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

0:00You said you were over him, but his hoodie is stealing your rotation. It's time. Grab your phone, snap a few pics, and sell it on D-Pop listed in minutes with no selling fees. And just like that, a guy 500 miles away just paid full price for your closure and ride on Q. Nope, but I've got tonight's dinner paid for. Start selling on D-Pop, where taste recognizes taste. List now with no selling fees. Payment processing fees and boosting fees still apply. See website for details. Hey, Elizabeth. What is your biggest hurdle when it comes to tracking your expenses?

1:00I don't want to blame it on my ADHD, but my ADHD. You know, 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 Nerdwallets Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. 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 listeners question, which comes from a text message. Hey, nerds, 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, et cetera, that consistently involve commingling purchases of groceries, clothing, toys, and other budget categories.

2:00Any 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 itemize receipts by hand, which becomes extremely cumbersome and often leads to abandoning the budget. Thanks. 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 listeners question, we are joined by personal finance nerd Amanda Baroso. Hey, Amanda, welcome back to Smart Money. Hey, y'all. Listen, I just went to Target the other day and my receipt was exactly what this is where it's talking about. It was like, bluey rain boots, baby wash, some hummus. I mean, like it has all. What those aren't. All needs. What do you mean? 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 bluey rain boots it is. But this is, I think, a really common issue. I'm so glad we got this question.

3:00Yeah. I mean, this question really gets to some of the practical, really tactical issues of using budgeting apps. How do you store it out your expenses when you have so many, maybe within one single purchase? Because especially when you are going to a target or 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 registry 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? No. Do you guys know what I'm talking about? I do. I do. 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 is 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.

4:01But in retrospect, that was probably more of a want. I would have categorized out 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 that 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. Absolutely. So I reached out to folks at Monarch, the folks at YNAB and every dollar. 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 your Costco receipt. Monarch automatically attaches it to the right transaction 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.

5:04It splits one big charge into multiple, properly categorized transactions. How does the app know if those peaches are my need or might want? 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 us 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. We 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,

6:07and then re-categorizes 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 now. Yeah, essentially helpful. Well, what did you learn about YNAB, Amanda? 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. Yeah. 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

7:09the remainder, so like sales tax, that kind of thing across all the categories automatically. 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 accounted for and would be allocated across these different categories of here's my budget for a jarred peaches. Here's my budget for blue e-boots every month and 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. That's totally a key feature that the YNAB adapts that budgeting style, every penny really matters. Yeah, that's why that budgeting app is not for me, I like your general understanding of where my money is going, but not down to the penny, I'm not that anal about it. Same, but I do think budgeting down to the penny is very helpful for people who are like, where is on my paycheck going and who are trying to get their budget together. Okay, so I have one more to mention and it's every dollar, which is the Dave Ramsey

8:10Budgeting 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 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. Okay, so now based on the three apps that you have told us about, thank you for getting all the low down on all three of them, which one would you say makes what the listener is trying to achieve easiest? 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 level of 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 $100.

9:16Every dollar costs 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 cost, how they compare, so maybe Sean, you can throw those in the show notes or something and that might be helpful. Absolutely. And if I recall correctly, do you use monarch Amanda in your life with your husband? Yeah, if you pull up the monarch app review, it's my experience with my husband and I honestly think that this was 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 might try it again because I feel like these are some pretty cool new features. 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? 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

10:17not 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 think we were the problem. 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. Maybe it wasn't right. 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. Yes. Knowing what's a 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 that? 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.

11:19So, 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 on spending my money every month? 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

12:20the fancy thing because I just want it and feel like I deserve it, which frankly I do. But you don't want to blow your budget. So it's all about priorities too. I will disagree with you Amanda about Netflix, not being in need because how else am I supposed to escape from the chaos happening in the world? So definitely in need for my mental health. And investment in your mental health, for sure. We're humans. We need some pleasure in life. We'll be back in a moment after a quick break. Stay with us. Today's episode is sponsored by Spectrum Business. Picture this. You're running a business and the internet drops during business hours. Where to do list instantly becomes one panic, two stare at the router like you're negotiating with it. And three, start offering customers a brief moment of mindfulness while the checkout screen loads. For business owners, be connected isn't a perk. It's how you take payments, talk to clients and keep things moving. Spectrum Business keeps businesses connected seamlessly with fast, reliable internet and advanced Wi-Fi.

13:20Plus phone, TV and mobile services if you need them. Spectrum Business offers 100% US-based customer support 24-7 to help you stay up and running. That means you get actual help, not submitted ticket and hope for the best. Our colleague, Carrie, is a Spectrum customer, shout out to our social media team. And she told us that she chose Spectrum because people online kept recommending it as a reliable and affordable option for internet and phone service. Carrie told us she was actually a little hesitant to switch at first because she'd been using a different service for a while. But after a year of Spectrum, she's had a really good experience. Her phone gets strong, reliable service, and it automatically connects to Spectrum Wi-Fi everywhere. Join the millions who rely on Spectrum Business, visit Spectrum.com slash business to learn more. One more time, that's Spectrum.com slash business. Restrictions apply, services not available in all areas. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed.sponsored jobs to find the right people with the right skills fast.

14:21It's a simple way to make sure your listing is the first candidate to see. According to Indeed data, sponsor jobs have four times more applicants than non-sponsored jobs. So go build your dream team today. With Indeed, get a $75.sponsored job credit at Indeed.com slash podcast, Terms and Ignitions apply. One thing we've been 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 isn't my thing. Even if you're using an app, it's still labor-intensive. But then, on the other hand, I think a lot of folks might be okay with some ambiguity in their budget. 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 abandoned budgeting entirely? I'm glad you asked me this question, because I talk a lot about budgeting in your wallet. Like this is my whole job.

15:23And obviously, we never really talk about the work that goes into it. 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? Per receipt. Yeah. It sounds tedious, though. It's the last thing I wanted to do, I'll be honest. 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 maybe your budget requires a little friction. And 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.

16:26From 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, 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

17:28that you are saving regularly, you're paying off your debt, yada, yada, yada. If you get too uncomfortable 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 just buying my own behavior though. 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. Right. Okay, so I have three ideas for people who don't want to track every penny, but kind of emphasize 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 hot pot of things.

18:32If 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 where 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 your listener is, try picking a default category for each store. So like Costco could be groceries. Target is household stuff. Target 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 $100.

19:34Anything else? It's $25, whatever, right? Again, personal to you, you could set your own threshold, but this could be a way to kind of lessen that fatigue. I like that. 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 haul, 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. So you could avoid bringing out that way. I like those. That does seem pretty adaptable. So each spending and tracking style could kind of fit into each of these. 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

20:35own 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? 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? 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.

21:38And 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? I feel that. It sounds like we need an emotional spending category in your budget. Yes. But I can completely realize another stinking function on exactly. Well, that's the beauty of a budget, right? Like when you look through the budgeting apps, there's always some category you could

22:39read. 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. This is my pot of money that I used to process the trauma of the world on a regular basis. Oh, I had to wake up and do XYZ 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? 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 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 fund 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 is 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.

23:40Listener, I hope this has helped you sort out how you're going to sort out your expenses. If anyone listening has their own on 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. Thanks for having me. You know, I love talking with you guys. 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 and fill out the application form in today's show notes. To have the nerds answer your money question, call or text us your questions at 901-730-6373. That's 901-730 in ERD. You can also email us at podcast at nerdwall.com. 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 Podcast, and I heart radio to automatically download new episodes. Here's our brief disclaimer.

24:40We 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. This episode is produced by Tess Vigland, Hilary Georgie, Health with Editing, Nick Kursamy and Eve Krogan, Helmar Audio and Video Production, and a big thank you to Nerdwallis editors for all their help. And with that said, until next time, turn to the nerds. At Blinds.com, it's not just about window treatments. It's about you, your style, your space, your way. Whether you DIY or want the pros to handle it all, you'll have the confidence of knowing it's done right. From free expert design help to our 100% satisfaction guarantee, everything we do is made to fit your life and your windows. Because at Blinds.com, the only thing we treat better than Windows is you. Visit Blinds.com now for up to 45% off-site-wide, plus a professional measure at no cost. Rules and restrictions apply.