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Simplify Your Buckets

by Judy Hoctor

Imagine it’s 1935 and you're going to the grocery store for laundry detergent and other cleaning products. The first mainstream credit card that could be used for a variety of stores, Diner’s Club, wouldn’t be issued until 1950. Instead, you are likely to possess a variety of envelopes that have cash in them and labeled according to their purpose. Rather than having a large grocery envelope containing smaller envelopes for food, pet food, household cleaners, etc., you are more likely to pull cash out of a single envelope: your grocery envelope.

Fast forward to today. Some people like to have buckets for every single purpose. The trouble is that you have to work extra hard to juggle all your buckets and make sure there’s the right amount in each of them. Do you really have time to dissect your grocery receipt to see how much you’ve spent on food versus non-food items? When I used to do my budgeting in Quicken, that’s exactly what I tried to do, and I dreaded having to input those receipts and needlessly split out dozens of transactions.

Back in the day, I sometimes bought pantyhose at the grocery store, and I still occasionally buy certain cosmetic items there. And what about trash bags and aluminum foil? Sure, perhaps I could tell you how much I spent on cleaning products, etc. at the end of the month or year, but did it really matter? And if I didn’t break out every single occasion, my results weren’t accurate. You have better things to do than getting caught up in this minutiae. The point is that you want to become more aware of your spending habits. If you notice that your grocery budget is creeping up—or if you consistently need to “borrow” from your grocery bucket to afford some of the other items in your spending plan—then maybe it’s time to look at your grocery bucket and make some adjustments.

The reality is that at the end of the day I’d rather spend my time enjoying life instead of being trapped in front of a computer micromanaging my individual expenses. Don’t bother creating extra buckets if the things in them aren’t problematic for you or if it’s a static expense. For instance, I don’t track my payroll taxes and FICA charges from my paychecks. I get statements each pay period to see this information and a W-2 at the end of the year that shows my totals. These taxes aren’t anything I have control over, so it doesn’t make sense for me to go to the effort of splitting my transactions to capture this information. However, I break out my auto loan from my other auto expenses because I want to be sure it gets paid every month and separating it helps it to stand out.

Here’s are a few examples of my buckets and why I use them:

1. Automobile - all my gas, oil changes, maintenance, and repairs go in here—everything except the loan payments
2. Dining - I use this for fast food, finer dining, delivered pizza—basically any meals not prepared at home using groceries
3. Groceries - trips to the supermarket, farmer’s market, seafood store, etc. generally all get put in this bucket, including purchases like deodorant, shampoo, soap, cleaning supplies, batteries, and aluminum foil—If I did my grocery shopping at a place like Super Wal-Mart, I might be more careful to split out household supply items because of the potential for impulse purchases
4. Household Supplies - laundry baskets, hangers, plates, light bulbs, air filters—pretty much anything used for our household operations
5. Lawn Care - includes gardening supplies, fertilizer, mulch, and flowers in addition to the lawn service we pay every month
6. Loan-Automobile - only my car is financed, but if my husband had a loan on his car, they both would share this bucket unless the timing on the payments were different (also, the name starts with "Loan" instead of "Automobile" to make it easier to use MoneyWell’s auto-complete functionality)
7. Pet Care - pets aren’t cheap, so every pet expense we incur goes in this bucket (it's also used to show how much it costs to have one dog and give us ammunition to say “no” to our daughter’s request for a second one)
8. Personal Care - manicures, pedicures, spa appointments, massages, haircuts, and anything I purchase at these appointments—nail polish, shampoo, etc.—unlike my kids’ shampoo, which I buy at the grocery store and leave as part of my grocery bucket
9. Savings - both emergency fund money and long-term savings go into this bucket so that I don’t spend it and I can periodically transfer that money to my savings account
10. Self Improvement - this consists of exercise tapes, gym memberships, class fees, professional literature, seminars, and also includes all my magazine and web subscriptions since they are related to self improvement—leaving me with no need for a separate “Subscriptions” bucket
11. Taxes - this is for our homeowner’s association fees, property taxes, MUD taxes (a million "Intuit" years ago I also tracked sales tax—I cannot be bothered with this anymore!)

Your buckets may look different than mine, but be consistent with the types of transactions you put into them. We deliberately don’t have buckets that are hierarchal—some people call these nested or grouped—because our focus is to budget our money before we spend it, and we don’t want to hide buckets and potentially miss that we’ve overspent or underfunded them. It may be a new way of looking at your money, but hopefully you’ll discover that it’s a much more proactive way of handling your spending.

When you’re looking at organizing your buckets, remember your goal is to get control of your bad spending habits, like impulse purchases, and promote your good ones, like saving and debt reduction. Although it’s important to track every dollar of your spending, it’s not necessary to break down everything to its smallest component. When you’re trying to decide whether to add or remove a bucket, ask yourself the question, “Will having this broken out help me to control my spending?” In many cases, less is more and MoneyWell makes it easy to drag and drop transactions from one bucket to another if you feel you need to break them out later into additional buckets.

So go ahead and try simplifying your spending categories—you can always change your mind and your buckets.