At the bottom of the budgeting screens is a link to your budget categories. Here you can add, edit, or delete the different categories that you assign your spending to. A good rule of thumb is to have enough budget categories that you get a good picture of where your money goes but not so many that the level of detail makes the budgeting process take so much time that you lose interest.
All budget categories are part of eight parent categories:
Living expenses are expenses that might vary significantly from month-to-month such as groceries, dining out, and clothing and that you are able to change depending on how much income you have left over in your budget. That is in contrast to your housing expenses (rent and utilities) that tend to be pretty similar every month and which you have little control over.