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Old 08-04-2015, 07:28 AM   #1
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budget categories

I am curious what categories others use in their budget forecasting. At first I had too many items and have consolidated somewhat and wondering what others do.

Currently we have

Mandatory 'predictable" items - these are ones where we can't reduce & know the amount
- mortgage
- health insurance
- school expenses
- property tax
- groceries
- cable, internet, phone
- utilities
- insurance
- gas/car maint

Mandatory "unpredictable"
- health above insurance premium
- home maintenance

Discretionary - things we could cut back on if we needed to
- travel
- HSA contribution
- shopping
- car sinking fund
- gym memberships
- eating out
- entertainment
- kid spending
- charity
- spending cash

How do you categorize things so you can project spending going forward?
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Old 08-04-2015, 07:34 AM   #2
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I've consolidated spending categories from the original couple of dozen down to just seven today. It was too much trouble to track spending that closely, and didn't seem to give any benefit.

I have all my spending records for the past nine years, and a spreadsheet shows me the category totals along with a graph. That makes it easy enough to track and predict.
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Old 08-04-2015, 08:01 AM   #3
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Again, it's such a personal thing. But we have 3 sources of income (pension, divs,interest, all net of tax). About 60 lines of expense categories. Split into major groupings for general, travel,4 separate personal use properties, alimony, child assistance. Don't track groceries, as this is immaterial and too much trouble. Just put it in "cash".
One of my key controls is that I "role" my cash bank balance each month, eg opening cash, plus income, less expenses must equal ending cash bank balance. Thus I know I recorded everything.
Again, there is no consensus on this stuff.
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Old 08-04-2015, 08:28 AM   #4
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Originally Posted by Danmar View Post
Don't track groceries, as this is immaterial and too much trouble.
Danmar, you are an outlier. For most of us, groceries are not immaterial. But it just goes to show how everyone's situation is different.
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Old 08-04-2015, 08:31 AM   #5
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As Danmar said it is personal. It also depends if you are creating the budget for tracking purposes, potential places to cut expenses, or intellectual curiosity. If it is the latter and you are committed to the process many categories could work. I do it mostly for tracking purposes so I have a fixed cost category that catches many of your above costs into one column. I am not going to break out mandatory costs I have to pay anyways.


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Old 08-04-2015, 08:40 AM   #6
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Originally Posted by jabbahop View Post
I am curious what categories others use in their budget forecasting. At first I had too many items and have consolidated somewhat and wondering what others do.

How do you categorize things so you can project spending going forward?
My categorization is similar to yours, about 23 categories. This is because of historical reasons, and I haven't simplified it yet. They are mapped to fixed and discretionary expenses (for FIDO planning purposes).
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Old 08-04-2015, 08:53 AM   #7
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I've got 37 categories but will probably whittle that down some next year; we moved this year and I wanted to make sure that our expenses related to the sale and the move, as well as the $$ we paid to fix up the place we sold and improve the place we bought, are shown separately. I haven't created a "Miscellaneous" category (I worked with data a lot in my career and that usually included a lot of stuff people would have coded correctly if "Miscellaneous" hadn't been available) but I can see that it might be a good place to consolidate some of the smaller items such as haircuts and postage.
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Old 08-04-2015, 08:59 AM   #8
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No two people are the same, and neither is their spending. I'd just take a comprehensive list and pare it down to suit me. Just Google, here's one list with over 70 potential home budget categories 70+ Basic Personal Budget Categories to Start Your Budget (just the first hit I got). My goals would be:
  • choose as few categories as possible, but
  • make sure I have enough to separate significant spending categories,
  • make sure I won't need to review/change categories often (even if some are dormant for a few years), and
  • if my "Misc" category is significant $, I am probably missing useful categories.
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Old 08-04-2015, 09:07 AM   #9
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I only have 12 or so categories plus the all encompassing 'stuff I forgot' line item......it's invaluable as the catchall and there's always a lot of one time stuff in there... if it continually recurs, I'll make a line item for it under another category
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Old 08-04-2015, 09:10 AM   #10
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Quote:
Originally Posted by jabbahop View Post
I am curious what categories others use in their budget forecasting. At first I had too many items and have consolidated somewhat and wondering what others do.

Currently we have

Mandatory 'predictable" items - these are ones where we can't reduce & know the amount
- mortgage
- health insurance
- school expenses
- property tax
- groceries
- cable, internet, phone
- utilities
- insurance
- gas/car maint

Mandatory "unpredictable"
- health above insurance premium
- home maintenance

Discretionary - things we could cut back on if we needed to
- travel
- HSA contribution
- shopping
- car sinking fund
- gym memberships
- eating out
- entertainment
- kid spending
- charity
- spending cash

How do you categorize things so you can project spending going forward?
Yours is similar to ours. But we also have major and sub-categories. For example, we have a major category Utilities, but we break it down to gas, electric, water, mobile phone, Internet, etc.

Food is a major category, with grocery and restaurants as sub-categories

Tax is a major category with property, income and auto registration sub-categories

Medical is major with Medical and Dental as sub-categories (not paid by insurance)

Insurance is major with home, auto, life, medical, dental and LTC as sub-categories.

Auto is major with gas and maint as subcategories

Clothing is a category by itself though if we wanted to we could separate it out to each of our individual needs

Mortgage is a major category. Had 2 homes for a while, so had 2 sub-categories.

Also have HOA, professional membership, items reimbursed by our HRA (and not included in the budget), gym memberships and charity all as separate items.

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Old 08-04-2015, 09:42 AM   #11
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Here's my list, FWIW. I could probably combine some things. But this is a managable list and I have many year's history in this format, so I will probably stick with it. Pre-ER, we tracked this for spending control and to make sure we maximized savings. Now, in ER, it's to make sure our planning assumptions for retirement are playing out as expected.

Any large one-shot expense that doesn't occur regularly goes into the last category. This is mainly cars, home improvements, new furniture, or major repairs. That way, I keep categories like home maintenance and car maintenance "clean." And by looking back over multiple year's history, I can reasonably estimate how much we need to set aside for these items.

Federal income tax
Property tax
Home insurance
Home maintenance
Home security
Electric, water, waste
Natural gas
Car maintenance
Car insurance+umbrella
Car registration, inspection
Gasoline
Phone, TV, internet
Groceries
Restaurants, entertainment
Clothes
Gifts, household supplies, misc (catch-all)
Medical
Travel
Allowance for major expenditures
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Old 08-04-2015, 11:18 AM   #12
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I've been using the same categories for 15 years. Some of the categories have been tweaked over the years (eg: never had an HOA until 2 years ago so I expanded the category that has pest control, lawn weed control and the alarm system costs).

House Expenses:
  • Mortgage (don't have one currently, but the spreadsheet is 15 years old)
  • Property Tax
  • Insurance (Home, Flood, and Liability)
  • Electric
  • Cable and Cellphones
  • Water Bill, Garbage, Reclaimed Wtr
  • Alarm, Pests, Termites, Lawn, HOA
  • Maintenance (includes allowance for repair / replace including appliances, roof, plumbing/electric)

Boat Expenses:
  • Fuel
  • Docking (never used this one and never will !)
  • Insurance / Licences
  • Maintenance
Spending Money:
  • Him (this is the don't ask / don't tell category. It's our monthly "allowance" which we can spend however we please. Covers hobby expenses and recurring gasoline costs as well as beer / wine / booze)
  • Her (same as above)
  • Gas (road trips etc) - this is for non-recurring gas spent on joint adventures only. I couldn't decide if this is travel or entertainment.
  • Entertainment
  • Groceries (includes paper goods, cleaning products, etc)
  • Order In / Dinner Out
Insurance & Meds:
  • Life insurance
  • Health Ins Premiums
  • Out of Pocket Health
  • Long Term Care (placeholder category - I am self insuring)
  • Medications / Vitamins / Supplements
  • Car Insur / Tags

Other:
  • Dog (food, meds, doctor)
  • Car Maintenance
  • Donations
  • Car Pymts (like I said, the spreadsheet is 15 years old)
  • Clothing
  • Household Stuff (generally home decor and other junk I really don't need)
  • Gifts
  • Vacation
  • Future One Time purchases (accrual for replacement of mattress, furniture, electronics)
  • Ongoing Purchases (more stuff I probably don't need!)
  • Unexpected (this never has actuals -actuals go into the corresponding category. This is 2.5% of my total budget so its minor but it makes me feel better when a repair that I hadn't planned on comes up).
  • Income Tax
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Old 08-04-2015, 11:37 AM   #13
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I don't have a budget, but I do keep track of spending by category.

I revised my spending categories in 2011. Before then I had 23 categories, and now I have 10. I categorize expenses twice, once with each set of categories. That way that I can compare with the 23 categories of years ago, but using the 10 new categories I can take advantage of what I believe is a better system. In a few years I'll drop the old categories.

My new categories are:

1. Miscellaneous
2. Video gaming, apps
3. Food
4. Car
5. House
6. Utilities
7. Fitness
8. Clothes
9. Medical
10. Income Tax

In coming up with my 10 category system, I combined a lot of the 23 categories I once used. Property tax and home insurance, lawn mowing, maintenance, upgrades, etc are all included in House. Automobile insurance, gas, driver's license and registration, repairs, etc are included in Car. Medical insurance, Medicare, prescriptions, new glasses, and dental work etc are all included in Medical. Food includes all restaurant eating and groceries. Electronics, gifts/donations, and other items are in Miscellaneous, which is actually one of my smaller categories. I used to separate all of these out but I get information that is more useful to me when I use fewer categories.

We almost never travel and I don't have a pet. On the rare occasion when we do travel, I cram things into relevant categories: food goes in "food", gas goes in "car", motel goes in "miscellaneous", and so on. Then I total up the trip in another Excel column off to the side, in case I'm curious about that.
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Old 08-04-2015, 11:48 AM   #14
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When I putting together my ER plan back in 2007-08, I created 11 categories of expenses I could easily quantify. They were:


Co-op Maintenance
Telephone+Internet (billed together)
Car Insurance
Co-op (home) Insurance
Health Insurance
Dental costs (pre-ER this included insurance, copays, deductibles; in ER it was all OOP)
Electric
Cable TV
Cash expenses
Credit card bills
Income taxes (cell-referenced from a linked income tax worksheet)


Back then, I did not use my credit card very much. In the last few years, I have used it more to replace cash expenditures, mainly food shopping.


I also had a category for commutation expenses because I was still working. But when I started projecting future expenses, I was able to ZERO it out!
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Old 08-04-2015, 12:15 PM   #15
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I spend far less money on far fewer things than most other people so my budget is fairly simple.

-Condo(condo fee, prop tax, insurance, maint.):$300/mo
-Electric(everything is electric, water is included in condo fee):$85/mo
-Internet/cell phone:$115/mo
-Car(gas, maint, insurance):$175/mo
-Food:$200/mo
-Health(insurance premium + deductable):$100/mo
-Self employment/income tax:$400/mo
-Misc.:$125/mo

Total:$1500/mo
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Old 08-04-2015, 12:32 PM   #16
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Danmar, you are an outlier. For most of us, groceries are not immaterial. But it just goes to show how everyone's situation is different.
No doubt. Although the majority of our "cash" category would be groceries and liquor. I think when I first started tracking expenses we would pay for these items with cash, hence the category name. I guess I could call it groceries, liquor, and cash items. Maybe represents 5-6% of our total spend and very consistent.
Also, home expense is multiplied by 4 places(including travel expense to get to some of them) whereas most people would have only one. We break the main travel for pleasure category into: airfare, hotels, tour fees(biking or cruises), and general. My assistant does a trip specific analysis of each trip to get a per day cost which we compare to previous trips.

As I said this is such a personal thing. If you look at a person's budget categories you can pretty well see how they live their lives, I think.
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Old 08-04-2015, 01:16 PM   #17
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Danmar, you are an outlier. For most of us, groceries are not immaterial. But it just goes to show how everyone's situation is different.
Another outlier here (as usual ).
One of my seven categories is Cash/Food/Entertainment.

Cash: I don't track anything I buy with cash; I just enter the cash I get out of ATMs.
Food: This is everything bought in supermarkets, other food stores, and the costs of dining out.
Entertainment: Tickets to concerts, movies, etc.

Over the past eight full years, this multi-purpose category has accounted for between 7% and 15% of my total spending.

What I do is set a target spending amount (Total) each year, which is the max I feel I can comfortably spend. So far, it hasn't been over 3%, although this year it will be about 3.15% due to buying a new home and moving.

Once I know my total for the year, I just use my seven categories to see how it's going. The percentage of each category varies each year, of course.

It's a very simple approach, but works for me.

FWIW, the other six categories are Auto, Hobby/Vacation, House/Utilities, Medical, Miscellaneous, and Taxes.
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Old 08-04-2015, 02:07 PM   #18
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Here is what I use for categories. I also analyze the budget across Required, Essential, or Optional but don't use that analysis very much other than to give me an idea of what we could live on if we had a black swan event.

HousingMortgage
HousingHome Insurance
HousingProperty Taxes
HousingPropane
HousingFirewood
HousingElectricity
HousingSnowplowing
HousingMaintenance and repairs
HouseholdFood and groceries
HouseholdGardening
HouseholdSpending money
HouseholdClothing
HouseholdGifts
HouseholdDonations
TransportationMaintenance and repairs
TransportationLicense fees
TransportationGasoline
TransportationCar insurance
TransportationBoat insurance
TransportationJet-ski insurance
TransportationSnowmobile insurance
Personal and Health CareDoctors
Personal and Health CareDentists
Personal and Health CarePrescription Drugs
CommunicationsTelephone
CommunicationsMobile Phone
CommunicationsTelevision
CommunicationsInternet
Personal InsuranceLong Term Care Insurance
Personal InsuranceHealth Insurance
Personal InsuranceHealth Insurance Subsidy
Personal InsuranceDental Insurance
Personal InsuranceUmbrella Insurance
Recreation and entertainmentTravel
Recreation and entertainmentSewing
Recreation and entertainmentSkiing
Recreation and entertainmentSnowmobiling
Recreation and entertainmentGolfing
Recreation and entertainmentHockey
Recreation and entertainmentMovies
Recreation and entertainmentDining Out
MiscellaneousMiscellaneous
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Old 08-04-2015, 08:19 PM   #19
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I chance these as needed. You might take a look at the YNAB forums were budgeting categories are endlessly discussed. There are two primary conceptual ways of categorizing.

1. By type of expense - So Food is a category (possible broken down into sub-categories of groceries dining out. Home repair would be a category, auto fuel, etc.

2. Others categorize by the mandatory nature of the expense. So Mandatory fixed expenses are one category, mandatory variable might be another, discretionary another. And so, on. The problem with this one is that many types of expenses have a mandatory and a discretionary component. Clothing is mandatory. However, most of us spend some amount that is discretionary.

In your categories, I would make a few comments:

1. The insurance premium if you pay it (even if deducted from a pay check) is an expense. I would argue it should be categorized as such.

2. Shopping is a vague category. When I look back at past spending I find that I do better if I am more specific than that.

3. Spending cash - If this is a few dollars a month for things you didn't get a receipt for then fine. If it is a lot of money that you have no idea what you spend it on, then I would advise tracking it better. We do have a spending category for DH and for me. This is all recorded but basically is money where it is for personal spending. We give each other a set amount at the start of the year and that is categorized as personal spending. It works well and so I don't have to be annoyed with whatever DH buys that I think it worthless and vice versa.

Our current categories (and sub-categories where relevant)

Irregular - This is a catchall at the start of the year where I put in a few thousand dollars for irregular expenses. One year it might be medical, another year household, another year, auto. Basically every year I will probably have a few categories that end up way over the expected amount, but it doesn't make sense to fund every category for that since they won't all go way over. Example: DS's car got hit in the parking lot at his apartment (he is in college) and we had a $1400 expense that wasn't anticipated.

Auto Fuel
Auto Repair/Maintenance
Auto Ins
Auto Regis
Auto Tolls/Misc
Food -- Divided into sub categories for groceries and dining out
Home Repair/Maintenance
Home and Umbrella Ins
Real Estate Taxes
Mortgage
Major Improvement
Home Consumable Supplies - thinks like toilet paper and batteries
Decorative
Furniture and Goods - This includes durable goods like a new vacuum cleaner
Computer/Office
Fitness
Utilities - sub categories for electricity, gas, water, garbage, phone and internet
Healthcare subcategoires for insurance premiums and for healthcare expenses
Entertainment
Financial
Income tax
Gifts/Donations
Cash Miscellaneous - This averages under $5 a month
My Clothing/personal care
DH clothing/personal care
Pet expenses (has subcategories)
Children - Separated out by child
DH Spending - We allocate to each of us $X at the start of the year and anything unspent can be carried over to the next year. This is used for our personal hobby expenditures and our personal technology expenditures (new computer for example).
My Spending
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Old 08-05-2015, 08:13 AM   #20
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Capital (loosely defined as large items with multi-year value - think roof, car)
Income Taxes
Other expenses (anything that isn't Capital or Income taxes)
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