"Uri" <balor123[at]gmail.com> wrote in message
news:b50d33dc-094b-49a3-b46f-18f1668fc107[at]n75g2000hsh.googlegroups.com...
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Folks, the first thing you must do if you want to manage your finances in a
useful manner is delete every default category and start from scratch.
There is no category scheme that suits all people or even many people, you
need a custom setup that matches your specific financial affairs.

The purpose of categorization is to inform yourself about the sources and
amounts of your income and the nature and amounts of your expenses. If you
know where your money comes from and where it goes then you have the power
to make useful changes. Detailed knowledge about your income and expenses
motivates some people to maximize income and minimize expense. When you
confront yourself with waste it becomes much easier to modify your behavior.
For example, if you religiously categorize your spending on cigarettes or
Starbucks you are more likely to eliminate or at least control that item.
It can be a major shock to see a Money report declaring that you just spent,
say, $4,500 on booze, $2,500 on cigs and $2,000 on Starbucks (total $9k)
last year. Don't laugh plenty of people do just that and more.

I started using Quicken way back in the 1980s (switched to Money when it
first came out, forget when that was). My checking account had a regular
running balance of maybe $1,500-2,000. Wife kept the checkbook. I scanned
it weekly and it looked ok, I also reconciled monthly and saw no problems.
But I was making decent money and we never seemed to have any. So I started
tracking our income and expenses. After about 6 months I figured out a good
category setup and low and behold I saw huge numbers of small cash
withdrawals from the checking account that I had seen before but never added
up. Money reports added them up and they were massive in total. Turned out
my kids were hitting their mother up for money every other day and she gave
in - cashed a small check, maybe $20-25 and gave them the cash. It was
frittered of course. Those small withdrawals added up to 10s of thousands
over the course of a year. I put a stop to it and the balance in our
checking account jumped through the roof. Kids were ticked but tough tarts.
Allowance was reduced to a reasonable amount. I bought a new sport fishing
boat by writing a check for payment in full by the end of the first year
paid for solely by Quicken showing me where my money had been going.

So make up your own categories that fit your actual income and expenses. If
you spend money on cigarettes make a category for cigs. Make lots of
categories, the more detailed your breakdown the better. You don't need to
perfect your category list from day 1. Start slow and add categories as you
see the need for new ones. You can always add, delete, merge and rename
categories. I have added, deleted, merged and renamed hundreds of
categories over the years. You can also re-categorize any transaction after
the fact and I do that constantly as I see better ways of informing myself
about income and expenses. Look at categories as a lifetime changing list.
Many categories will become obsolete (like diapers because your kids grow
up) but never delete old transactions because they can come in handy when
you least expect it.

Regards

Bill Wood

PS: By the way "Not an expense" is an ok category if you personally decided
you need it and it makes sense to you. Exactly what MSFT thinks it means is
not known but it probably means a miscellaneous deduction from income that
is not a regular expense. For example, suppose your employer, by mistake,
pays you $200 to much in your last paycheck which you deposit and record in
Money. Next month they find the mistake and you have to give the money
back. You could categorize the check back to your employer as "Not an
expense" and that category would be in income. I wouldn't do it that way
but it would be technically correct.

"Uri" <balor123[at]gmail.com> wrote in message
news:b50d33dc-094b-49a3-b46f-18f1668fc107[at]n75g2000hsh.googlegroups.com...
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I deleted all the default categories and started from scratch.

I created a category for things I want to track for tax purposes, and for
groups of related transactions.

I don't think there's any serious magic to the categories they create by
default. The list has changed a lot over the years and generally is less
sensible now--and has more of these odd overlaps--than when they started.
Note also that they have all but eliminated subcategories from the default
list even though many of us find them quite useful and really can't imagine
using their dumbed down list.

I think they put things in there according to goofy things like usability
lab feedback and "noob on the street" kinds of exercises where people who
haven't actually tried to do personal financial management tell the
designers what categories they THINK would be useful.

By all means, adapt the categories so they are useful to you. And feel
free--indeed encouraged from the NG--to delete the STUPID ones like "not an
expense" and "credit card payments/transfers".

"Uri" <balor123[at]gmail.com> wrote in message
news:ab493da7-da0f-4b99-9f60-806da7fda8c7[at]28g2000hsw.googlegroups.com...
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Uri <balor123[at]gmail.com> wrote on 24 Feb 2008 in group
microsoft.public.money:

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My experience with accounting programs, starting in the Apple II days,
is that the developers try to come up with things that will look good to
potential purchasers, rather than things that will look good to an
accountant or IRS agent. Then they leave the old things there when they
come up with new ones. (Gotta have those new features, ya know.)

In my opinion, accountants and IRS agents are the main reason for
tracking expenses.

--
Steve B.
New Life Home Improvement

I've also found that confusing. I just dump everything thats not an
income or expense into misc/other income. If you add all the
subcategories you'll notice that some items are listed in multiple
places (mortgage/rent for example is a main category and under bills).
I suppose you are supposed to remove the duplicates and keep the ones
that you like.

I'm currently trying to figure out what the difference is between
Entertainment and Hobbies/Leisure. There are no subcategories for
Entertainment and for Hobbies/Leisure they are: Books & Magazines,
Cultural Events, Entertaining, Movies & Video Rentals, Sporting
Events, Sporting Goods, Tapes & CDs, Toys & Games. The category group
for all of the Hobbies/Leisure subgroups is "Entertainment"! I'm
thinking one or the other has to go.

It takes a long time to figure out what categories are useful and
Microsoft greatly shortens this process by providing defaults. The
defaults aren't useful if you can't figure out their intended usage
though.

On Feb 24, 3:02 pm, "Dick Watson" <littlegreenge...[at]mind-enufalready-
spring.com> wrote:
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Did you note that there is no "Not an income"???

This particular category is beyond explanation. I suggest you delete it.

"Uri" <balor123[at]gmail.com> wrote in message
news:b50d33dc-094b-49a3-b46f-18f1668fc107[at]n75g2000hsh.googlegroups.com...
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Uri <balor123[at]gmail.com> wrote on 24 Feb 2008 in group
microsoft.public.money:

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I've never found a comprehensive explanation for the default categories.
The majority of them are self-explanatory, but the oddities, like "Not an
expense" only make sense in the minds of naive pseudo-accountants (as far
as I can tell). I've picked up a general sense of how to use, or not use,
most of these by reading posts in this group. My accountant has been a big
help here, too. Some of them are described in Help, but not all. The odd-
balls are never definitively defined anywhere.

Rule of thumb: if the category doesn't make sense to you, don't use it.

--
Steve B.
New Life Home Improvement

Is there a description somewhere of the categories that Microsoft
Money creates by default? I know that you can get subcategories but
that doesn't help explain what "Not an expense" is or why it is in
income.