Use Labels as Categories and Tags for Blogger.com

While Blogger.com does not have a built-in category list, it is easy to use the Labels option as a category.

To set up Categories

Create a Labels widget, then under the option "Show", choose "Selected Labels".
See picture below for illustration.

"Categories" Option 

I am using the following setting for Categories:
Show: Selected Labels
Sorting: Alphabetically
Display: List

To set up Tags/Clouds 

Create a Labels widget, then under the option "Show", choose "All Labels".
See picture below for illustration.

"Tags" Option

I am using the following setting for Categories:
Show: All Labels
Sorting: Alphabetically
Display: Cloud