If you want to spend less on a category, put less in the category initially  and then don’t overspend that amount. 

Obviously financial goals are a very individualistic thing.  I think all we can offer is our own personal mindset.  The only feedback I have on your specific proposal is that it sounds much more likely to have the opposite effect on reducing mindless, discretionary spending.  If anything, seeing $50 left over in the Dining Out category and spending it just because you know you have it, is much more mindful than WAMming from a slush fund all year.

From my own personal YNAB use for 11 years, my financial situation and cash flow has changed more times than I can count.  If I didn't have YNAB, in any of its iterations, I'd be dead in the water by now.  But how I choose to progress is I make up my own little "challenges" for myself.  I might do one a year, one a month, or three times in one sitting because a certain situation presents itself.  They are often more arbitrary than researched, but sometimes they are based on financial wisdom I've learned here and elsewhere. Here are some examples:

As my cash flow increased in the last couple of years, I chose a few discretionary categories to budget the "average" for every month.  That is not a built-in YNAB goal, but I use an emoji symbol to remind me that's how I chose to budget that category.  My reasoning behind this, was these are historically categories I underfund, and then regret it later because I don't have the money when I need it.  However, my goal is definitely not to spend it all as quickly as possible.  Sometimes I check my own progress by looking at previous months and comparing the average budgeted to the average spent.  Two years ago they were almost always the same, indicating that I was often zeroing out the category (probably by wamming).  For the past year I've seen that gap grow larger and larger each month, signifying I'm saving more now than in the past.  It also helps me relax a bit when making decisions like, spring for the more comfortable rental car on vacation, park closer to the airport, buy a ticket to that special event, etc.

I set annual spending goals for myself on other expenses, and "ride the wave" as I go, trying or hoping to keep the month's outflow in line with what is available.  If it is not possible, then so be it, YNAB will help me get back on track going forward.

After one of my two dogs died, and I adopted a new one a few months later, I set up a new plan to self-insure for vet expenses for both of them so that in their senior years I'm not faced with a huge financial/ethical hit again.  I made up my own formula of a base amount funded per dog per year, plus an addition each year based on the dog's age.  I have no idea how this will support their healthcare expenses going forward, but I'm giving it a try.

I'm trying to escalate payments of a car loan by increasing my payment by 10% each month.  Again, no clue how long I can sustain this, but it's a personal challenge I'm trying.  

I could go on and on.  I don't need YNAB to always tell me what I should be saving or spending in a category.  Sometimes their tools really help, and sometimes I come up with my own, and often they complement each other.  You should do some mindfulness exercises on setting your own goals and challenging yourself to meet them, and forgiving yourself along the way if you don't, and adjusting as necessary.  THAT'S the power of YNAB, but the rest is up to you :).  Good luck in the new year!  We all need it...

I'm not a fan of the many "This is the way" replies you have received however,  how does your approach differ from not having a budget at all?  If you are deciding purchase by purchase then other than the set bills you have, how are  you managing your priorities?  That has never worked for me but ymmv.

There are a ton of ways of achieving goals such as mindful spending as demonstrated by the posts here. I think it would be far too easy to start overspending in one category and pulling it out of the big pile and then when something really important to you pops up unexpectedly at the end of the month, you have nothing left.

One thought I had on how to use YNAB is to use other parts of the software to help. What if you colour coded the categories using the flags to denote which ones you can spend to zero with no implications? Others can be ones that you intend for longer term use that should have 10% left at the end of the month to help ensure you have enough available later on. 

When it comes to mindfulness, i think in the same terms as  WordTenor , which is that it starts ahead of time. If I evaluate each purchase independently, how can I compare it to other priorities I have for my spending? Mindfulness to me is making sure that what I purchase is in line with my goals, intentions and desires for how I live my life. The pile of money gives me no sense of what my goals are because there is no definition to it.

Powder Blue Trumpet said:
Having a zero limit, and having to value each purchase against my "Income Replacement" feels... I don't know, thoughtful rather than destitution. 

 What makes the Income Replacement category better than the individual category it is in? What would you need to do to make the category have this same thoughtfulness feel to it? 

Powder Blue Trumpet said:
having to value each purchase against my "Income Replacement" feels... I don't know, thoughtful rather than destitution

You should evaluate each purchase first against its relevant category. If there insufficient funds there, then evaluate against the LEAST important thing with funds in the budget. If that is less important than the original category, then you SHOULD take those funds.

Leaving funds in the least important category while something more important to you goes unfunded (and therefore unpurchased) is the opposite of meaningful, "priority-based" spending.