Budget categories question

[Melisande]

I am trying to track our expenses and make a budget for the first time ever. To do this, I am going back through the last 12 months of credit card statements and checks and attempting to categorize our expenses. However, I am having problems figuring out how to categorize many items. It seems like many items can go into one or more category. The key, here, it seems to me, is to make a choice and be consistent about it. But I'm not even sure about the broader choice of categories.

Some examples:

We eat out a lot. Sometimes we eat out at home and sometimes we do this on trips. Should the eating out on trips be categorized with "vacation" or "eating out?" If we didn't travel so much, I'd be tempted to categorize the eating out on trip with "vacation." But we do, so it will look like we spend incredibly much on vacation but not very much on food since all the food on vacation will be excluded from the food budget. However, if we categorize this eating out as "eating out," it will look like we don't spend that much on vacation -- but that's of course one of the reasons why we are eating out in the first place.

If we decide to include the food on vacation as "eating out," since I could bring my own food on at least some vacations (this is not permitted overseas), do we include drastic attempts to minimize cost for meals (i.e. buying nuts and fruit at a store instead of eating at a restaurant) as "groceries" instead of "eating out?" I would think yes.

We like to bird. It is our primary hobby and it can be expensive. So, should all the travel that is primarily birding simply be categorized here and separated out from family visits? How about if the trip is partly both?

Let's say I gave my husband an expensive lens which I knew for a fact he wanted for bird photography as a present. Do I count this under the "gifts" category or the "birding" category?

I have a category for entertainment which includes things like: "Books, Music, Magazine subscriptions, Movies, Theater, Museums ..." However, my husband spends a lot of money on professional subscriptions. So, we have subscriptions that are not entertainment. It seems like his subscriptions need to be in a special category, but this seems overall fine-tuned. Or maybe I could just make up a non-reiumbursed professional expense category and stick it in there?

[rubybeth]

You can break it out in whatever way is useful for you.

For me, I include eating out on trips as part of the "travel" budget, because we probably wouldn't be eating out if we weren't on vacation, you know? So the total cost of the trip including getting there, someplace to sleep, eating (whether it's a restaurant or groceries), entertainment activities is part of the "travel" budget line. If we skip taking a trip, then we don't have any of those expenses, so if we don't take a trip in a year, we don't need to budget that money.

I'd also break out the professional subscriptions from the general entertainment budget. Once he retires, he wouldn't need those subscriptions anymore, right? So that would be an expense that goes away, so you can take it out of the money you need to retire.

[Melisande]

You can break it out in whatever way is useful for you.

For me, I include eating out on trips as part of the "travel" budget, because we probably wouldn't be eating out if we weren't on vacation, you know? So the total cost of the trip including getting there, someplace to sleep, eating (whether it's a restaurant or groceries), entertainment activities is part of the "travel" budget line. If we skip taking a trip, then we don't have any of those expenses, so if we don't take a trip in a year, we don't need to budget that money.

I'd also break out the professional subscriptions from the general entertainment budget. Once he retires, he wouldn't need those subscriptions anymore, right? So that would be an expense that goes away, so you can take it out of the money you need to retire.

Thanks. That makes a lot of sense. Unfortunately, we do eat out when we don't travel. But, still I think would make more sense to include the restaurants on vacation in "vacation."

But now there is also this. We travel a lot and there is a whole range which includes spending the day at the coast an hour away from home. So, we eat lunch and dinner out because we are not at home, but we are not exactly on vacation either. I mean we are not staying overnight any where. Maybe I should categorize all this in travel/vacation too? Actually, come to think of it, we do rarely eat out when we are actually at home since we are away so much it feels like a true pleasure to be able to cook.

Looks like I"m going to have to go back and re-do everything.

Actually, it feels like in order to be mustachian we need to become different kinds of people with different interests. Birding can be mustachian, but in order to do this, we would need to bike and/or camp a lot, but I dislike biking and my husband refuses to camp or ever go the AirB&B route. So, there's that. :-) Sorry, just feeling a little frustrated.

[ohsnap]

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Looks like I"m going to have to go back and re-do everything.
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No...it really doesn't matter.  Really, what rubybeth said, the information just needs to be useful to you and it can be either way.  When you run a report at the end of each month or quarter, just use the information however it's presented.  If you put the restaurant expense under "vacations", then you can say, "Look we spent a ton on that vacation including eating out."  If you put it under "dining", then you can say, "Look we spent a ton on vacations and eating out last month, but most of the eating out was because we were on vacation."

My husband and I just looked at the big picture for our YTD spending, and we basically lumped all of the following categories together for discussion: dining out, recreation (incl. vacations), and entertainment.  I had the same conundrum about a theater ticket: if I go see a play at home, it's "entertainment" but if I go to a play in a different city is it "vacations"?  And I decided it didn't matter because we looked at it in totality.

[With This Herring]

Are you using a certain program to help you in this?  Or Excel?  You can make your categories whatever you find most useful.  If you are in a program that will deal with this sort of thing automatically, I would say you should use as much granularity as you might want later.  You can always go back and merge categories easily, but it can be a pain to break things out later.

I would make "vacation food" a category, or "vacation groceries" and "vacation restaurants," since you have an interest in seeing it broken out.

I include gas for my car in either "Car - Gas" or "Travel," depending on whether it is refilling gas used for day-to-day driving or gas used for traveling across the state to see family.  This lets me combine that gas and tolls to see what it actually costs me to make that trip.

I think a gift is a gift, but again this is your choice.  Would you have purchased him another, similarly priced gift for another hobby if you two didn't bird together?

+1 for breaking out professional subscriptions.  It will make things a lot easier to have this categorized for taxes.  If it helps, many companies have a category called 'dues and subscriptions' for professional publications and magazines, plus dues to professional associations.

[rubybeth]

You can break it out in whatever way is useful for you.

For me, I include eating out on trips as part of the "travel" budget, because we probably wouldn't be eating out if we weren't on vacation, you know? So the total cost of the trip including getting there, someplace to sleep, eating (whether it's a restaurant or groceries), entertainment activities is part of the "travel" budget line. If we skip taking a trip, then we don't have any of those expenses, so if we don't take a trip in a year, we don't need to budget that money.

I'd also break out the professional subscriptions from the general entertainment budget. Once he retires, he wouldn't need those subscriptions anymore, right? So that would be an expense that goes away, so you can take it out of the money you need to retire.

Thanks. That makes a lot of sense. Unfortunately, we do eat out when we don't travel. But, still I think would make more sense to include the restaurants on vacation in "vacation."

But now there is also this. We travel a lot and there is a whole range which includes spending the day at the coast an hour away from home. So, we eat lunch and dinner out because we are not at home, but we are not exactly on vacation either. I mean we are not staying overnight any where. Maybe I should categorize all this in travel/vacation too? Actually, come to think of it, we do rarely eat out when we are actually at home since we are away so much it feels like a true pleasure to be able to cook.

Looks like I"m going to have to go back and re-do everything.

Actually, it feels like in order to be mustachian we need to become different kinds of people with different interests. Birding can be mustachian, but in order to do this, we would need to bike and/or camp a lot, but I dislike biking and my husband refuses to camp or ever go the AirB&B route. So, there's that. :-) Sorry, just feeling a little frustrated.

Not really, I wouldn't re-do anything if it makes sense to you. Restaurants should be a separate budget.

I also have a few expensive hobbies (singing lessons, orchestra season tickets, regular visits to the big city for other fun stuff like theatre/museums), but I realize that they aren't "necessary" expenses, and things that could be cut or reduced in a slim year of the market being down when we're retired. So break things down into needs and wants, or things that are essentials, and things that are "fun extras," or however it makes sense to you.

We also budget for date nights. It's important to us to have one night out a month or every couple weeks to just focus on each other. But we realize it could be reduced or we could do alternate things (cook dinner at home, then watch a rented movie instead of going out).

[Zikoris]

I don't think there's a right or wrong way to do it. I put eating out as "travel expenses" if it's an overseas vacation, but "restaurants" if it's some sort of local getaway or weekend trip.

[kmb501]

I don't know if this would help, but maybe put your money on separate debit cards or have credit cards that you only use for certain expenses? To be honest, I have a hard time budgeting, too, but I think it's because my expenses aren't necessarily fixed. My car has needed lots of unexpected repairs in the past year. I think it is the worst one I've ever owned.

[Melisande]

...

Looks like I"m going to have to go back and re-do everything.
...

No...it really doesn't matter.  Really, what rubybeth said, the information just needs to be useful to you and it can be either way.  When you run a report at the end of each month or quarter, just use the information however it's presented.  If you put the restaurant expense under "vacations", then you can say, "Look we spent a ton on that vacation including eating out."  If you put it under "dining", then you can say, "Look we spent a ton on vacations and eating out last month, but most of the eating out was because we were on vacation."

My husband and I just looked at the big picture for our YTD spending, and we basically lumped all of the following categories together for discussion: dining out, recreation (incl. vacations), and entertainment.  I had the same conundrum about a theater ticket: if I go see a play at home, it's "entertainment" but if I go to a play in a different city is it "vacations"?  And I decided it didn't matter because we looked at it in totality.

Actually, I did go back and redo the calculations to include eating out on vacations with vacations -- it just felt so much more useful when I did it that way.

I think I'm at least 2/3 of the way through.


Net monthly income (i.e. excluding medical insurance, retirement contributions, withholding for income tax and social security): $11,550

Monthly spending this past year on essentials:

Mortgage (P+I): 1,389.06
Utilities (electricity, water, sewer, cable, internet, cell phones, pool & lawn service): 1,044.34 (Currently, this is all listed under essential, but it's obviously not all "essential," so eventually, I'll have to rework this)
Property tax & insurance: $558.69 (our homeowner's is sky high partly because we live in Florida and partly because we screwed up and claimed when we should not have.)
Groceries, pharmacy, supplements and other household supplies: $780
Out of pocket medical -- co-pays, subscriptions, medical devices: $95
Dental: $29
Hearing Aids: $140 (We paid $5,000 for a pair in August, but they are supposed to last for 5-7 years. I spread the sum over 4 years to be on the conservative side.)
Cars: Autoinsurance & Registration $72
Cars: Maintenance, repairs and fuel: $223
Clothing: $50

Total essential so far: $4,380.

For essential, I still need to complete Transportation (tolls and parking); Financial (Turbo Tax; Quicken; Income tax payment); and Computer and electronic supplies, but I know these aren't going to be huge expenses.

I'll post the entire budget + assets and liabilities in a spreadsheet as a case study when I finish which will hopefully be in a few days.

The discretionary part of the monthly "budget" or rather spending analyses includes:

Travel and vacations: $1,931 I had a hunch we spend a lot on travel and vacations and now I know -- a total of over $23,000 last year. But this included something like 8 vacations plus 10 weekends away.