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NerdWallet's Smart Money Podcast
The “Commingled Purchase” Problem That Budget Apps Don’t Warn You About
00:24:52
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- [00:01]
Sean Pyles
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- [00:14]
Elizabeth Ayola
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Sean Pyles
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Elizabeth Ayola
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Sean Pyles
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Amanda Barroso
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- [01:16]
Amanda Barroso
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- [01:17]
Elizabeth Ayola
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- [01:18]
Sean Pyles
I'm freaking out. Don't worry, I can fix this.
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Amanda Barroso
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- [01:27]
Sean Pyles
I'll be with you every step of the way.
- [01:29]
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- [01:39]
Sean Pyles
what is your biggest hurdle when it comes to tracking your expenses?
- [01:42]
Elizabeth Ayola
I don't want to blame it on my adhd, but my adhd, you know
- [01:46]
Sean Pyles
I'm right there with you. But fortunately there are lots of budgeting apps that try to make this easy for you. Although sometimes it's a little bit more difficult when the rubber actually hits the road with these apps. Welcome to NerdWallet's Smart Money podcast where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.
- [02:05]
Elizabeth Ayola
And I'm Elizabeth Ayola. This episode we're going to be exploring how to actually make budgeting apps track your expenses. And here's our listener's question which comes from a text message.
- [02:17]
Amanda Barroso
Hey, nerds.
- [02:17]
Elizabeth Ayola
Tools such as Monarch, Ynab, et cetera are great for creating a budget. However, for years, I've struggled to actually track expenses against that budget. A big reason for this is many of my family's expenses come from big box stores like Costco, Target, Walmart, Amazon, etc. That consistently involve commingling purchases of groceries, clothing, toys, and other budget categories. Any suggestions on how to accurately split these changes to get an accurate picture of spending? The only way I have discovered around this is to log itemized receipts by hand, which becomes extremely cumbersome and often leads to abandoning the budget. Thanks.
- [02:58]
Sean Pyles
I can relate to any administrative hurdle leaving me to quickly abandon my budgeting. So I'm right there with you, listener. So, to help us answer this listener's question, we are joined by personal finance nerd Amanda Barroso. Hey, Amanda. Welcome back to Smart Money.
- [03:12]
Amanda Barroso
Hey, y'. All. Listen, I just went to Target the other day, and my receipt was exactly what this listener is talking about. It was like, bluey rain boots, baby wash, some hummus. I mean, like, it had.
- [03:24]
Sean Pyles
But those aren't all needs. What do you mean? The bluey rain boots are really important.
- [03:27]
Amanda Barroso
Oh, my gosh. Listen. Well, we're flying to New Jersey next week, and it's going to be snow on the ground, and this is as close as I can find to snow boots here in Atlanta. So blue rainboots it is. But this is, I think, a really common issue. I'm so glad we got this question.
- [03:42]
Sean Pyles
Yeah, I mean, this question really gets to some of the practical, really tactical issues of using budgeting apps. Like, how do you sort out your expenses when you have so many, maybe within one single purchase, because especially when you are going to a Target or you're going to a Costco, you might have different categories in one single spend like our listener described. Like, when I go to Costco, I'm getting myself a really nice rotisserie chicken for dinner. But then there's always some viral product that I want to get. Like, did you guys see that gigantic jar of peaches?
- [04:11]
Amanda Barroso
No.
- [04:12]
Sean Pyles
Do you guys know what I'm talking about?
- [04:13]
Amanda Barroso
Okay, I do. I do.
- [04:14]
Sean Pyles
My algorithm is full of random crap from Costco and people buying them. So with this jar of peaches, the whole gimmick was that there was one woman in one video who spent maybe five minutes trying to get the peach out of the jar because it just wasn't designed to actually get the peaches out, I guess. And then when you eat it, it's a whole entire peach with the pit in it. So eating it is a mess. But I still did it for the novelty of it. And to me, in the moment, that felt like a need, because I love peaches. But in retrospect, that was probably more of a want. I would have categorized that a little bit differently. That's all to say. It's hard to sort these things out in the moment. So, Amanda, what do you think is maybe a good place to start when categorizing these different purchases when using budgeting apps? I mean, I would hope that some apps would have a functionality where you could split purchases in one purchase into different categories. I mean, I imagine it depends on the app that you're using.
- [05:08]
Amanda Barroso
Absolutely. So I reached out to folks at Monarch, the folks at Ynab and everydollar, and. And I asked them directly, just like, hey, how do your apps address this issue? I spoke with the head of product marketing at Monarch. She explained two features that could potentially solve this problem for our listener. I think so. The first is this new receipt scanning feature in the app. So you snap a photo of, like, your Costco receipt. Monarch automatically attaches it to the right transaction. Right. And adds details about what you actually bought. So I think it kind of sounds like it does exactly what our listener was hoping it would do. It splits one big charge into multiple, properly categorized transactions.
- [05:51]
Sean Pyles
How does the app know if those peaches are my need or my want?
- [05:54]
Amanda Barroso
Well, it might not categorize it into wants and needs, but it might say peaches belong in groceries, which are needs. Right. The point being that it takes this, like, just one big mystery $250 Costco purchase and breaks it down into groceries, household items, electronics. The goal here is, like, just to give you a much clearer picture of your spending, they have a second feature which I think is worth noting. It's called a retail Sync Chrome browser extension. So with most of these budgeting apps, not all, but most, you can access them on your desktop or on your phone. So this would be one that you would download a Chrome extension for when you're operating and you're working on your budget on your desktop. So this lets users connect their Monarch account to their Amazon and Target account. So right now it's just those two stores. So from there, Monarch pulls in orders your purchase details, itemizes those details, and then recategorizes them accordingly so that your budget and all the reports that you're pulling or whatever reflect the categories you've actually spent on. So sometimes what will happen, especially with something like Target or Amazon. Those purchases will just get funneled into like a shopping category, this sort of like big amorphous thing. So between those two things, there's a lot of functionality here.
- [07:11]
Sean Pyles
Yeah, it sounds really helpful.
- [07:12]
Elizabeth Ayola
Well, what did you learn about ynab, Amanda?
- [07:14]
Amanda Barroso
I'm glad you asked. So Ynab is another super popular budgeting app. It stands for you need a budget for folks who don't know. So with ynab, you can split transactions across multiple categories, but you'll need to do the calculations yourself, which is something that this listener was saying was really a pain point. So you'll take your receipt, there's a button you can push that says like, split it, and you'll go through each item in your receipt and add it to the categories again, like groceries, household, baby and kids clothing. You kind of get the picture. Ynab app tracks your running total and then when you get to the end, you can distribute the remainder. So like sales tax, that kind of thing across all the categories automatically.
- [07:55]
Sean Pyles
Yeah, that sounds really crucial for YNAB in particular because of how it functions. This is a zero based budgeting app, meaning that every single dollar in your budget is, is accounted for and would be allocated across these different categories of here's my budget for jarred peaches. Here's my budget for bluey boots every month. And you know, depending on your household, you might have different values and different amounts going to these categories. So you really need to have every dollar sorted out. And that's why splitting this receipt is crucial for something like ynab.
- [08:24]
Amanda Barroso
That's totally a key feature that Ynab adapts, that budgeting style. Every penny really matters.
- [08:30]
Sean Pyles
Yeah, that's why that budgeting app is not for me. I like the general understanding of where my money is going, but not down to the pen. I'm not that anal about it.
- [08:39]
Elizabeth Ayola
Same. But I do think budgeting down to the penny is very helpful for people who are like, where is all my paycheck going? And who are trying to get their budget together.
- [08:48]
Amanda Barroso
Okay, so I have one more dimension and it's every dollar, which is the Dave Ramsey budgeting app. Now, this one also lets you split transactions, but unlike the other two, you're totally in charge of separating those costs manually into their appropriate categories. And. And unlike Ynab, there's no running total. I think in the three apps that I looked into, this one is the most basic and requires the highest level of effort on the part of the user.
- [09:14]
Elizabeth Ayola
Okay, so now based on the three apps that you have Told us about. Thank you for getting all the lowdown on all three of them. Which one would you say makes what the listener is trying to achieve easiest?
- [09:25]
Amanda Barroso
To me, based on these conversations, Monarch seems to automate more of this than any of the other apps. But again, so much of this is personal. And it might take you a few apps, like trying out a few apps, downloading a few free trials to see what feels easier for you. What actually what, what level of like, touch you really want on your money. I will say looking at cost, the good news is Monarch isn't even the most expensive option. So you're getting a lot for your money. YNAB is about $10 more per year. It's like $109 a year, whereas Monarch is about a hundred Everydollar cost about $80 a year. So that's kind of where those all stack up in cost. We have a huge roundup and review of budget apps for any listener who wants to dive a little bit deeper into their apps, their functionality, their costs, how they compare. So maybe Sean, you can throw those in the show notes or something and that might be helpful.
- [10:18]
Sean Pyles
Absolutely. And if I recall correctly, do you use Monarch Amanda, in your life with your husband?
- [10:23]
Amanda Barroso
Yeah, if you pull up the Monarch app review. It's my experience with my husband. And I honestly think that this was like part of our problem, why I abandoned the ship on it because it was just like, yeah, I really relate to this listener. So I, I might like, try it again because I feel like these are some pretty cool new features.
- [10:43]
Sean Pyles
Uh huh. Okay. But you liked it up until the point where you didn't. I remember you saying initially that you kind of liked how it helped you and your husband manage your money together. Because that's one of the big selling points of Monarch, right?
- [10:53]
Amanda Barroso
Absolutely. I really do like that feature a lot. And I think we were the problem. Like the way that we're thinking about our money was not working. And actually I'm going to talk about this a little bit later in the episode about how you can start thinking about some of these things, but I
- [11:05]
Elizabeth Ayola
think we were the problem.
- [11:07]
Sean Pyles
I would say the app should be able to work for you no matter your budgeting style. Or maybe it's just that app wasn't right for you.
- [11:13]
Amanda Barroso
Maybe it wasn't right.
- [11:14]
Elizabeth Ayola
All right, well, as we're talking about this, I'm thinking about the importance of categorizing your expenses to begin with. So, Amanda, it can be good financial hygiene to categorize your expenses. Right. And just know where Your needs versus wants are.
- [11:30]
Amanda Barroso
Yes. Knowing what to need and what to want is like one of the most fundamental principles of budgeting. You have to really dig down and really look at your life and figure out, like, what actually do we need to survive? And like, does that Netflix subscription cut it? Probably not, right? Some people are going to want, though, within those categories, different levels of specificity. So itemizing could mean the difference between blowing through your grocery budget or spreading costs out more accurately to reflect your spending. So, you know, take Costco, for example. I might have $125 worth of groceries, but then I might have batteries and light bulbs and toilet paper. 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?
- [12:34]
Sean 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, you know, 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. But that said, you don't want to blow your budget. So it's all about priorities, too.
- [13:12]
Elizabeth Ayola
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 health.
- [13:20]
Sean Pyles
Investment in your mental health for sure.
- [13:22]
Amanda Barroso
It's true. We're humans. We need some pleasure in life.
- [13:24]
Sean Pyles
We'll be back in a moment after a quick break. Stay with us.
- [13:32]
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- [14:00]
Sean Pyles
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Amanda Barroso
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Amanda Barroso
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- [14:31]
Sean 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?
- [15:07]
Amanda Barroso
I'm glad you asked me this question, because I talk a lot about about budgeting at NerdWallet. Like, this is my whole job and obviously we never really talk about the work that goes into it. Like, budgeting takes time and attention. 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 per receipt?
- [15:40]
Sean Pyles
Yeah, it sounds tedious though. It's the last thing I want to do, I'll be honest.
- [15:44]
Amanda 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 that 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, like, this is a pain point for some users. Like, having to sit there and itemize everything and recategorize everything, like, takes a lot of time. 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.
- [16:42]
Sean 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, 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.
- [17:52]
Elizabeth Ayola
Yeah, I think it's about having that good financial foundation or framework for managing your money. And once you get in a good rhyth 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.
- [18:06]
Amanda Barroso
Right. Okay, so I have three ideas for people who don't want to track every penny, but kind of empathize with the listener of like, okay, 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 pending like who you're talking about, you could 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. Or if you're trying to lower it. You could challenge yourself a little bit and. 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. Okay, I'm only going to itemize receipts if they're over a hundred dollars. 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.
- [19:34]
Sean Pyles
I like that.
- [19:34]
Amanda 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 are household kind of expenses, and I just don't want to go over that amount every month. So you could avoid burnout that way.
- [20:12]
Sean Pyles
I like those. That does seem pretty adaptable. So each spending and tracking style could kind of fit into each of these.
- [20:19]
Elizabeth Ayola
All right, well, this is the part of the show I just made it up, because now it just become a part of our show where we talk about our own business. Okay, 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?
- [20:35]
Amanda 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
- [21:08]
Elizabeth Ayola
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. 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?
- [22:17]
Sean Pyles
I feel that it sounds like we need an emotional spending category in your budget.
- [22:21]
Amanda Barroso
Yes, but I can completely relate.
- [22:24]
Elizabeth Ayola
Another sinking fun Sean. Exactly.
- [22:26]
Amanda 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 re. Okay, you don't have a pet. Well, I'm going to rename this like your emotional spending category. Get the fancy coffee creamer. Get whatever the little thing is that makes you feel good.
- [22:38]
Sean Pyles
This is my pot of money that I use to process the trauma of the world on a regular basis.
- [22:43]
Elizabeth Ayola
Oh, 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, okay, 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 I budget.
- [23:04]
Sean Pyles
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. 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.
- [23:47]
Amanda Barroso
Thanks for having me. You know I love talking with you guys.
- [23:50]
Sean 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 to
- [24:00]
Amanda Barroso
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@podcasterdwallet.com and our next episode
- [24:17]
Elizabeth Ayola
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.
- [24:30]
Sean 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.
- [24:41]
Elizabeth Ayola
This episode was produced by Tess Vigland, Hillary Georgie help with editing, Nick Karisimi and Eve Krogman Helmar audio and video production and a big thank you to NerdWallet's editors for all their help.
- [24:51]
Sean Pyles
And with that said, until next time, turn to the Nerds.