Miscellaneous Expenses: Where Did My Money Go?
â€œSome couples go over their budgets very carefully every month. Others just go over them.â€ â€“ Sally Poplin
On Friday, my beloved Bose â€œNoise Cancellingâ€ Headphones broke just before the flight home from a long week of work in Europe. Snapped in half is a better description. I was just settling into Seat 20B when I pulled them from carry-on where they were flopping around like a broken limb. I recall letting out an audible groan. Why the horror?
1. I had a 10 hour flight ahead of me without the ability to cancel the noise in 20A, 20C and any of the children that would inevitably be sitting in Row 21.
2. It will cost me $299 to replace them before my next long flight.
Before anyone comments with advice about using the warranty, Iâ€™ll pipe up and let you know that the coverage period is long over. Besides Iâ€™m certain all the proper packing rules have been broken and likely caused the snapped in half defect in the first place.
So where am I going with this? I hate spending my hard earned money on replacing things. When I buy something, I try to buy quality so in theory it will last forever. Miscellaneous purchases are supposed to get you ahead of the game not just back to baseline.
I often fret over the miscellaneous category in our budget. In my opinion, $299 is a huge expense and wrecks havoc on a category that is supposed to be reserved for the arbitrary stuff that falls outside of the regular budget categories. But â€œmiscellaneousâ€ is typically what gets people into trouble with finances and credit card debt in the first place.
Johnathan Nightingale at Meandering Wildly explains it this way:
A popular tactic is to leave a â€œmiscellaneousâ€ category in the budget with some arbitrary (but usually too small) amount in it, to catch-basin all that. But then, the more of your budget that falls under miscellaneous, the more it resembles your old, budget free life without the discipline you were supposed to be getting. And when you see that happening, you feel bad, you slap your wrist, you say â€œno more slipping, we need to get back on our budget.â€ Shame spiral â€” itâ€™s worse than a diet.
So more thought should be given to this category. Think of it this way: it is everything not included in these regular categories:
- Rent or Mortgage
- Other Housing Costs (property taxes, home insurance, etc.)
- Utilities (water, electric, gas, garbage, telephone)
- Home Maintenance
- Auto & Upkeep (car payment, gas, insurance, license, parking)
- Food (groceries, restaurants)
- Entertainment (Cable, DVD rentals, theater, vacations, etc.)
The Miscellaneous category is one category that eats up a lot of the money in budgets, and most families can never remember where that money was spent. This category can include a myriad of items, ranging from daily snacks and vending machine soft drinks to Christmas and birthday gifts, haircuts, magazine subscriptions, and toiletries.
Hereâ€™s their solution:
Five percent of Net Spendable Income should be applied to the Miscellaneous category of budgets. So, if the annual Net Spendable Income is $50,000, the Miscellaneous category should be allocated $48 per week or $2500 per year. If $700 is spent annually on Christmas, birthday, and special occasion gifts, this would leave just over $34 per week or $150 per month for all other miscellaneous expenditures.
Miscellaneous is the one category that generally develops creeping inflation because it is so easy to justify â€œborrowingâ€ from one budget category in order to satisfy the latest or current need or obligation. However, seldom is the borrowed money ever replaced, which forces a shortfall in the category from which funds were borrowed. All too often this shortfall is reconciled by using credit cards.
The key to controlling the Miscellaneous category is to establish a realistic plan for careful spending and stick to it, not allowing it to grow out of proportion. There is no substitute for self-discipline when it comes to miscellaneous spending.
Hereâ€™s another way to look at it... check out your monthly credit card statement. Brian Carr at Saving Without A Budget writes:
So, I took the most recent monthly statement, opened it up and examined what exactly I had spent my money on during the past month. Because I charge everything (and pay it off each month) I figured this would be a pretty simple way to take a good look at how I was getting rid of my hard-earned money.
In order to determine where my money was going, I wrote down six categories - food/health, clothes, home, entertainment, car, and miscellaneous - and placed each item in my credit card statement into one of the categories. From there, I broke each category into two sub-categories - needs and wants.
Items like groceries, gasoline, utilities, etc., fell into the needs sub-category and items like DVDs, golf balls, video games fell into the wants sub-category.
In looking at the balance of where my purchases were going, most of them fell into the needs sub-category, however, I noticed that there were a lot of unnecessary purchases in the wants sub-category. I figured that if I could eliminate 50% of those purchases I would be able to save several thousand dollars each year.
Needs vs. wantsâ€¦ figure that out and youâ€™ll master the miscellaneous! That said I â€œneedâ€ to replace the headphones and will forego other â€œwantsâ€ for a couple of months.
Nina Smith blogs about money and how to save it at Queercents.