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I have a budget with all the essential categories (rent, utilities, groceries, etc.) and I wonder if it is worth having a few (many?) non-essential categories even if my monthly contribution to them is tiny (because the bulk of the money is allocated to more important categories). For example:

  • Laptop replacement
  • Mobile phone replacement
  • Glasses replacement
  • HiFi sound system
  • Furniture fund
  • NAS drive
  • Cycling gear

Because of the tiny contribution the goals wont be reached in a realistic time frame; but at least I'm saving for them, right? Or should I not bother?

  • Since the goal of budgeting is to make sure you don't overspend, I'd say it's more important to keep your progress right in front of your nose, so to speak, since you may be tempted to buy the time early without a reminder that you haven't saved enough yet. – chepner Aug 16 '18 at 22:12
  • When money was tight, I've never found a budget to be useful. I paid for essentials like car, rent, utilities and food and other than that, I saved every penny that I could. When there was some cushion, I bought a non essential need - something I either already had but needed upgrading (for example, nearly worn out shoes) or something that I wanted (minimal furnishings, etc.). . – Bob Baerker Aug 16 '18 at 22:46
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The answer is you have as many budget categories as you need.

A concept that goes hand-in-hand with this is the notion of sinking funds. That is if you plan to replace your roof in 10 years and it will cost 12K, then you should start saving 100 per month. Of the categories you mentioned laptop and cell phone replacement would fall into those categories.

We keep our various sinking funds in a high yield savings account and keep track of them via a spreadsheet. You might as well earn a little interest on your laptop replacement fund especially if your laptop lasts a few months longer than you expect.

I think it is great that you have these funds even if the contribution is tiny. When your income rises, you know specifically how to allocate the funds. Also you have goals. The one thing I would encourage you to do is to focus on one at a time. For example, perhaps your goal for the next 12 months would be to save for a HiFi sound system. Your cycling gear might suffer a bit, but then you can knock that out and have a sense of accomplishment.

Good work!

  • Thank you for the encouragement and advice. I agree, I should be saving the correct amount for the sinking funds, unfortunately I can't as other categories take priority; I guess a small contribution will have to do. – Pablo Aug 17 '18 at 15:29
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Budgets serve two purposes: psychological and practical.

Psychologically, it helps to quantify a goal and see progress toward that goal. The trade-off between massed and individual goals is that one looks like it’s growing more quickly (a chunk of +$10 instead of 10 lots of puny +$1s) while the other feels more tangible (generic ‘savings’ vs ‘Amazing PC / latest iPhone / glasses that work / etc’). Pick whichever way motivates you more.

Practically, the budget is your expression of your priorities. If you’re a person who prefers to accumulate money in a bucket and just buy discretionary stuff when you can afford it, go with the masses ‘savings’ - it’s much easier to keep updating. If you prefer more granularity, say, because you prioritise glasses #1 and PC/iPhone equally at #2, etc, then work out your percentage allocations for every piece of discretionary income. It can be harder to update (e.g. got $10 in birthday money, that’s $2.75 into glasses, $2 each into ...; then you recovered $3 from under the couch, so that’s $...) but you will be able to tell at a glance how much you still need for each item.

It’s horses for courses, as they say. Pick a level of detail that is useful to you, that you can sustain, and which motivates you. You have too few categories if you can’t tell how much more you need to save, and you have too many categories when you can’t stand the data entry.

  • 1
    building off what @Lawrence said, most of budgeting is psychological, especially as a written plan tends to encourage one to keep to it. A budget must balance every month; if you don't have enough earnings to cover expenses, then expenses need to be reduced. However, if you have extra money, then you should budget that to something such as paying down debt, savings, etc. The budget each months allows you to be honest with yourself (and your spouse). – rocketman Aug 19 '18 at 4:14

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