Category Groups for Budgeting vs. Category Groups for Tracking?

I've just made a fresh start in my budget and am rethinking my approach to category groups. I'm torn between grouping them for tracking purposes and grouping them for budgeting, planning, living purposes. In the past, I think I have used YNAB more as a spending tracker than to truly modify or clarify my spending.

As an example of my conundrum: I have a car payment. At the moment I have that expense grouped under my "Car" category which has other car related expenses like gas, insurance and repairs. I like the idea of seeing how much my car costs me in total over time. However, my car payment is also a predictable monthly expense, and could easily be grouped with similar expenses, like my rent or utilities...part of my basic monthly personal overhead.

The question I'm asking myself is do I organize my budget so the categories are grouped as types of spending (monthly expenses, long term "true" expenses, "fun money" expenses...etc) or do I group based more on the specific thing the money is being spent on (car expenses, dog expenses, healthcare expenses...etc). The former seems more helpful in terms of budgeting, the latter in terms of tracking, both of which are important to me.

I'm not expecting anyone to answer this for me or my budget, but I am curious how others have handled this.

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  • Often times when people are starting out and trying to get their financial house in order, temporal groupings like Daily/Weekly/Monthly/Quarterly/Annual work well for them. I was sort of set up in that manner back when I first started. Now I am set up functionally - The Home, Transpo, Medical, Giving & Celebrating, Entertainment/Electronics, Personal Stuff, Vacation/Enrichment, Finances, Everyday.

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  • I've done both. It's not that difficult to move categories around, though it can get tedious. Basically, when I want to focus more on minimizing expenses I find more time-based categories, like Monthly, Annual, & Long term Savings helpful. At other tests I want more of an overview, so I do the House, Car, Health, etc master categories. If I don't want to move them around, I export the budget & use Excel to add a new master category column for reposting, in addition to what YNAB has,

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  • I wish I had a good answer for this! The first few months that I used YNAB, I swung back and forth between these options on what felt like a weekly basis. Ultimately I settled on one method but I think it was more out of fatigue than finding the objectively best solution.

    Currently I have categories set up for budgeting rather than tracking. I have a category group for monthly expenses; I know I absolutely need to fill these ones up every month. I have a category group for annual/semi/bi-annual ones; I use balance-by-date goals to make sure these stay on track. I also have one for "rainy day" expenses where I know I'll need to spend money eventually but not on any fixed basis.

    Your "Car" category group is a good example because it covers all three of my groups. I spend a predictable amount on gas, so that's a monthly expense. Insurance and registration fees are annual. Maintenance is rainy day.

    This is what I settled on because I found I was budgeting more often than I was tracking, and if I needed to combine categories across different groups I could still do so in reports. But sometimes I still think about switching everything around again...

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  • Anecdotally, functional (tracking) groups seem to work best for people who are able to budget their entire month at one time. If you are still at the "what does THIS money need to do before I get paid again" stage (picking and choosing which categories get funded and which have to wait), temporal organization makes that process much easier.

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  • I like tracking too, so I have my category groups organized by the thing being spent on (food, giving, etc.), but I've named some of the individual categories using emoji to help me quickly distinguish between fixed monthly expenses (yellow), true expenses (brown), and so on

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  • I think it just depends on what you want and what helps you the best.

    Personally, I have a lot of detail in my  budget that I am sure many people would find to tedious, but I like the data it gives me. I have accounts for every debt and I also track all my assets. Things like the value of my house, car, retirement accounts, etc. That way my Net Worth report is very accurate and I can really see the progress since using YNAB. In just the last 18 months, I have increased my Net Worth over $46,000. starting at -$11,000. 

    I also have my categories broken down to a fine grain. I have 98 active categories right now. For long term debt like house and car, I have categories that track the amount that goes on principle and interest separate, because it motivates me to see the progress. Each leisure activity we have is tracked separate, as well as categories for Groceries, Dining Out, Take Out, and Work. 

    There truly is  no best way. For me, the more detail the better. 

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  • Thank you all for your input. It seems like you all generally made the distinction that when you are starting out with budgeting, or when your finances are tight (cannot budget a month in advance), having your budget organized by types of spending (monthly, long-term, charitable, fun money) can be helpful. It sounds like many of you who have been budgeting for a while like having your expenses grouped by object of expense (food, car, dog, house) for tracking purposes.

    I ended keeping my budget arranged by object of expense. I realized that the "goal" function helps tremendously in separating monthly expenses from long-term expenses. I can set the goal for a monthly amount on things like my car payment, rent, etc, and I can have a timed goal for the longer-term stuff. And things that are not priorities I don't have a goal for at all.

    Anyway, thank you! Your responses were helpful as I was setting up my new budget.

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  • I currently find myself in a similar position but for a slightly different reason. The default YNAB categories when I started were more Temporal with something like "Immediate Obligations" and "True Expenses" or something along those lines. I transitioned to the Functional structure years ago, but now I have a brokerage account in which I am investing my yearly (or at least less frequent than monthly) expenses. I'm battling with YNAB to retain the category balances of these expenses while making it easy to calculate the transfer amount. Right now these expenses are across across multiple categories. I will probably be switching to a Temporal structure just so I can group these expenses together so I don't have to go hunting for them every month.

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
      • 1
      • Reported - view

      Sea Green Rhythm What are you investing in?

      I have a brokerage account for budget money that I include as a budget account, but it's only invested in Money Market Funds since my budget only contains spending with a timeframe less than 10 years (and money intended for that short a timeframe should not be invested in stock funds.

      My long-term investing is in a separate brokerage account.

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    • nolesrule I have a mix of stocks, bonds, and money market and put all my savings (long-term and short-term) in the same brokerage account. This lets me pull from any type of investment, when I need to, depending on the current market conditions. That's my theory anyway.

      I use Vanguard which does integrate with YNAB. I started with a Tracking account, but didn't like that when I did a transfer of my long-term savings categories, those category balances were diminished (as is the nature of transferring to a Tracking account). I'm now going to try splitting it into two YNAB accounts, one Budgeting account for long-term savings and a Tracking account for short-term savings.

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Peter Taylor Maybe Superbone can comment. As I said, I don't invest budget money.But if you have a mix of budget money and non-budget money in the account you won't be able to do what you want. It has to be all or nothing. My recommendation would be that 50% of the stock allocation in the account be held in an Investment padding category rather than split among your regular spending and savings. That way your budget won't be screwed up by a stock market crash.

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Peter Taylor The other option would be to invest only in stock for the long term, and only in bonds/money market for your budget needs, and keep 100% of the stock amount in a "long-term investing" category. This would still allow you to pull from whichever investment type is optimal. You can adjust your overall target asset allocation in tax-advantaged accounts.

      My long-term investing in taxable is 100% stocks, and I measure my overall asset allocation against that stock account + retirement accounts + HSA. Bonds for long-term investing asset allocation  are held only in tax deferred accounts for tax efficiency. That way I can easily ignore my budget money when reviewing my asset allocation, since I don't want the cash to skew my allocation.

      But if you want to include it, then perhaps my suggestion in the first paragraph of this post might work for you.

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    • nolesrule The way I'm going to try it is to have the split long-term and short-term YNAB accounts. The short-term balance doesn't change other than the transfers in and out per the expenses being saved for. Any change in my brokerage account asset value will be tracked in my long-term, YNAB Tracking account. That isolates my short-term savings from any market volatility. I just need to make sure my brokerage account allocation makes sense based on the relationship of my long-term and short-term savings.

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