You Have Too Many Categories

Which categories should be in your budget?

Here’s where you have to be absolutely perfect. It’s where you need to have the perfect set of categories, with all of the perfect set of percentages assigned to each category.

Just kidding, it’s another place where we can overthink. I know I’ve done it. I’ve spent way too long searching for what other budgeting categories people use, and googling what percentage we should be allocating to each category. 

YNAB already sets you up with some default categories to get you started. I think they’re a great starting place. You just want to dive in and start assigning dollars. Anytime you think of a new category, go ahead and add it. What’s great is that you can always delete later.

Ok, so now that I’ve shared my advice about not overthinking when it comes to creating categories and assigning dollars, I’d like to share my thoughts on what categories I do think you need.

This is where I’ve changed my mind a lot over the years but I finally found this truth- you only need to have a category for things you need to track.

To figure out what we may need to track, let’s look at some example of things we definitely don’t need to track.

Do You Need All of those Categories?

So should you have categories for:

• Toothpaste?
• Paper towels?
• Toilet Paper?
• Diapers if you have kids?
• Makeup? (Not a personal need for me but a big deal when it comes to my budget)

All of these items except for one fit into a category for us called Household Expenses. This category for us is a general catch all category that takes care of all of the things we generally think of as “needs.” 

So this isn’t a place where we’ll buy something we want, just a place for things that we need. But it’s a catch all. We set aside money each month and throughout the month, we’ll just keep an eye on how things are going to help inform us if we need to try to be careful. 

This will ebb and flow. Some months we have more than enough to cover those expenses, and then some months we’ll need to make an adjustment because we have a “need” that we’ll need to meet.

But did you notice how we could track all of those items individually in their own category?

The reason those items are all in one category is that we don’t need to individually track how much we’re spending on toothpaste. 

I don’t need to set aside 12 dollars a month in its own category so that we can see how we’re doing there.

I guess I could. If I wanted to be super detailed and I wanted to see all of the data on our spending habits and really nail things down on how we’re doing. 

But dang, that is so not worth it. 

As my good friend Mike says, the juice isn’t worth the squeeze. 

What is the cost for the small benefit I gain from tracking that? It’s just too much work and not worth it.

This example may sound completely ridiculous and it’s meant to.

But what are you tracking that’s maybe not worth it?

We don’t track dog food anymore. We used to. We used to put that in its own category. Now we just put it in our grocery budget. It’s not that big of an expense. Now if you were spending a ton on dog food because you have a bigger dog, I can see why you’d want to put that in it own category.

For us, Ellie is just a Mini Schnauzer so we don’t feel like we need it to be separate from our grocery budget.

Categories That Contain Multiple Expenses

I’m sure that some people could take their dining out category and split it out to include dining out for family, work lunches, coffee shops, ice cream trips on the weekends.

We don’t do that. We just have the one general dining out category. It’s the category that we’ve set this amount of money in and regardless of how we spend it, it all comes from this same category.

We also have a monthly fixed bills category. So we used to take every little individual bill and make it it’s own category. So that would mean that we have a category for:

• Netflix
• Disney+
• Internet
• YouTube TV

And anything else that’s a fixed monthly expense. That just cluttered things up, so we decided to pair it down into one category for all of those items. I just added up what they all come to, and I budget that amount for that category each month.

I don’t need to track individually that I pay $7.57 for Disney+ each month. I just know how much we’re paying each month in fixed bills.

We used to have a whole lot of different categories for our “wants” spending. Now I’m still not sold on the way we’re doing it here, but this is still an evolving idea.

We just have one spending category, which we’ve decided to call-spending. It’s where date night, trips to the zoo, buying clothing for the kids, and stuff for the house all reside. 

This is where we’ve put all of the rest of our money where it should go and then we look at how much we have to spend and put it in one category. This is our guilt free zone. But it does get tricky because if you aren’t thinking ahead, you can block yourself in here.

I do keep going back and forth on this one. 

I think it just requires some experimentation, like we’re doing, to get the right fit for you.

More Categories Make It More Complicated

Here’s what I want you to remember. When you have more categories, it just gets more complicated. 

Your budget needs to be just complicated enough that it works, but no more.

So if you’re wanting to track diapers, or if you’re just wanting to make sure that you’re leaving enough money for them, then you’ll want to have a category for diapers.

I think that’s why budgets get the bad reputation about not working. They’re probably too complicated. 

So if you think you’ve got just way too many categories. Try making your budget simpler.

Try making the numbers easier to look at and understand. It’s definitely going to take some experimenting to figure out what works best for you and your family, but don’t be afraid to make a mistake here.

It can be as simple or as complicated as you need it to be.