Last week I wrote about what size categories to use for expenses in PTA. The basic idea was a general principal of simpler categories. Why? For one reason, simpler categories are more likely to lead to success in tracking your expenses. It doesn’t matter if you have a highly detailed structure of expense categories, but it results in so much work to use that you fail to actually track your expenses!
Are there exceptions to the above? That is, are there times when you would benefit from having extra categories? One case would be if you can identify a potential new category whose total of expenditures was a significant portion of your expenses.
Let’s take as an example that you have a hobby of collecting pennies. Let’s say that your typical total expense for penny collecting is 0.0001% of your total expenses. This isn’t a significant portion, so there is not going to be much benefit in creating a specific category for this hobby. On the other hand, someone else with the same hobby might spend lots of money going to coin collecting conventions, and 25% of their total expenses goes to this one hobby. In this second case, it’s going to be very appropriate to have one expense category for this hobby.
In short, while in general you want simpler categories, it’s worth deviating from simplicity and adding an extra category if it tracks a significant portion of your spending. Otherwise, simple is likely to work better.