Photo by Towfiqu barbhuiya on Unsplash
A few months ago I started to recognize a pattern that some of my clients were struggling with when I’d ask them to come up with a summary of their spending. It turns out that they’d hit an expense that could have fit into a couple of different categories, and then they were stuck. For example, they’d pay for parking because they traveled to Boston for a performance that their child was involved in. They were unsure what to do, because it could be classified as parking, or as travel, or as child-related activities.
Another example is something like a higher-than-normal gas expense because you drive to go skiing a couple of hours away. Should be categorized as “Gas”, or “Skiing”?
These are pretty low-stakes problems, right? Nothing bad is going to happen if you categorize an expense incorrectly. However, hardly anybody truly enjoys tracking their expenses, and we need to make the process as smooth as possible in order to not give up at the first roadblock.
My philosophy on these kinds of expenses that aren’t always obvious is to go back to the source. In the parking case above, I’d put that as a child-related activity, because that’s the underlying reason it was incurred in the first place. If the child hadn’t had an event in Boston, they wouldn’t have parked there. I’d call the gas used for skiing a Ski expense. Even meals and snacks that day I’d probably include in the Ski category, assuming it’s likely I wouldn’t have gone out to eat that day had I not been skiing.
I like to know how much every category of my life costs me. If I stopped skiing or my child stopped playing the flute, I want to know how that would change my spending. I see it as artificially inflating my monthly gas expense if I include a tank that I only needed because I drove to a ski resort. My Gas category should be just my normal gas consumption that I incur in my regular life.
I’m certainly not over the top on this. I make a quick determination and move on. I’m not going to agonize over whether I had some gas left in my tank after the ski trip. It’s just designed to give me a reasonable sense of what that activity costs me in total. Don’t overthink it – just be consistent over time in how you record these sorts of expenses.