How do you determine categories?

I just began using Tiller and determining my categories for the first time led me to ask a lot of questions, including ‘What is important to me?’ I noticed a trend as I was going through past transactions. Some felt like they were a necessity or reasonably important (e.g. buying groceries or investing in music) while other transactions seemed unnecessary or less important (e.g. takeout food or HBO subscription). So, I used my group column to differentiate these two types. This process was highly subjective and I decided to go off my intuitions rather than use logic. A question I still ask is “…important or necessary for what?” Perhaps, for a thriving, meaningful, full life… but I think there’s more to explore there.

To determine categories, I was inclined to look less at the specific item being transacted and more closely at the use or motive behind the item. For example, I recently moved into a new studio and I’ve spent a significant amount of money purchasing household items (e.g. furniture, lights, electronics, kitchen & bathroom supplies, etc…). Labeling all of them as “household items” wasn’t going to work, because some clearly had a greater benefit on my life than others (i.e. some seemed more important). I chose categories like “ambience” to describe household items that contributed to a living space which made me feel joyous and relaxed. I used other categories like “decorations” to describe household items which didn’t feel as important. I ended up splitting travel expenses into “visiting friends and family” and “vacation,” to differentiate travel expenses which connect me to people I care about versus ones that are fun and exciting but not paramount.

I think spllitting transactions up in this way will help me spend more on things that matter in my life and less on those that don’t. Throughout the process of categorizing transactions, I may even discover new things that matter to me; I think there is something about the question “Is this worth spending money on?” or “Can I justify this purchase?” that can unravel tangled values.

What questions do you ask to create and fit transactions into meaningful categories? Any book recommendations?

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To me its simple as I came from Mint since 2014 and been with Tiller for a year. I use Groups and Categories with a sheet I design myself for ultimate flexibility and because I like formulas. I think of categories as the lowest level so Netflix, Gym, Groceries, Restaurant, Alcohol & Bars, TV, Internet etc. This is how it worked in Mint as well. Then Groups, to me, is just a level of Bills which needs to be transactions that are every month without a doubt, this way I know how to budget this number as it should always be the base of how much is taken out of my expenses every month. Then I have Food & Dining which is where I try to control and look at with a fine tooth comb on trends like MoM, Average transaction size etc. Then I have finally Discretionary which is my other category.

I also have income and transfers but those are more self explanatory.

I try to follow a zero balance approach where each month I want to net out to 0 so I try to monitor my cash flow yearly as well as monthly. When i look at my cash flow for the year it doesn’t include savings or investment accounts this way I know if my cash flow is increasing and if i can start to move some money out of my checking to go to savings or invest more.

I know i didn’t directly answer your question but hopefully i gave more information than you needed to help you get started. I am sure that I am not 100% correct in my approach and I could be better at certain things but this is just my approach.

With 328 categories and 27 groups, one would guess I would have lots to say. Yes, I know I am crazy.

My approach is to get as detailed as possible. That way if I want detail I have it. If you go to broad then want more detail later, you cannot do it without redoing all of your categories. I like to categorize by vendor.

The bottomline, there is no right or wrong answer. It is whatever you want it to be.

@Josh has put alot of thought into his methodology. Nice.

Here is one of my groups with all of its categories so you get a flavor of my madness.

Groceries is my biggest expense. If you use just one category called Groceries, you’ve got nothing. With all my categories, this is what I can produce.

I don’t know about you, but that is powerful.

Same thing with Utilities.

Same thing with pizza. (This one resulted in us making some changes.)

So,.what do you think? Starting to understand my madness?

That is madness there! How do you keep up?! I personally like it simple. I don’t ever see a use case where I would need to dig into what grocery store I am spending the most in, however if I do the description with maybe some regex could help to bucketize the transactions into stores as that is what descriptions are for they should tell you the location. I know Central Market, Kroger, and Costco for me show up in the descriptions so instead of reinventing the wheel i just use that, but whatever works for you is the best!

It is actually no more work to do it after you initially set up your categories. In my mind, categories are the most important piece of your Tiller sheet. I have never budgeted but like to track expenses. I do not really need the detail but it is there and allows me to do the types of things that I attached. With me, a lot of it is intellectual curiosity. Those items I attached were done as part of me learning how to create charts and tables back when I first joined Tiller. Cheers!

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Great questions @Josh!

This inspired me to resurrect our “Values Driven Budgeting template.” It’s pretty basic, but if you really just care about whether the expenses align with your values and want to see it broken out that way (yes or no) give it a try.

Just feed data into it and play around. No need to set up Categories, just a simple yes or no on each transaction.

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