In this episode we answer a question from a listener about budget categories. We offer our suggestions on how we would treat the situation if we were in it.
Excerpt from listener email:
We’ve been tracking our expenditures and budgeting for about 6 months now, so we’ve been able to create categories for most fixed and variable expenses. Our budget is fairly accurate each month, however we have a difference of opinion when it comes to handling the variable expenses…
My wife feels this is too controlling and wants to have one category called “credit card” and lump all the variable expenses listed above together. Can you offer some suggestions to help us categorize the variable expenses?
Thanks so much for the email. We love to help and we have responded to this listener with a personal email that has a much more detailed answer than what will be in the show notes. If you have a question use our contact page and let us know what it is.
In general, we only have one area that is variable as far as we are concerned, and that’s our miscellaneous area. Everything else from food to home repairs we consider fixed costs. It took us awhile to dial those numbers in, but they have been incredibly accurate for us.
As an example we have a fixed cost of $400 a month for our grocery budget. For the last six months we have come in slightly lower than that number. It gives us room to grow if we need to, but it is also pretty accurate. We have spent as much as $398 a month on groceries and as little as $382. As you can see, there isn’t a lot of variation there and keeping track of it each month is more work than what we want to do.
We look at our budget as a tool to set our direction financially. We want to generally know where our money is going and how much of it we can use to do things.
Please let us know what you think in the comments below!