How to deal with planned small one-time expenses
Each month, when I sit down with my wife to plan budget for the next month, we come up with a bunch of things we want to buy on that specific month. Maybe a toy, maybe clothes, maybe something else. These are small enough that we fit them in our regular budget, so we don't have separate savings categories from them. The problem is at the moment I budget them to any fitting category and use the notes to know what are the thing we have to buy in that category.
And it's easy to guess it's just not working really well. Notes are not displayed in the list anywhere so it's easy to forget about them.
I think the best solution would be to create new categories each month, assign the money to those categories, and then either a) add transactions to those categories and clean them up at the end of the month (Collapsing them to universal, more fitting ones) or b) add transactions to the universal categories and move the funds from the temporary one and delete it.
Here's an example: Let's say there is a category Kid's Toys where we monthly assign $100 and when we want to buy our kid a toy, we use money from that category. But one month we know we want to buy him a specific book. I could create a new category Pucio Book and budget $20 that it costs (and either reducing Kid's Toys or pulling the money from somewhere else, doesn't matter). And when I bought the toy here's
Method A: I add a new transaction and set the category to Pucio Book. At the end of the month when I go through all the one-time categories, delete Pucio Book, reassign its expenses to Kid's Toys and move the amount that was returned to TBB to Kid's Toys.
Method B: I add a new transaction and set the category to Kid's Toys. I then move the paid amount from Pucio Book to Kid's Toys and the rest anywhere I like (because hey, free money!) and also delete the one-time category,
There are two problems though:
- I'd need to overhaul the categories I currently have, which for the most part I am fine with, I enjoy doing this.
- I have this inexplicable fear of creating new categories. I think part of the reason is it's not great user experience to add transactions on mobile when you have a lot of categories.
Now that I wrote all this... I am pretty sure I'll just to that, create new categories for those one-time purchases and go with Method B. I think I just needed to write it all down and it feels like a waste to have all those words go to waste so I'll ask: what are your thoughts about this approach and do you know a better way?
(also it appears Rubber Duck Debugging works with budgeting too!)
I create temporary categories for things I'd like to save for. Once I use them, I hide them (not delete them). For example, I had "snow tires and rims for the van" which I purchased last week. I added the transaction and then hid the category. I also have "summer tires for the Kia" and today I am on my way to pick up some tires I found on a local buy & sell. I will post that transaction and then hide that category.
I have categories for almost anything I want to buy. If it's a book, it goes under Entertainment. If it's a kids' toy, I have a category Kid Necessities. If it's a kitchen appliance or towels, I have a Household Goods category. I have a software category. If it's fees for a school activity, I have a Kids' Activities category. If it's a new rug or couch, I have a Furnishings category. If it's a new dishwasher, I have an Appliance category.
What I will sometimes do for things that are wants and not needs, I make a Wish List category for that item. When it's funded, I move the money into the appropriate category (sheets in Household Goods, new wreath in Seasonal Decor), make the transaction come out of household goods, then I can delete the wishlist category. You mess things up if you delete a category that a transaction has gone through and merging Payees is messy. I'd like to minimize the number of hidden categories; on the other hand, I don't mind having a very granular detailed budget, which is good because I have over 90 categories (kids alone have something like 18 categories in the Kids category group).
Categories protect money from other categories. If your budget is so tight that you need this, then Method B is a good one.
You also have to recognize that it's a lot of work to micro-manage these expenses. Everyone will have a threshold where the magnitude of the supposed one-off expense is worth that. A different approach is to realize that a series of one-off expenses aren't really one-off expenses. You can budget at the average spending level in Kids Toys. If you don't spend it all, then leave it in there to support a later larger-than-average month's spending. OTOH, if there's not enough for a particular purchase, then either don't make the purchase or reallocate from a lower priority category to allow it.