How many categories should I have in YNAB? 12, 24, 158?
This is a question we’ve been getting since the dawn of time—err, well, since the dawn of You Need a Budget in 2004.
There’s No Wrong Way to Categorize
Just like there’s no wrong way to eat a Reese’s, there’s no wrong way to categorize your budget. Sure, there are impassioned hordes on the internet that might have a definitive (and contradictory) stance on this question, when it comes to your budget, you do you.
How Many Categories is Too Many?
You probably want me to say the answer is something definitive (like, 29) but it would make for a really short blog post. To be honest, the answer is different for everyone. Some people have 45, some people have 145. One woman (who met her now boyfriend through YNAB) had just eight categories when she was focused on paying down her debt.
So why isn’t there a correct number of categories? Well, a budget isn’t just a record of your spending. It’s a tool to make your life better. Your categories are part of that process. When you have just the right amount, they’ll most effectively point you in the right direction.
When in Doubt, Simple is Better
We suggest starting with fewer categories and then let any new ones earn their way into your budget. You can always add or change them at any time, just remember: simple is better.
When you started using YNAB, whether it was today, last week, or last year, we gave you some categories and groups that we thought may be useful to get you started. Here’s what that starter budget might’ve looked like:
And while this set of default categories and groups work great for some of us, we want you to know that they’re not your only option. You might have variable income, you might be aggressively breaking the paycheck to paycheck cycle, or maybe you want to save up for a specific fun thing like a vacation or even a blanket ladder.
Changing your categories isn’t wrong. In fact, there’s no wrong way to organize your budget. We can organize our budgets based on the category structure that best fits our lives right now. If we change our minds later, that’s ok and we can restructure again then too.
Here’s an example of categories set up around when you get paid:
And here’s one broken out by theme:
You might be super granular in your categories, or as big-picture as possible. When adding categories, let these questions guide you.
- Will the category give me greater awareness without creating unnecessary tedious work?
- Will this category help me change my spending behavior?
Start with fewer categories and let them earn their way in. What if you’re not sure? “Gah! Should I add one for XYZ or not?” If you’re not sure, leave it out. If you’re wrong, you’ll know. You’ll feel yourself reaching for it. You’ll struggle to categorize spending (Where should I put that?!?) that belongs in that yet-to-be-created category. That’s how you know you need it. In a way, you’re forcing the category to earn it’s spot in the budget.