list (for example, you could categorize a transaction as Bills : Telephone, or Bills : Rent). Some users prefer to choose a category and then choose a subcategory from a separate list (for example, choose Bills from one list, and Telephone or Rent from a second list). Both methods let you see the same list of categories and subcategories, and add new ones; which method you use is simply a matter of personal preference.