Suppose that we have the following expense categories: Car, Holiday, Insurance. How shall you categorise the insurance of your car? And what about the fuel that you purchase when going to the seaside with your family in summer? And if the seaside is in another country you will need a travel insurance. Will you categorize it as insurance? Or travel? Or half-half?

If we are not sure about the category of an expense, then there is a big chance to categorize them case by case differently and our expense tracking will be confused. If your categories present such dilemmas, then think twice your categories and make them distinct.

The resolution of the above-mentioned dilemma is that the categories there are in different dimensions: the car is an asset, the holiday is a purpose, the insurance is a service. Within a dimension the categories are much more distinct. It is very rare that a car is a washing machine at the same time. The insurance and the electricity are different services generally from different companies. We have daily goals: food and beverages, clothing and accommodation for our everyday life. These are not overlapping purposes.

But what about a holiday? On a holiday you generally eat out, you rent an accommodation, while you are still continuously paying the utility bills of your home. In this case we suggest you identifying the holiday as a separate purpose. The purpose is not the accommodation – you already have one – but to get out of the daily routine. When we are on holiday, we still have a home, may be even the fridge is full, but we would like something different. From the financial management point of view the definition of the holiday is, when the food and the accommodation is not a goal but a service.