Choosing Between Two Categories For A Given Transaction
First time posting, and sorry if this has been covered elsewhere.
I've gone back and forth over the years between two different approaches on how to select a category for certain transactions - those transactions that would appear to be one category at face value, but may also be a different category when the context of the transaction is considered. A couple examples:
Example 1: My family goes on a vacation and we have to fill up the car with gas a few times during the trip. I could categorize every fill up as "Transportation - Gas" or as "Vacation / Travel." The first option would be simpler and show the transaction as it is at face value, but the second option would show it within the context of actually being an expense that only occurred because of, or was directly related to, vacation/travel and not just every day vehicle usage.
Example 2: I attend a concert downtown and have to pay for parking in a garage. I could categorize the transaction as "Transportation - Parking" or as "Entertainment - Arts." Again, the choice would be between taking the transaction at face value or considering the context in which it happened.
To be honest, I've even made more of a mess of it by sometimes splitting these transactions 50/50 to be half of the face value category and half of the contextual category.
I know this is one of the things within YNAB where other users could say "There's no right answer! Do what works for you!" And I get that, but I'd also like to hear from other people about WHY they'd choose between the different approaches (and if there are more ways of thinking about this), and if there are any best practices in this area.
We actually did discuss this recently, so you're not the first to ask! https://support.youneedabudget.com/t/g9hm9zk/how-do-you-budget-fuel-when-you-take-a-trip-fuel-budget-or-trip-budget-category
But it's totally gonna be "There's no right answer! Do what works for you!" in the end. Thinking about it for a minute, I'd have to say I do it differently for every category and then sometimes even change it a few years in. For fuel during vacation, I categorize as Vacation except for one fill which presumably covers whatever regular driving we did before or after. It helps me compare the cost of taking a road trip vs. plane.
I have a Parking category for the transactions you mentioned. Our Entertainment spending isn't huge, and neither is our parking/rides, so I can't even remember if the last time I prepaid parking with a baseball game ticket I split the transaction!
I used to have a "Computer" category. We are HUGE nerds in this house, all 5 of us. But then you need chargers, printer ink, new cables, a battery, and I'd be like, Ok is this computer or household needs? I had it as Household Needs for a long time. I finally changed the category to "Computers and Technology" and went back about one calendar year and recategorized and split some transactions. It seemed wrong to lump cables and toner with toilet paper and ziploc bags. So don't be afraid to change your mind if you think something else may give you better comfort and visibility going forward.
I just bought a ridiculous computer for my youngest son (11) for Christmas. This was actually his first NEW computer as he always got hand-me-downs or a family desktop. So I was like, ok is this "Computer & Technology" or "Gifts?" Either way it was going to wreak havoc on my reports :). So I went back to see what I did when my other kids got a new device, which was usually around some celebration or holiday, and I had put it in Gifts. So for sake of consistency, I categorized this new purchase to Gifts as well.
So be consistent yet not afraid to be flexible... I think that's an even worse answer than Do What Works for You! 🤣🤣
Hi there, As mentioned by Annieland it will come down to a personal preference because everyone's budget is different. For me, when I have transactions that could go into different categories, I look at what why the purchase is being made and what kind of information do I want to know in the future.
In the example of fuel for a road trip, if I regularly take road trips as vacations, I would want to categorize it as vacation so I can use that past information to make informed future decisions. If I had it all lumped into the Fuel category, then I don't know how much is "regular commuting and day to day life" versus vacation road trips. Other people would not care to separate and are fine with the lump in Fuel.
In your second example, I usually include the parking in parking and not entertainment. In this case, my parking is not a huge category and doesn't make a difference overall when i budget parking. But it does again depend on how you view it.
My approach is how do I want to know what I expenses I had to help inform future budget purchases as part of my annual review. I know that YNAB is a look forward but one of the pieces I use is to look at what I purchased in the past, determine if I will continue with those type of purchases in the future, see what other priorities exist and then make the adjustments. Then, throughout the year, I make adjustments as necessary based on the annual plan and rolling with the punches as things change.
A big part of this is to know what your category includes and does not include. And you can change them over time. Add new ones, change what is included in others, get rid of some. That is the great thing, YNAB gives you a base to set things up flexibly based on your needs.
I am consistently inconsistent with this type of thing. At the end of the day, it works for me because I am the only person using the budget and categories like parking (which I only use for "personal" travel as the commuter rail station I use in non-COVID times has free parking and any work related parking would be reimbursable), entertainment, and vacation are discretionary (and well-padded) enough that it just doesn't matter. So if there is a month where I've been spendy on Parking/Transpo (covers parking, tolls, and ride share), I might say parking at a theater is part of Entertainment, but the very next month I might use the Parking category if I have to park at a metro station in order to go out with friends (remember when that was a thing that people did? :sigh:) (I use a pre-tax payroll deduction to buy monthly metro passes so I don't really budget for the cost of metro travel as the money never really hits my budget).
When it comes to vacations, I but a hashtag entry in the memo for all expenses during the vacation even if I don't assign to the vacation category so I can do a search in the all accounts view for all expenses (Ex: #FloridaOct2018).
If you are using a budget with a partner, it's probably better to be consistent though you can say this is how we're doing it "now" and then change the method in the future.