I don’t know how you do it, but during my short 4-month “internship” as a budgeter I’ve used a category called “Household Needs” to handle all miscellaneous purchases.
I decided these transactions were too random and infrequent to merit their own category, let alone allow for much spending optimization.
Problem is, my “misc” category has grown to be about 15% of my total budget. 15% of my spending inside a “black box” (see YNAB podcast episode #78) is too high – makes me think I’m probably hiding from some important truths in my budget.
I decided to go through all four months of “misc” transactions, looking for re-categorization opportunities that would let me increase awareness and decrease spending – without hurting happiness.
I ended up with six new categories:
- Birthdays and Other Gifts
- Home Exterior
- Home Interior
Thanks to my relatively short history as a YNABer, it wasn’t too much work to go through my entire transaction history and re-categorize all relevant transactions.
Can you guess which category is costing me an extra $200 per month?
It might sound strange, but it’s the gas for the cars. I’ve been telling myself my family doesn’t drive much, but we’re tracking toward $2,400 per year in fuel cost, and I walk to work most of the time!
Digging into the transaction history, I found that our around-town driving is minimal. We rack up the fuel bills when we drive to visit family – the closest being my sister (a four-hour drive). In other words, we do most of our driving in our 21mpg small SUV (the family car) rather than in our 35mpg compact.
With new awareness of our real fuel costs, Kate and I can have a good talk about how to get the most of those dollars. We may visit family less often, or take the compact on road trips. It might even make sense to get rid of the SUV and its high operating costs. Without the awareness, we couldn’t have the conversation.
Maybe you’re not like me – using a miscellaneous category to hide the truth about your spending. But I’d take a thoughtful look. You never know where you’ll find hundreds of dollars per year to be used in better ways.