Budgets are useful when figuring out how much money you can spend, but categorising every expense isn’t simple. Instead of trying to predict categories of your spending, examine your daily spending habits to cut frivolous spending off at the source.
Picture: Lars Plougmann/Flickr
As personal finance blog MoneyNing points out, your spending likely doesn’t always fit into specific categories. Moreover, we rarely go out to eat thinking “My monthly food budget has room for a $20 meal”, but rather “I’m hungry and this restaurant is close.” Your budget isn’t the problem in that scenario. It’s your habits. As long as you’ve paid for your major bills, you can focus on fixing habits to solve the rest of your budget problems, rather than trying to force every expenditure onto a pie chart:
We make sure to have enough money to cover those priorities, so it doesn’t really matter where we spend the rest of the discretionary funds. So trying to fit everything into categories, and limiting what we spend in those categories, doesn’t really work for us.
But I still sit down and manually enter transactions into my personal finance software so I know where we stand, and what our spending habits look like.
Of course, if you already have a category system working for you, then stick to it. But for those of us who still struggle with spending, a better way to use money tracking software may be to examine our triggers and find out what’s causing us to be tempted to spend money in the first place.