Variable expenses: What techniques do you employ to stick to subjective budget category goals ie: groceries, fun money, dining out etc.?
So I'm about a month into YNAB and really enjoying the software and methodology. I have a good handle on how to approach most set monthly true expenses ie: rent, phone bill etc. and also categories with monthly savings goals (new computer, vacation etc.). The one area that I'm having the most difficulty with is variable expenses such as groceries, fun money, dining out, household goods and the like.
So far—and I'm still very much in experimentation / learning the approach mode—I've been burning through funds in these categories in super short order. As an example, I set a $200 fun money fund for the month. Saturday night I went to a concert and out for drinks and dinner; I spent about $82. I gave myself what I felt was a very liberal amount for groceries of $350 (I usually split groceries with my partner, so like $700 for a couple) and have burned through 90% of it by day 22/30. Things like this are what I'm talking about.
I am very much hip to the fact that I can cover these categories with funds from things like "stuff i forgot to budget for" or pull from one to fund another., and that the idea isn't necessarily how you spend your money but instead to spend only money that you already have. In order to give my dollars jobs that I really want them to have, though—vacation savings, paying debts—a big part of this process for me is to cut spending in areas that have been sucking my money away, which I suppose this is all a big part of. I just don't really know where to start when it comes to tackling this issue and have sort of watched my greens turn red without making any real corrective efforts.
TL;DR — I need all of your tips, techniques, tricks and willpower manifestations to ensure I don't overdo it with subjective budget categories.
I budget those categories weekly. And I will allow my self to use rule 3 between fun money and dining out but I wont let myself touch any other categories which means if I don't have enough I have to just tell myself no. And wait till next week when I get a new chunk of money allocated to those.
Groceries I don't explicitly budget weekly, but I take 4.3 times what I spend weekly and budget that every month and I know what that comes up to weekly and stick to that or else rule 3 from some discretionary spending budget item.
With groceries I even go so far as to reload a gift card online with my weekly spend which helps me be aware if I'm going over budget and, the real reason I started doing this, I use a discount grocery store that wont accept credit cards. But you can buy and reload gift cards online using a credit card so this way I can still earn cash back from my grocery shopping.
Aquamarine Wizard I agree that this is just a normal part of the learning process. When you say $350/month for groceries is a liberal amount, from where is this idea coming? Did you just pick it as a random number and decide it sounded good, or did you look back at past credit card statements and see what you were *actually* spending, and decide to use that as a starting point and cut, let's say, 25%? I've been on YNAB for about a month and a half and am still in the learning process, as well. I had a false start a while back, and it recently clicked to me that one of the reasons it didn't stick the first time around is that I used to create category numbers that I thought "sounded" good or reasonable, and they didn't have much of a basis on what I was used to spending. This time around, I did some more looking into my actual habits and decided not to be draconian. With some of my categories (including food, *cough, cough*), I've budgeted for numbers that are perhaps higher than I would prefer, but still quite a bit lower than what I was actually spending in the recent past. And I've generally been sticking to the budget! What I suggest is to be somewhat gradual in your approach. Cut your spending a bit, and then try cutting it a bit some more. For me, getting some momentum and early success under my belt is helping me carry on and set new short-term goals that are a bit more ambitious than my initial ones.
I've not been YNABing long but I have been paying some attention to bills and expenses so I have an idea of how much we spend in most categories. The key is being realistic - a budget of $350 for groceries isn't going to work if you're always spending $500. You'll start to see trends in spending after a few months. You'll have annualized more and more expenses as you get through each month as you're likely having to save up a larger percentage than 1/12th for many categories. In many cases, I tend to overestimate how much I'm going to need to spend which works out well when I adjust the goal downwards.
But when it comes to super discretionary funds, like fun money, maybe you're going to need to say no more often in the beginning until you're able to afford your wants. Or you're going to need to bring in more income. For me, I've actually added a ton of categories and most of them have target goals. This will allow me to track where our money is actually going. Conversely, having some categories is giving me permission to do things I would previously cheaped out of doing. I have a go out and do the things category for fun family activities that cost money. It's not a lot of money, but it's allowed us to do some things I would never have done before. If being cheap is not your problem, then you'll need to go with the flow until you have more trends to make educated guesses as to what the future is, perhaps plus some degree of reduced spending until you have a better idea unless you're already consistently spending less than you bring in..
Aquamarine Wizard Another thing: I was just thinking of you spending $82 on a concert and dinner out when your monthly budget is $200 for fun. That's not a problem as long as you're not doing it every week. Even if you feel something is a splurge, you budgeted for it and should enjoy it, and not every week needs to be equal in spending. My fun and dining out categories have been some of the hardest for me to reign in, so I've been trying to mix going out with staying in and cooking a new recipe, catching up with a friend during the day over coffee and a pastry instead of at night with more more expensive alcoholic drinks, and inviting people over to my apartment more. Even with the cost of entertaining, it still usually comes out to less money than I'd spend on my share of the bill going out. Honestly, it seems some of my friends are a bit *relieved* when I suggest cheaper or free activities.
Is now the time for the "buffering" speech?
You are asking great questions, and the answers might even be better. You've got this! Just keep asking the questions. That's how I got through some of the rough spots. It can be very enlightening, and frightening, to see what you've been spending on, and choosing your goals instead. It has been for me, and I hope it will be for everyone coming to YNAB.
With time, I recommend you build up some buffer, or lee way, in some of your categories so if you have a spendy month, you can cover it. Glad to see you have the
Aquamarine Wizard said:
"stuff i forgot to budget for"
category. It can be a life saver when starting. A little cushion in some categories can be also. How are you doing on your "emergency fund?" When starting, I had more categories than I had money to fund them. Started with funding them according to my priority and those that didn't get funded mostly got removed, or placed in my wish farm.
You have just about as many options as you want. The trick is to find the ones that speak to you, and fund them.
I'll stop now. I love YNAB, it has turned my life upside down, in a good way. In an even better way than I dreamed could be possible. Hope you find the same success.
My general method was (and still is for some categories as I figure them out) to keep track of the spending of the category for several months and budget a little above what my typical spending is for that category. That way the extra funds usually cover the months that have slightly higher than usual expenses without having to reassign money from other categories. For example, if my typical spending for a category is $97 and rarely above that, I'd budget $100 to round it up and buffer it a bit.
These can be really hard categories to get a handle on! In general, I've found its best to start closer to my actual spending until I have learned to live in that amount & then cut back. Here's a few ideas that may be useful for groceries.
Is your grocery budget only food, or is it everything you buy at the grocery store? If you're including paper products, otc, pet supplies, etc in with food I can see how it would be very easy to spend a lot of it on non-food early in the month! Splitting out the categories while you are learning how much you need for each might help.
How much of the food you buy actually gets cooked & eaten? Are you buying ingredients or prepared meals? Meal planning and prep can help make sure you get the most out of the food you buy.
Are you buying everything from an expensive grocery store (organic, specialty, etc)? Is there a cheaper store available that you can buy some (if not all--even Aldi & Walmart have organic produce)? Some things are worth the added expense or can only be found at the high-end stores, but if there are other options usually a lot can be purchased more cheaply. Or maybe you live somewhere that the only option is a basic yet expensive store. In that case planning is even more important! Maybe drive further once a month for cheaper staples? If you have multiple options, shop around & get an idea of the various quality & price ranges.
We're almost at farmer's market season, so you may be able to get local produce for less at the farmer's market than the store.
Figure out how much you spend in a week and make that part of your category title. Then shop once a week & keep your spend down to that amount.
Hang in there through the beginning. EXPECT that you are going to need to move money around between categories because you don't yet have a complete picture of what it actually looks like to spend your money for months at a time. When I'm pitching ynab to new folks, I always tell them to give it at LEAST 6 months, if not a full year before they really start to feel like they've got a handle on things. I've been working with it for about a year and a half (longer than that from coming from YNAB4, but my budgets restarted with the change over) and finally NOW I can actually look at monthly averages and get useful information to work with moving forward.
So don't stress about moving money around A LOT for the first 6 months to a full year. It's going to happen, and that's normal. You really have no idea how much things cost. I just encourage people to put in everything they're spending, and don't worry about keeping categories tight or anything like that. Just put it in, and cover it with funds from where ever, and if you over spend, that's ok, just work to trim here and there. After the first 6 months or so then you can start to see patterns so you know how to plan for things moving forward, and what is realistically a reasonable budget for food and other things.
And, just for perspective, my BF and I spend an average of $250 per month eating out, and $350 on groceries each month. We live in Maryland, which has a reasonably high cost of living, but no where near as high as other areas. It's only the 2 of us, so we don't have any additional kiddos to worry about or anything like that.
This is kind of how it is in the beginning, but you also started YNAB to get a handle on it. So, I think you have to start with a realistic amount you actually want to spend on stuff. Like, if you're trying to save money, you want to reduce spending. I set limits for groceries and eating out and tried to stay within those limits. It took a few pay cycles to understand exactly how much $ I need for those categories and adjusted. I'm finding that I'm SUPER FRUGAL now, when before I spent whatever I wanted, whenever I wanted (and had the credit card debt to prove it). The main thing I'd suggest is to look at your app while at the store/event/restaurant (or before) to find out what amount you're able to spend. Don't spend more than that unless necessary. I actually use a calculator at the grocery store now and stick to the budget. I put things back if needed. This really eliminated the impulse buys (or food that looked good, no one ate, spoiled). Other suggestions - see if there are coupons in your junk mail for the grocery store you're going to anyway. If there's an Aldi nearby, go there. HOLY CRAP I got so much food there yesterday for $110! You're going to feel "YNAB broke" for a good month or more, and it sucks, but it's worth it. Immerse yourself in YNAB workshops, the FB group and the journals (to not only get knowledge, but also to keep busy when you're bored and want to shop). GL!
Aquamarine Wizard said:
TL;DR — I need all of your tips, techniques, tricks and willpower manifestations to ensure I don't overdo it with subjective budget categories.
First bit of advice? Take your time. Aim for continuous small improvements in different categories rather than wholesale drastic changes. Can you reduce a discretionary category by $10 or by 10% and still be satisfied? Can you reduce it again a month or two later? I constantly tinkered with my category levels, gaming my budget in an effort to get my costs lower. I started YNAB in my most expensive part of the calendar year. I didn't know that at the time. Now, I can look back and see that there are definitely predictable peaks and valleys in my spending, and I accommodate for that rather than see it as a budget failure.
YNAB helped me identify a specific robo-spending problem with drive-thru breakfasts fairly early on. I didn't even like the food; it was just so darn convenient and a habit. But I soon decided that the $5/day or $100/month (Egads! that's gonna be $1,200/year!) was better spent on a different budget priority. I also quit smoking. Both these behaviours were in their own categories and the spending was not camouflaged by other larger group spending. It was easy for me to see just how much it was costing me for the zero value they both provided. My tip? If you want to address some indulgent behaviour, hive off the spending for it in its own category where the data is impossible to avoid.
As for groceries, that is a category that needs constant tending. I now see that I will have an expensive year followed by a cheap year followed by an expensive year and then another cheaper year. It depends on where I am in the food-buying cycle. The year that I stock in a lot of meat direct from a rancher, for example, is a more expensive year, but then the next year I will buy hardly any meat at all and eat from my freezer. My grocery costs range from an annualized average low of $150/month to a high of $300/month, giving me an overall 5-year average of $225/month. If I can keep it under an average of $250/month this year, I'll be really happy. I'm implementing Skip-A-Weeks in my grocery buying, not going to the store one weekend out of every month to encourage better turnover of my stored foods.
I deliberately separate household sundries or non-food consumables such as batteries, light bulbs, shampoo, tin foil, etc (everything I buy to keep me, my clothes, and my home clean and functioning) from food. I couldn't believe how much I was spending on unnecessary non-food at the grocery store. That was ruthlessly cut out. As for food, I budget for and categorize food purchases into 3 distinct categories: groceries (fresh stuff I buy at the grocery store), pantry/freezer (pantry, freezer, bulk, case lots, and meat purchased farm gate), and gracious living (adult beverages, treats, and luxuries). I'm not sure it actually makes a difference any more, but it makes me feel like I'm controlling the chaos. 🙂
I'm going to echo, really, what others have said. Now six months in I am starting to see the shape of the year and the spending I do, but it takes time. I used 'Stuff I Forgot to Budget For' a lot to begin with, but deleted it after four months or so. (I also had 'Things that I don't know what they are' for the first two months, but that's another story.)
I am super-granular in my categories (food in, food out, household items, dry cleaning, haircuts, tips) and that has helped me see where the money goes in detail. I literally enter every item by hand, even the 79 pence that ITunes takes every month for storage!
By following the advice to 'embrace scarcity' I have used this new insight to discuss with myself my priorities. For example, much as I personally don't really care about haircuts, I have to look smart for work, and my son for school, so there they sit. Funded. Holidays are a big chunk of my spending, but then I love them. On the other hand, we all need clothes, but I would prefer a new piece of diving equipment to a new pair of shoes, so that's prioritising again. Where I live there's not much to do, so my normal Fun category is small, but when we are in Europe in the Summer we make up for it by wallowing in culture, music and experiences, so that Fun category has to be well-funded.
I already meal-planned and batch-cooked, and now I'm trying out no-spend weeks for groceries, and I can already see (thanks to the reporting features in YNAB) that it works.
But you see, all this has come to m over the last six months of humming and herring over my budget, listening to podcasts, watching the online workshops, reading experiences on here, and constantly fiddling around with the category names and amounts. If you had asked me last August what I spent all my money on I could have quite honestly answered you, 'I haven't got the faintest idea.'
Others have addressed that you may be underfunding the category.
One tip to try to help stay within whatever limit you've selected: Install the YNAB Toolkit browser extension and turn on the Pacing feature. You get a cool bar graph showing where spending would nominally be throughout the month.
Unfortunately, this only works on a desktop browser (not the mobile app).
FWIW, there are a lot of features in the Toolkit that should be part of the standard product. I wouldn't use YNAB without it.