I’ve focused in previous Whiteboard Wednesdays on keeping things simple so you can stay on track. While unsustainable effort can affect change, it’s only meant to move the needle–not keep it there indefinitely.
With keeping things simple, I’ve tried to help people use fewer accounts (if you’re using YNAB correctly, a checking account and long(er)-term savings account is really all you need–with the savings account being optional). I want people to use fewer categories.
In fact, my goal, by the end of 2011 is to have our budget categories (these aren’t master categories, but the actual categories themselves) whittled down to the following:
Tithing
Savings
Bills (Fixed)
Cash
However, for many of you, you may want to go in the opposite direction, for a time. Remember, a short burst of unsustainable behavior can affect change. Something unsustainable you can try is to make certain categories very granular.
The saying goes, “Where performance is measured, performance improves.”
A YNAB user over at wi-fi voltage journals about YNAB fairly regularly. They decided to break out their grocery bill into two parts:
- Groceries
- Junk food
Guess what behavior they’re trying to improve there? It’s an excellent implementation.
Do you find that you’re addicted to purchasing shoes? Your “Clothing” category make look like this:
Clothing : Other
Clothing: Shoes
Do you want to quit smoking? For some, the financial drain can be motivation enough:
Miscellaneous : Other
Miscellaneous : Cigarettes
Do you play too many games? Buy too many comic books? Eat too many pizzas? Eat out too often? (Make these categories head south.)
Want to cook at home more? Want to read more? Eat more fruits and vegetables? (Make these categories head north. That’s right, spend more!)
Let me know in the comments section how you’re going to user your budget like a laser–pinpointing behaviors you’d like to change and measuring for results.
I’ve often thought about this. How much detail do I use? I see the benefits of only using 5 or 6 categories like you have, but I also see the benefits of lots of categories like you point out in this article. I’m still leaning towards more categories because that makes the expenses more real. We can easily look though and see what exactly we are spending money on and where we could cut back.
Adam, this is what i would suggest : if you need to put money towards a certain type of expense and you know that right now you don’t really think about it or forget it, well then you might need one.
Like myself, in Entertainment, i always put some money towards aquarium stuff. I don’t have anything fancy but the filters, liquids to treat the water, it really adds up. So i put up one category aside for that, and then i can monitor if my aquarium expenses are going up, down, and actually put some money aside for replacing my lamp, filter system, etc.
If you want to get rid of a habit, like smoking, junk food, take-out/restaurant, you might want to add a category to help yourself treat that money leak/bad habit.
Sometimes too much is as bad as too little, I’m guessing add parallel categories as you go, if the need presents itself?
And Jesse, i was surprised when i saw you referenced me. Glad you liked my idea! :)
The reason that I purchased YNAB is because of its ability to be able to categorize my envelopes digitally. I am no financial expert; however if I didn’t have the desire to track the two dozen or so categories that I do I would have continued using Excel.
6 months ago I was going along the road of hoe-dumb with my money like many Americans thinking broke is normal and was lead to FPU. I have since then paid off all my credit cards, caught up on all my late vendor payments (including property &$!#@), and set aside money by categories for auto repair, Christmas, quarterly utilities, etc. I have even set enough money into my property $&*($@ envelope to pay it in full when it is due the first time.
We are applying, for our lives, a complementary hybrid between YNAB and FPU. For us, we are minimizing accounts because YNAB allows us to breakout the funds that are in the accounts within the FPU categories.
An example that comes top of mind that we COULD do is reduce each utility from the multiple sub categories to one. The reason I WOULDNT “want” to do this is because I had canceled the monthly insurance for our iPhones and self insure with that money in our YNAB Phone sub-category each month.
A few:
Health: Tobacco (Irony, no? Helps keeps things in perspective…and it’s working!)
Food: Crap (My version of your example above. Mostly 7-11 and fast food runs.)
Computer: Software
Computer: Hardware
Computer: Services (Yes, I’ve identified I spend too much on my “hobby”)
-Mikey
I, too, use categories to focus on expenses and behaviors I want to change. What I’ve found happened was that once I identified those areas, it jump starts my creative juices.
Example 1: I’m already a voracious reader and was spending waaaay too much on new hardcover books. At ~$25 a pop, that sure adds up for someone on a fixed income. So I began haunting the local thrift shops and the library and never felt deprived of new reading matter. If the book was especially enjoyable and one I’d like to keep permanently, I wander over to Amazon.com and buy a “like new” or “very good” copy of it.
Example 2: My bad…I’m still smoking. When I actually saw how much I was spending on this nasty habit, I found a less expensive vendor AND consciously cut back at the same time (cold turkey made me a flaming b**ch so that friends/family were actually asking me to go back to smoking, and using patches/gum was like using Antabuse for a heroin user!). I’m now smoking less than 5 cigarettes a day (down from a full pack at the beginning of the year) and well on my way to cutting them out completely. PLUS the money I save is what I use to buy books with.
And I owe it all to YNAB!
I have a bad habit of buying too many iPhone apps on a whim, so I have decided to create a Recreation:Apps category to budget myself to a $5 “treat” per month. This will prevent the random purchasing of apps that I end up using for ten minutes and never looking at again. I’ll give them credit, Apple created a really easy and tempting sales device in the App Store, but I need to curb that spending to free up some money for more important things.
I smoked for many years. I realize it injures my overall health and so I wish to stop smoking and yet it is literally impossible. None of the stopping hints helped me. Then I stumbled on the e-cigs. It has luckily improved my life. No longer sucking in poisons feels superb!