Why I Budget 4 Ways for “Miscellaneous”

This post is pre-written; I’m away for a few days at a conference. I should still have internet access but responses to comments will probably be slower than usual.

I’ve been refining my budgeting strategy for a while now — as those of you who’ve been following know, since I can’t shut up about it — and there’s one thing I started doing in January that I really like. If you look at my budget categories, you actually see four that could be filed under “misc.” I take out $300 in cash every month; I have a line item for “gremlins” (more on that in a sec) that I’m now putting $100 into every month; I have $500 going into the emergency fund kept in a separate account; and I also have a line item for “slush” that is currently getting about $120 a month.

I realize this might seem overly complicated, but what it allows me to do is make sure my budget is focused on my financial priorities. It’s all got to do with self-knowledge. Each of these four categories represents a line of defense so that I’m sure I won’t spend all my spare $$ on random wants.

1) Emergency Fund. For now, I’m trying to get this to $5000. It’s my backup backup cash and I only want to use it in case of job loss, a medical emergency, or car trouble I couldn’t fund any other way. Maybe also emergency travel, like to see a sick relative.

2) Gremlins. I wish I could take credit for this term, but I can’t! It was coined by Cat from Budget Blonde, and I loved it so much I just had to use it. I guess you could say these are like mini-emergencies — they’re all the stuff that kind of pops up randomly in your financial life every month. A good example for me would be the flickr pro account that auto-renewed last month. Or maybe buying an air conditioner if I had to do that. Anyway, the point is that eventually this stuff is going to come up, and I want to have cash available for it that isn’t my emergency fund, but also hasn’t been spent on a night at the casino.

3) Slush. This is where my “leftover” money goes after I allocate to all my other categories every month. Some people call it “blow money.” This is money I feel free to spend on pretty much anything I feel like, and unless it’s the basics of rent/gas/insurance/medical, it’s also where I try to go first even for things I technically have budgeted for in other categories. For example, if I bought some clothing, I might try to find some cash for it in here instead of using my clothing category. I paid for the flickr pro account last month from slush, actually. Of course, I also use it for entertainment like meals out or movies, assuming I haven’t paid for them with cash (see below). I pretty much expect to use all of this every month and my hope is to be frugal enough that eventually my category sinking funds can start to add up a little.

4) Cash. I more or less give myself an allowance every week. I buy groceries from it, then use what’s left over for other stuff, like coffee and postage and movie tickets and a church contribution and basically whatever. This is the most liquid version of “misc” and I definitely expect to spend it all every month because I try to use it first for fun/entertainment stuff, before dipping into the slush line item.

For an example of how this works: when I had to pay for a $350 car repair last week, I already had $125 of this sitting in my repairs/maintenance fund. I started finding the rest of the money by reassigning my entire slush category ($121) to the repair, and only after that moved $104 from “gremlins” to repairs. So, for the rest of the month, if I want to make a purchase I’d normally make from slush (eg movie tickets or eating out) I’ll need to think *really* carefully about whether I should further empty the gremlins fund, or else use my spending cash. If I’d left anything in slush, and pulled most of the repair amount from gremlins, I’d be much more liable to spend what remained in slush.

So, my four misc categories basically exist to protect the two really important ones (emergency and gremlins) from the two that I feel freer to spend (slush and cash.) It’s OK if I end up emptying my gremlins category because I need to, but I don’t want to do that without thinking about whether I really need to, so I keep it out of my spendier categories. Seems to work pretty well for me.

Do you guys do anything like this, basically multiple categories for the same kind of thing meant to prevent overspending?

22 thoughts on “Why I Budget 4 Ways for “Miscellaneous”

  1. I believe that our budget should be tailored to our own personal lives. I have a basic budget. I pick a debt I plan to attack until it’s gone, pay my basic month bills and save the rest. I don’t have spreadsheets, but just a pen and a pad. Have fun at the conference.

    1. thesingledollar says:

      I used to budget on paper and I liked the materiality of it! Also, when I was in debt I barely budgeted at all because, like you, I was paying my basic bills then throwing everything else at the debt, so why bother with a formal budget? But now I’m trying to spread my savings and spending around so a more formal budget helps. I agree with you that everyone has to have their own system that works for them.

  2. Cindy says:

    Right now, mine is a little simpler, but mainly because I’m in debt payoff mode. I have a weekly amount of “spend” money, which includes gas and groceries, and then what doesn’t go towards my regular bills goes towards debt payoff. For now, my emergency fund is sitting at $3,000 and I’m comfortable there while I’m paying off debt.

    I’ve already started thinking about how to divide my “extra” money once the debt is gone. I think I’ll keep my spending the same, but probably set aside money for short-term and medium-term needs/wants, while socking away more money for long-term (retirement). I don’t think I’ll get too specific, but to me, short and medium-term include everything from car repairs to vacations to a down payment on a house.

    But I’ll probably change my mind a million times between now and then!

    1. thesingledollar says:

      I’m changed my mind so many times! 🙂 And when I was paying off debt I definitely just threw all the extra at that and didn’t worry about portioning it out. I find savings more difficult actually and so it needs more thought from me about how to make it happen and not just get my account down near zero every single month.

  3. CBuggle says:

    I use a Capital One 360 Savings Account, and I have 6 or 7 accounts within it labeled for different purposes. I also have an “Emergency Checking” account tied to it in case of an actual emergency since this is not a brick and mortar bank where I live.

    Categorizing my savings has been a huge help for me. It’s taken away the stress of managing the one lump of money I get each month. Having all of my savings in a completely separate bank than my transaction account is so helpful. I set all of this up after I had spent about a year paying off credit card debt and really learning more about my spending tendencies and habits. I spent a lot of time observing myself and trying really hard not to judge or be harsh on myself. Then I decided what things I wanted to change. Having this savings structure really helped me start to change the habits I wanted to change. (Thank you to Melonie at Deardebt.com for introducing me to Capital One 360 and targeted savings). There is a great post on The Simple Dollar today about goals and how they change. It sort of ties into this conversation on targeted savings.

    My Categories: Emergency Savings, Veterinary, Dental, Gifts, Open Index Fund, Car Maintenance and Tires (I have a health savings account through my employer for medical expenses). I can change these names as my goals change. After reading this blog post I think I’ll add an account that is for non-emergency gremlins.

    1. thesingledollar says:

      Cool, I’m glad you liked gremlins too! Spreading the word 🙂 I also have a Capital One account with four targeted savings accounts (retirement, emergencies, travel, and down payment) and I love that. I wouldn’t mind setting up more accounts there once I get a surplus in some of my spending categories; right now I’m spending most of them most months so it would be a pain to keep transferring in and out, but eventually I’d like to do that. Thanks for the comment! I’ll check out the changing-goals post too.

  4. ARBM says:

    This system is sort of like a hierarchy of spending… Each category back requires more thought before allowing yourself to spend it. It’s a cool way of thinking of things. I like it! Right now I’m just trying to learn not to spend, so I’m trying to make myself think about every purchase or cost, but down the road, once being frugal is more of a habit and comes naturally, I’d like to give myself an amount each month for “free spending”…

    1. thesingledollar says:

      Yeah, I think I’m at more of that “habit” point with basic frugality (and it did take a while to get there) but I still don’t really trust myself, so I like my hierarchy (good word for it).

  5. Brooke says:

    I like it! Right now we have a brand new “misc” category, $100 cash for the month between the two of us, and then the leftover money beyond our basic budget. We try to split that leftover money between savings and debt and to *not* spend it on further purchases. I hope the wiggle room means our budget is more successful. So far, so good in for Feb.

    1. thesingledollar says:

      I think some kind of “misc” category is essential — mine is unusually elaborately broken down, but you have to have one otherwise when stuff comes up you’re just like “wait wait!” 🙂 I’m really glad February is going well for you.

  6. There is no need to shut up about a budget – they are amazing and I absolutely love mine/refine it each and every day. I like the idea of the gremlin fund…those things do come up and it is such a pain to try and pull them out of the emergency fund (because it isn’t an emergency) and I have mine parked in an online 1% “high APY” account. I think I will borrow this gremlin fund from you, it will make those unexpected things much less painful. Thanks!

    1. thesingledollar says:

      I’m kind of weirdly fascinated by the whole budgeting process, so I’m glad to meet other budget-obsessed people 🙂 It’s just like you say — there are things that are *not* emergencies and I don’t want to pull from the EF. But on the other hand, they gotta be done.

  7. I really like that Gremlins category. Considering my recent car repairs, I’m considering it. Actually, these are pretty solid categories in general. But definitely the gremlins.

    1. thesingledollar says:

      It’s a great category! Three cheers for Cat 🙂 It turned out I really needed something between the category I might as well have marked “Spend Me!” and “Emergencies.” Already had to use it for my own car repair actually.

  8. Interesting, I love seeing how other people budget and deal with stuff that pops up.

    Instead of giving ourselves an allowance, we budget for each expense separately, groceries, entertainment, “stuff”, repairs. We have a healthy cash buffer, so we’re not too concerned if we go over a little one month. It’s a little more work, but once all the kinks get sorted out I think it will be pretty quick to track (we put everything on credit cards, then pay the balance off each month)

    1. thesingledollar says:

      that sounds like a great system. “A healthy cash buffer” is my favorite part. I definitely want to get to that point 🙂

  9. dojo says:

    We use mostly cash (I closed an account because of the too many fees) and also try to break it down in few categories as well. Love how you’ve thought about yours, it makes a lot of sense and, from what I read, it does work well.

    1. thesingledollar says:

      I love using cash for the things that I’m most likely to fritter everything away on! Account fees are so obnoxious, too.

  10. Unfortunately not right now. My budget is too tight and income has been lower than usual, so any extra would go to my emergency fund which has been depleting for the last several months. I can’t wait to get to your point though!

    1. thesingledollar says:

      ugh, I keep hoping your clients are going to pick up again! This is definitely a “once the basics are taken care of” kind of strategy which is why I only implemented it after my loans were gone.

  11. Becca says:

    I think this is so smart! I have a tendency to way overcomplicate my budget. Lately I’ve been trying to keep a general miscellaneous category rather than separating it out into things like clothes, entertainment, restaurants, etc. That way, I can use it however I want/need to that month. The thing that’s helped the most is setting aside funds for annual expenses each month. I still have gremlins, but the handful that I’ve anticipated are also already taken care of!

    1. thesingledollar says:

      Yeah, I think people with annual expenses (property tax, things like that) find that *really* useful. Right now I don’t have any of those but I will definitely implement that system if/when I get them. Mine tend to be more irregular so I like my gremlins category — I found that when I had more precisely defined budget categories I was just constantly moving stuff around and it seemed less useful.

Comments are closed.