Master Category Madness


If adding, naming, and arranging budget categories in YNAB has caused you confusion or stress, this post is for you.

I spent an hour sharing screens with a coaching client on Thursday. We spent the last 15 minutes or so going through her categories, simplifying wherever possible. We eliminated ten (or so) and moved a few others from one Master Category to another.

I could tell the exercise lightened her mental load, and it occurred to me: understanding your budget categories’ role is crucial to moving from expense tracking to budgeting.

When we name and arrange our budget categories, we’re not just setting ourselvses up to “tag” transactions. We’re deciding what jobs we want our dollars to do before we decide how many dollars to assign each one.

Rather than talk about individual categories, I thought I’d review YNAB’s default Master Categories. Some of you may have looked at them as filler or placeholders, but the YNAB Team added them thoughtfully – with the 4 Rules in mind.

Pre-YNAB Debt: credit cards you use in daily transactions that have balances.

Budget Role: promote awareness of the debt emergency.

Monthy Bills: Fixed (or only slightly variable) bills, paid monthly (Internet, cable TV, Rent/Mortgage, etc). Some YNABers choose to bundle their fixed bills into one category, adding a note to help them remmber exactly which bills – and what amounts – account for the category total.

Budget role: promote awareness of the “fixed costs” we’ve built into our lives.

Everyday Expenses: variable categories that comprise most of your day-to-day transactions (groceries, household goods, restaurants, entertainment).

Budget role: promote awareness of how we’re using our discretionary dollars.

Rainy Day categories: Other-than-monthly bills, including both those whose due dates you know (life insurance premium in September) and those whose due dates you don’t know (car repairs).

Budget role: promote awareness of infrequent-but-expected expenses.

Savings Goals: Categories where you hope to build big balances. Money goes in and doesn’t come out except to fulfill its assigned job.

Budget role: promote awareness of our progress toward Rule 4 and other delayed gratification priorities.

Debt: Outstanding loans, except credit cards with balances (because those live in Pre-YNAB debt). Budget Role: promote awareness of the cost of borrowing. You see the common thread: your budget categories’ role is to promote awareness. That could mean following YNAB’s default setup or going with something more creative.

Make sure your categories help you decide where you want your dollars to go, not just see where they went.