Milk, Bread and … a Purse? How to Track Purchases that Cross Budget Categories
The way we shop doesn’t always neatly fall into the budget categories we set for ourselves.
Many times, a purchase will include multiple items that fall under different categories, especially when we’re shopping at a department store or an online retailer like Amazon. It can complicate how you track your spending.
If you go to Walmart, for example, and spend $100 on groceries and a few DVDs and video games, how would you add that to your budget? If you went shopping for a gift for your sister’s baby shower but also purchased some home decor items for your apartment, how would you make those distinctions when recording your spending?
You don’t want to throw off your budget by lumping expenses under a category where they don’t belong. Here are five ways to handle purchases that fall into multiple budget categories.
Option #1: Color Code Your Receipt
When you make a purchase with expenses that fall into different budget categories, take some time when you get home — or before you leave the parking lot — to mark which individual charges on your receipt are for which budget categories. Use colored highlighters, markers or pencils for visual distinction.
While some retailers, like Target, itemize their receipt by department, be aware that your budget categories may not match up with how the store lists your expenses.
If you’re using a budgeting app that syncs to your bank account, use a “split transactions” feature to break up the charge into multiple categories.
Don’t forget to factor in tax. Total the expenses in each category and multiply it by the tax rate, assuming everything is subject to the same sales tax. Or to simplify things, take the tax amount at the bottom of your receipt and just add it to one of your categories. It’s usually a nominal amount.
Option #2: Break Your Purchase Into Multiple Transactions
Organizing the items in your cart and making separate transactions for different budget categories can eliminate the confusion when it comes to tracking expenses.
For example, if you’re at Macy’s buying clothes for your kids and also a gift for your mom’s birthday, ask the cashier to separate your purchase into two transactions. You will get two receipts and will see two separate charges on your bank statement if you’re paying by card, so it’ll be simple to record each expense under the appropriate budget category.
Out of common courtesy, tell the cashier you’d like to make separate transactions before they start ringing up merchandise. Also, be considerate of others waiting in line. Try to choose a register that’s not super busy if you plan to make several transactions.
If you’re shopping online, be careful not to split transactions in a way that results in you paying more for shipping.
Option #3: Pull Money From Different Cash Envelopes
If you manage your money via the cash envelope budgeting system, you can make sure each expense is properly accounted for by pulling money from each respective envelope.
Say you’re at the grocery store with a cart full of food, but you also picked up about $20 worth of toiletries. You’d take a $20 bill from your “personal care” envelope and pay the rest of the total with the cash from your “food” envelope.
To make this work, you may have to round your expenses to the nearest dollar and make sure your envelopes are stocked with bills of different denominations. Don’t forget to factor in tax.
Option #4: Keep Your Budget Categories Broad
When you want to keep close track of where your money’s going, it can be tempting to go granular with your budget categories. But having broad categories means you don’t have to put as much thought into how you categorize each purchase you make.
Budget methods like the 50/30/20 budget and kakeibo keep things simple by using broad categories like “essentials” or “needs” and “personal spending” or “wants,” instead of than more specific categories, like “groceries,” “gas,” “date night” and “home decor.”
When you use broad budget categories, you have a better chance that the multiple things you buy in one shopping trip will fall into one bucket rather than several.
Option #5: Track Spending by Store Rather Than by Type of Item
Though budgeters typically categorize their expenses by what they buy, you may find it more useful to categorize your spending by where you’ve made a purchase. Remember, there is no one-size-fits-all approach to budgeting. It’s totally acceptable to use this different metric for budgeting if that works better for you.
For example, if you go to TJ Maxx to buy an outfit for work but you also purchase some new towels and a chew toy for your dog, you don’t have to worry about breaking the expense down into multiple categories. You’d simply write down how much you spent at TJ Maxx.
When reflecting on your spending at the end of the month, you’d have a picture of how much money you spent at different retailers rather than how much you spent on different types of goods.
Feeling overwhelmed? Create a budget that works for you with our budgeting bootcamp!
Nicole Dow is a senior writer at The Penny Hoarder.