Budget Categorization

[Jerry1]

I've been trying to simplify my budget and get the categories down to a minimum. So, I started out the year with the basics but there is a group of purchases I'm trying to figure out a category description for. Basically, it's the stuff I buy for living the way I do. Things like my Ring doorbell, my pressure washer, kitchen utensils/gadgets. Things that get used around the house but don't really fit the description of home maintenance or home improvement. I have both of those and will probably combine them.

I'm getting stuck between trying to simplify/consolidate and not wanting a large percentage of my spend labeled "other". The main line I've drawn is necessities, loosely defined as the main things I need to live and discretionary which is everything else. Current necessity is $50K out of an $80K budget. I say "loosely" to define necessities because I would put the above mentioned items in the necessities bucket. Sure, I could live without a pressure washer, but I'm not trying to define necessities as bare bones, just what I would spend if I just stayed home and did my thing. Things in this bucket are housing, utilities, food, transportation, healthcare and insurance. Discretionary is entertainment, travel, gifts and other.

Any ideas on what to call stuff other than "other"? Any other thoughts on simplification? I currently have about 10 categories with usually 3-4 detailed items in each category. I'll probably combine utilities, but for now, I do have gas, electric, water, phone listed separately.

 

[steelyman]

Instead of reducing categories, maybe organize them in a tree structure if you can.

One way to think up names for categories is to picture what department you’d find them in a comprehensive store (like Macy’s, Home Depot, etc).

Outdoor equipment, housewares, appliances, furnishings, tools (auto, wood, etc), furniture, and so on.

[ADDED] The recent thread about spending (by W2R) might help with ideas.

 

[LastOfTheBoomers]

Agree with the tree structure- we use Household and have 2 subcategories - maintenance and improvements.
Buy a new hammer - generic household - get the furnace fixed Maintenance
Buy a new garage door - improvement

I look at improvement as things I won’t move when I move

 

[SecondCor521]

I have a category for House, under which I have:

HOA dues
Household
Improvement
Landscaping
Maintenance
Property Tax
Repair

The kind of stuff OP describes would usually go in House:Household.

 

[CRLLS]

You could simplify the number of major categories by eliminating "Insurance" and include those premiums into their respective and already-stated Housing, Healthcare and Transportation categories. That is where I keep it for my planning budget.

But I don't currently track expenses going forward. I really don't care if I go 1K over in one category and 1K under in another. So long as I have confidence in the planned budget and at the end of the year, the total expenses come close to the plan, I'm good. If they don't come close, either I can make a one-time expense footnote or go thru the expenses in arrears to find out why reality didn't match the plan. Tracking ongoing expenses is, for me, too much like "Work".

 

[Dtail]

I have a category for House, under which I have:

HOA dues
Household
Improvement
Landscaping
Maintenance
Property Tax
Repair

The kind of stuff OP describes would usually go in House:Household.

Closing on a house tomorrow and have come up with the same categories except combining repairs and maintenance.
Agree with this expense being "Household" category.

 

[W2R]

Things like my Ring doorbell, my pressure washer, kitchen utensils/gadgets. Things that get used around the house but don't really fit the description of home maintenance or home improvement.

I like the way SecondCor521 and others categorize these expenses. My own categorization is a little different but not too much.

To my way of thinking, your pressure washer fits in home maintenance since I feel like maintaining something includes regular cleaning and repairs and so on. The new, fancy doorbell belongs in home upgrades since it is an upgraded doorbell. Both of these subcategories are combined in my "House" category.

I'd put kitchen gadgets in "Miscellaneous"; that's where I put my Instant Pot.

But how do YOU think of these items? You probably have an idea about where they would most naturally fit in your own categorization system.

A list of my categories is in this post, but they are customized to me. This is why I don't use canned software; I'd rather choose categories that fit my life and are meaningful to me.

Closing on a house tomorrow […]

Congratulations! Pretty exciting.

 

[Dtail]

Thanks W2R.

 

[38Chevy454]

Some of you are way more detailed budget than I do. I just track overall basic spending, with allowances for the one-time expenses. Most of the time i just do it in my head as the month goes along. We put almost all of our purchases on the Costco Visa, so aslong as that number stays in the right range, I am good. Since I do have a small home-based business, I mainly record my house related expenses that are part of my home office deduction. But keeping tabs on those items is not done monthly, it is mainly for the yearly totals, so I may lag 3-6 months sometimes.


I am not criticizing those that do more detailed, it's just not needed for me.

 

[PaddyMac]

I separate Home Maintenance (which goes towards our Business Use of the Home deduction) from Housewares (which includes towels, lamps, etc.)

I also have a special/large maintenance costs that are hopefully one-off expenses. This allows me to see what is normal for Houseware and Home Maintenance, and what are major repairs.

 

[Katsmeow]

I am fairly complex but those types of things could go in 3 different categories:

1. Household Maintenance/Supplies -- these are things that are basically maintenance and minor repairs and the supplies to do them.

2. Home Consumables - Things that you buy fairly often and consume -- Examples: Batteries, Lights, Toilet Paper, Paper Towels.

3. Household Goods -- This is where I put things that don't really fit in the above but they aren't big enough to be furniture. For example, kitchen supplies that aren't consumables go here. Or, towels would go here. Linens. Items for the house that aren't maintenance related and aren't regularly consumable basically.

I do have a separate category for actual furniture.

 

[Jerry1]

Some of you are way more detailed budget than I do.

I am not criticizing those that do more detailed, it's just not needed for me.

i suspect over time, like 3 years or so, my budget will get far less detailed. At this point, I’m trying to make sure I have a handle on things. This is my first year without a paycheck and if I’m not where I need to be, I have to adjust quickly. It’s one thing to plan prior to retirement, but now it’s real. I was making about $250K. Then I worked part time for a couple years and made about $150. Now my budget is $80. It’s amazing to me that I think I can live on $50k and that my plan works well at $80K. If I start spending over $100K, that would be reckless. Detail is good to a point, but I agree, I’m not going to trade work for spending time maintaining a budget.

 

[Dtail]

i suspect over time, like 3 years or so, my budget will get far less detailed. At this point, I’m trying to make sure I have a handle on things. This is my first year without a paycheck and if I’m not where I need to be, I have to adjust quickly. It’s one thing to plan prior to retirement, but now it’s real. I was making about $250K. Then I worked part time for a couple years and made about $150. Now my budget is $80. It’s amazing to me that I think I can live on $50k and that my plan works well at $80K. If I start spending over $100K, that would be reckless. Detail is good to a point, but I agree, I’m not going to trade work for spending time maintaining a budget.

Always big difference of opinion on how much detail of expenses to track. Some of us just like tracking this stuff for a myriad of reasons.
Except during vacation, I track expenses daily and it truly takes 5 minutes daily to do so.

 

[steelyman]

It’s amazing to me that I think I can live on $50k and that my plan works well at $80K. If I start spending over $100K, that would be reckless. Detail is good to a point, but I agree, I’m not going to trade work for spending time maintaining a budget.

It was/is helpful to me to leave income out of the picture completely when assembling/adjusting a budget. That is, staying away from thinking, “now, how am I going to deplete this cash?” and instead use it (whatever software is good for you) to gain an understanding of where the money went in the recent past and adjust behavior/plans accordingly.

[ADDED] You started the current thread about Quicken 2016 Deluxe, I think. There are very flexible/customizable budgeting tools included that you can play around with as you zoom in on a budget that suits you. They should work independently of a current Quicken license.

 

[kgtest]

In terms of a budget, its simple one category for IN, an done for OUT...and everything rolls up into that, including expense categories.


I get pretty granular and list from most to least important. Food, Clothing, Mortgage, Insurance, Taxes, Vacation, Cash expenses, etc.


Then I pivot into a pie chart that really shows me 2 things, discretionary and non-discretionary income (1. money I could spend or save+invest, 2. money I have allocated to expenses). 1 is green 2 is red.

 

[scrabbler1]

My budget (or, more simply, spending summary) is broken out into categories I can most easily quantify. Some of these categories are further broken out into more categories, while others I put back together, if I can. It's like a tree and a "reverse-tree" within the entire budget.


For example, I start out with 3 broad categories: housing, medical, and everything else, each 25% and 40% of my total spending. Housing is mainly my monthly co-op maintenance payments. Medical is my health insurance and OOP costs. Everything else does get broken out into more quantifiable categories, from utilities to credit card charges to car costs to income taxes everyday cash expenses.

 

[target2019]

Any ideas on what to call stuff other than "other"? Any other thoughts on simplification? I currently have about 10 categories with usually 3-4 detailed items in each category. I'll probably combine utilities, but for now, I do have gas, electric, water, phone listed separately.

Consumer Discretionary vs Consume Staples, is what they call these sectors in the market.

Electric
Gas
Wate & Sewer
Broadband
Wireless
Entertainment (discretionary, charitable)
Business & Consulting
Auto & Home Ins
Fuel (penfed cc)
Home Improvement (lowes, hd cc)
Invest (Roth, etc.)
ATM
Checks
Fed Est Tax
State Est Tax
Home (major)
RE Tax
Clothes (store cards)
Food (POS)
Food and Travel (Amazon CC)

We usually segment purchases according to a card. I type totals into a spreadsheet, by month.

To be honest, we still work, so our income always exceeds our expenses. I usually do this accounting in the first few months of the following year.

 

[easysurfer]

This thread is a timely topic for me. Like the OP, I've struggled with the home maintenance category. I had a category called maintenance intended for household repairs, but would find myself "cheating" and put stuff under that category that wasn't totally a fix up.

I don't need to separate in detail, what is a fix up what is something new, but no necessarily a fix up (like LED bulbs instead old bulbs, as an example). So I decided to just rename my category "maintenance and improvements" call that a done deal .