The “Commingled Purchase” Problem That Budget Apps Don’t Warn You About

12:08Amanda Barroso:And those things in my budget might be under household supplies. So if I don't take the time to itemize that, well, dang, I've blown through two weeks of my grocery budget. And that's not actually true. That's not even accurate to my spending. So I think part of this is kind of looking inward and saying, what kind of specificity do I need to make my budget work and to accurately reflect how I'm spending my money every month?

12:31Sean Pyles:And sometimes what we think is a need when it comes to groceries in particular could be more of a want. Like if you're buying the ultra expensive, fresh handmade pasta from the store down the street, it's probably going to cost you several times more than just getting a box of pasta from the grocery store. And so in that case, you've made a need, which is having some nice pasta for dinner into more of a want by getting the most luxurious option out there. And that's something that I struggle with sometimes is thinking and justifying getting the fancy thing because I just want it and feel like I deserve it, which frankly I do.

13:04Sean Pyles:But you don't want to blow your budget. So it's all about priorities, too.

13:09Elizabeth Ayoola:I will disagree with you, Amanda, about Netflix not being a need because how else am I supposed to escape from the chaos happening in the world? So definitely a need for my mental investment in your mental health for sure.

13:18Amanda Barroso:It's true. We're humans. We need some pleasure in life.

13:21Sean Pyles:We'll be back in a moment after a quick break. Stay with us.

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15:20Sean Pyles:Okay, so one thing we've been kind of circling around is the idea of budgeting style, which can be really personal. And it seems like our listener is maybe leaning toward the zero-based budgeting style, which we mentioned earlier. There's a lot of administrative labor involved in zero-based budgeting, which just isn't my thing. Even if you're using an app, it's still kind of labor-intensive. But then on the other hand, I think a lot of folks might be okay with some kind of ambiguity in their budget. So Amanda, what are your thoughts on how people can find their own balance of tracking their expenses without there being so much work involved that they just abandon budgeting entirely?

15:56Amanda Barroso:I'm glad you asked me this question because I talk a lot about budgeting at NerdWallet. This is my whole job. And obviously, we never really talk about the work that goes into it. Like budgeting takes time and intention. It's work actually to manage a budget. And we live in a society that tries to make things as frictionless as possible. But maybe understanding our spending requires like just more friction. Maybe having to itemize your receipts, which probably literally takes, how long do you think? Five minutes or less?

16:29Sean Pyles:Per receipt. Yeah. It sounds tedious though. It's the last thing I want to do, I'll be honest.

16:34Amanda Barroso:Okay. But having to itemize those receipts and upload them to an app or whatever. I don't know. Maybe it's a hot take, but like maybe your budget requires a little friction. Now, I'm not saying it has to be this brand of friction, okay? But I just want us to hold two things in both hands to say, yes, because life is crazy, we are tired. We want apps and hacks and things that make budgeting feel easy. On the other hand, managing a budget requires thought, care, and some work. From a budgeting app side of things, many apps are realizing that this is a pain point for some users. Having to sit there and itemize everything and recategorize everything takes a lot of time.

17:17Amanda Barroso:And people want some level of automation and more accuracy too. So I think there are some workarounds that you can use to sort of hack your budgeting app. if it doesn't have the exact features that you're looking for just yet.

17:32Sean Pyles:It also raises the question of what's the purpose of budgeting at all? Because I think if your money is tight, budgeting is just a survival necessity. You have to know where every dollar is going because there aren't that many of them. And then as people's incomes grow or maybe their expense is lower, sometimes it can be really easy to just not budget at all. And the reality is that a lot of people, and this is kind of a secret of the financial planning world, is that most people don't really have a great grip on their monthly expenses and how much they're spending on a regular basis. That can be okay as long as you have the infrastructure in the background to make sure that you are saving regularly, you're paying off your debt, yada, yada, yada.

18:12Sean Pyles:If you get to a comfortable enough place of having your finances sorted, I actually don't know if you need to track every single penny. That's why I don't do that. But you still need to be responsible enough and understand how much you're spending on things on a regular basis. So there's a balancing act for sure. But I don't think that you need to be strict and punishing yourself and spending hours and hours budgeting if you have your finances mostly sorted out. Maybe that's just me justifying my own behavior, though.

18:41Elizabeth Ayoola:Yeah, I think it's about having that good financial foundation or framework for managing your money. And once you get in a good rhythm with that, and also obviously depending on your income and expenses, you can get to a place where you don't have to track every penny, unless you love doing that, of course.

18:56Amanda Barroso:Right. OK, so I have three ideas for people who don't want to track every penny, but kind of empathize with the listener of like, OK, maybe I have a family. Maybe I do a lot of my shopping at Costco, Amazon, Target, Walmart, where your cart is just a hodgepodge of things. If your goal is tracking your spending behavior, not your receipts to the penny like you're talking about, you could consider a merchant based budget where you designate like$200 at Costco every month,$150 at Target, whatever it is. You could go back, look at the last six months of your spending at, you know, these types of stores and come up with an average or something like that.

19:37Amanda Barroso:Or if you're trying to lower it, you could challenge yourself a little bit and come in a little bit lower. But consider the stores that you shop at the most and kind of give yourself a budget for those stores. I'll admit this is kind of what my family does. So if you're trying to avoid tracking fatigue, which I think our listener is, try picking a default category for each store. So like Costco could be groceries. Target is household stuff. Amazon is miscellaneous or it's shopping. You know, in all of these budgeting apps, there's some of those little categories that are like other. You could set a rule for yourself within this.

20:11Amanda Barroso:OK, I'm only going to itemize receipts if they're over$100. Anything else, it's 25 bucks, whatever. Right. Again, personal to you. You could set your own threshold, but this could be a way to kind of lessen that fatigue.

20:23Sean Pyles:I like that.

20:24Amanda Barroso:Okay, the third option, it might appeal to parents. You could create a like a family flex category in your budget that contains all your target runs, your Costco hauls, your Amazon orders, whatever that may be. You could fund this intentionally each month. Again, you'd probably need to look back and see how much generally you're spending monthly at these stores. So you'd care less about the exact category that the items are falling under. You just know this is sort of my threshold for all of these stores, our household kind of expenses. And I just don't want to go over that amount every month.

20:59Amanda Barroso:So you could avoid burnout that way.

21:01Sean Pyles:I like those. That does seem pretty adaptable. So each spending and tracking style could kind of fit into each of these.

21:09Elizabeth Ayoola:All right. Well, this is the part of the show. So I just made it up because now it just become a part of our show where we talk about our own business. OK, so I want to hear about each of you. How would you tackle this issue or just how do you budget generally? So tell me, Amanda, you go first. How do you do it?

21:25Amanda Barroso:We have a joint credit card where we put our household and shared expenses and we get travel points that way. So we like to kind of consolidate it that way. And we have a limit for what we want to spend there each month. And we try to come under it always so that we can put more into our savings. But the only thing that doesn't go on that is any target purchases because I have a red card. So I like to get that extra 5 % discount. And we just pay that like we would a normal credit card every month. What about you, Elizabeth? How do you handle it?

21:58Elizabeth Ayoola:Well, so I have what I would like to label an ADHD budget. So I do a little bit of pay yourself first and also kind of 50, 30, 20. So all my savings, retirement savings come out of my paycheck first. And then I have my fixed expenses. So I know a certain amount I have to spend on my fixed expenses every single month. And then the rest is a free for all girl, do what you want. So I kind of just separate, in other words, my needs versus my wants after I pay myself first. And then I just track my spending as the month goes on. So if I'm close to my limit, then it's like, hey, girl, you got to pull back spending.

22:34Elizabeth Ayoola:But something else that I find that I do a lot is when I am looking at what I spend, because I usually check my spending at least once a week. I usually find themes with how I'm feeling because that really impacts my spending. So I find when I'm in a very balanced place, I don't really overspend. You know, I buy essentials. Sometimes I spoil myself, but I'm pretty on budget. But if I am maybe going through a difficult time or in need of a lot of comfort, then I find myself spending more. So I more look through what I'm spending as a reflection of my feelings and maybe where I need to adjust. Does that make sense?

23:07Elizabeth Ayoola:I feel that.

23:07Sean Pyles:It sounds like we need an emotional spending category in your budget. Yes. But I can completely relate.

23:14Elizabeth Ayoola:Another sinking fund, Sean. Exactly.

23:16Amanda Barroso:Well, that's the beauty of a budget, right? Like when you look through the budgeting apps, there's always some category you could rename. Okay, you don't have a pet. Well, I'm going to rename this like your emotional spending category. Get the fancy coffee cream or get whatever the little thing is that makes you feel good.

23:28Sean Pyles:This is my pot of money that I use to process the trauma of the world on a regular basis.

23:33Elizabeth Ayoola:I had to wake up and do X, Y, Z today. I need to treat myself. So honestly, I could never track every dollar. Let me not say never. There have been times where I've been overspending month to month. And again, I'm like, OK, what am I doing and what's happening? But I think it's so important with finances that you do something you can commit to. And I just could not commit to tracking every single dollar.

23:53Sean Pyles:I budget really similarly to you, Elizabeth, actually. And instead of doing zero based, I like to think of it as like broad based budgeting, where I do pay myself first, where I have my money going into my various savings accounts. And then what I have in my fun money account, that's the amount that I can spend on whatever random things I need that month. But I'm not counting every penny as precisely as I probably would have been in my early 20s when I was pretty broke. So again, it depends on the phase of life that you're into. Listener, I hope this has helped you sort out how you're going to sort out your expenses.

24:24Sean Pyles:If anyone listening has their own fun, wacky, weird budgeting tips, because we all have our own, let us know. We always love to hear them. And Amanda, thank you so much for coming on and talking with us about this.

24:36Amanda Barroso:Thanks for having me. You know I love talking with you guys.

24:39Sean Pyles:Listeners, that's all we have for this episode. If you want us to give your budget a makeover so you can better track your expenses or maybe just reach a financial goal, then fill out the application form in today's show notes.

24:49Amanda Barroso:To have the nerds answer your money question, call or text us your questions at 901-730-6373. That's 901-730-N-E-R-D. You can also email us at podcast at nerdwallet.com.

25:05Elizabeth Ayoola:And our next episode is timely because we are going to be chatting about the best budgeting app for you. Look at that right on time. Follow Smart Money on your favorite podcast app. That's Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

25:19Sean Pyles:Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

25:29Elizabeth Ayoola:This episode is produced by Tess Vigeland, Hillary Georgie helped with editing, Nick Kersamee and Eve Krogman help our audio and video production. And a big thank you to NerdWallet's editors for all their help.

25:41Sean Pyles:And with that said, until next time, turn to the nerds.

25:48Amanda Barroso:every tuesday we take a deep dive into the world of security with security now hi this is leo laporte join me and steve gibson as we talk about the latest security information that big report that says password managers don't protect their vaults well enough steve will look at the details explain what it means and why you don't have to be too worried but still good to know all that this Tuesday and every Tuesday. Security Now, you'll find it on our website at

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