Study Your Spending Habits Instead of Creating Budgets by Category
Budgets are to a certain extent useful in calculating how much money you can spend. But categorizing all expenses is not easy. Instead of trying to predict your spending categories, study your daily spending habits to cut down on frivolous spending at the source.
As the personal finance blog MoneyNing points out, your spending most likely doesn’t always fall into certain categories. Moreover, we rarely go out to eat thinking, “My monthly food budget has room for a $ 20 lunch,” but rather, “I’m hungry and this restaurant is close.” In this case, the problem is not with your budget. These are your habits. As long as you pay your basic bills, you can focus on fixing the habits to solve the rest of your budget problems, rather than trying to force all the spending on a pie chart:
We make sure we have enough money to cover these priorities, so it doesn’t really matter where we spend the rest of the discretionary funds. So trying to fit everything into categories and limiting what we spend in those categories doesn’t really work for us.
But I still sit down and manually enter transactions into my personal finance software, so I know where we are and what our spending habits look like.
Of course, if you already have a category system working for you, then great. Stick to it. But for those of us who are still struggling with spending despite using Mint, the best way to use money tracking software is to study our triggers and find out what tempts us to spend money in the first place.