Setting up your reoccurring expenses in Level allows you to carve out income every month and set it aside to make sure your bases are covered before spending on non-essential purchases.
What should you tag as Recurring Expenses?
For those most part, when setting up your recurring expenses in Level, you will want to tag all of your recurring expenses with a fixed value, but there are some notable exceptions, which we'll highlight in this article.
Here are a few examples of things you should definitely tag as recurring expenses:
- Cell phone bill
- Utility bills
- Loan payments
- Monthly gym membership
- Subscriptions (netflix, hulu, spotify, dollar shave club, etc.)
- Insurance payments
(Sort-of) Recurring Expenses
There are lots of purchases that you make every month that fall into discrete categories, and when you end up spending about the same amount on them every month, it's common to create budgets for those spending categories and start to think about them as recurring expenses.
Buying groceries is a prime example of this. Most families are going to be aware of roughly what they spend on food per month, and therefore it's not uncommon to starting thinking of a 'grocery bill'.
"Well, we usually spend about $500 on food every month...so it'd be good to make sure I've set funds aside for that before I get into non-essential spending."
In reality - we don't have a grocery bill - we have a grocery budget.
Tracking groceries in Level as a recurring expenses doesn't work too well in practice because that spending doesn't occur all-at-once in the month. It's spread throughout the month, and therefore is a lot harder to predict what the total will actually be. If that moving target isn't tracked as part of your spendable, it's easy to lose track and overspend.
The suggestion for the following would be that you increase your spendable to account for spending in these important, but fluctuating categories of spending.
Things you should probably not tag as recurring expenses, but instead figure into your Spendable budget:
- Eating out
- Bars & Alcohol
Your Credit Card Bill
Should you track your credit card bill as a recurring expense within Level? This is a very frequently asked question, and the answer depends completely on your situation, and whether you pay off your card each month or are making payments towards the balance.
If you pay off your credit card balances in full every month:
- Do NOT track your credit card payments as a recurring expense in Level.
- Instead, you should mark those payments to your credit card company as transfers.
The reason for this is that every time you swipe your credit card to make a General purchase, that amount is debited from your Spendable budget. In Level's eyes, you have just paid for the item. In reality - you haven't paid for it - your credit card company is floating you the money. But because you will pay off the full balance on your card, we can treat those payments as effectively having been made with cash.
Seen through this lens, the "payment" to your credit card company, is actually just a transfer. You are transferring funds from an account with a positive balance to an account with a negative balance. When you see a payment to your credit card company appear in your financial feed in Level, you should tag them as transfers if they don't automatically appear that way.
If you don't (and instead track your credit card payments as recurring expenses), you are effectively double-counting those purchases in Level; once when you first swipe your card, and again when you pay off your credit card bill.
If you make fixed payments against your credit card balance every month:
- You should track your credit card payments as a recurring expense in Level
- Tag your regular payments to your credit card as recurring expenses
- If you make extra payments in a month, because you have setup a recurring expense tracker for that merchant, those additional payments will also be picked up as . Just be aware in these situations these additional payments will not reduce your Spendable left for the month - so you may want to reduce your Spendable target to account for that extra money going out.
As outlined above, the same is true here that if you categorize your credit card payments as recurring expense, you are double-counting those transactions within Level. However, in the case that you are carrying a credit card balance and making payments towards paying it down - the effect is minimized because the time the purchase is made and then later paid for will not fall within the same month.