Gift planning and the idea of multi-goal categories
Looking for best-practice advice on how to plan for spiky gift-giving throughout the year (or other categories with similar patterns). Suppose I pore over my past spending and determine that I typically spend as follows on gifts throughout the year (this is all made up, of course):
- December: $400
- February: $60
- March: $100
- August: $25
- November: $200
Now, assume that my "Gifts" category is currently at $0, and I'm trying to plan out how to handle these expenses.
Option 1: Single "Gifts" category with a monthly funding goal equal to the 12-month average of $65.42.
- Smooth budgeting; I know my monthly income will support this amount.
- Easy cognitive load —there's only one category to look at.
- Timing. These expenses aren't smooth, and right off the bat (November) I can tell I'm going to have to pilfer from other categories to make up for the season. This will probably happen again throughout the year, and I'm not sure if mathematically I'll ever catch up?
Option 2: Multiple Gift categories with dated target category balances.
- Pros: Assuming my monthly budget can flex based on which goal is coming up soonest, I can be sure of having the right amount at the right time. And I suspect that mathematically speaking I'll still end up only budgeting the total average each month, once I've been through a year of this?
- Timing, again —this month I still have to come up with the full $200 right away, plus half of December's $400, 1/4 of February's $60, and so forth. But presumably over time the total budgeted amount will drop down to the average.
- Increased cognitive load —I have to look at five separate categories instead of just one.
- Option 3: Single "Gifts" category with multiple goals (not currently a feature of YNAB).
It sort of seems like Option 2 is the most realistic/accurate? But also the least pleasant to look at? I already have 95 categories …
I have a three categories to deal with gift spending bumps:
- Current Birthday Fund
Gifts category is for anyone outside myself and my children. Perhaps a friend has had a baby, someone deserves flower, we go to a house-warming etc
Current Birthday Fund is for myself and children. Our birthdays are relatively evenly spaced between January, April, June, October and December. I change the goal after each birthday passes to a $ value (usually $300 to cover gifts and party expenses) by whatever birthday month comes next.
Christmas is a certain amount and I'm looking forward to having all year to save in to it come January.
In your situation where you need $800 for the year, I would begin by funding $200 in November and December to meet December goal. In January I would begin budgeting $70 per month and the flow would look like this:
Jan - $70
Feb - $10 (70+70-60)
Mar - $40 (70+70-100)
April - $110 (70+40)
May - $180
Jun - $250
Jul - $320
Aug - $375 (320+70-25)
Sep - $420
Oct - $490
Nov - $360 (490+70-200)
Dec - $440 (yay, surplus!)
The actual amount required is $66.67 per month but I've rounded for simplicity. I think the decision on whether to WAM to meet your December obligation is completely personal however for me, to avoid using the credit card, the short-term pain is worth is to me able to arrange the save and spend flow from January on. I also prefer less categories and categories that cover broad but similar expenses hence my own three categories (family gifts, friend gifts, Christmas).