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🏷️ Transaction Types & Categories

Understanding how to properly categorize your transactions is crucial for accurate financial tracking and meaningful insights. This guide explains FinTrack's hierarchical categorization system and when to use each transaction type.

🎯 Understanding the Hierarchy​

FinTrack uses a three-level hierarchy to organize your financial data:

Transaction Type → Category Group → Category

1. Transaction Type (Top Level)​

The fundamental nature of the money movement:

  • INCOME - Money coming into your accounts
  • EXPENSE - Money going out of your accounts
  • TRANSFER - Money moving between your own accounts

2. Category Group (Middle Level)​

Broad functional areas within each transaction type:

  • Groups related categories together
  • Provides high-level reporting views
  • Examples: "Food & Dining", "Transportation", "Housing"

3. Category (Bottom Level)​

Specific, detailed classifications:

  • The most granular level for precise tracking
  • Used for detailed analysis and budgeting
  • Examples: "Groceries", "Gas", "Rent"

💰 INCOME Transactions​

Use INCOME for: Money flowing into your accounts

When to Use INCOME​

  • ✅ Salary and wages
  • ✅ Freelance payments
  • ✅ Investment dividends
  • ✅ Interest payments
  • ✅ Tax refunds
  • ✅ Gifts received
  • ✅ Side business income
  • ✅ Rental income
  • ✅ Government benefits

Common INCOME Category Groups​

💼 Employment Income​

  • Primary Salary
  • Bonus Payments
  • Overtime Pay
  • Commission
  • Tips

💡 Business Income​

  • Freelance Payments
  • Contract Work
  • Business Revenue
  • Professional Services

📈 Investment Income​

  • Dividends
  • Interest (Savings/CDs)
  • Capital Gains
  • Rental Income

🎁 Other Income​

  • Tax Refunds
  • Gifts Received
  • Insurance Claims
  • Government Benefits
  • Miscellaneous Income

INCOME Amount Conventions​

  • Always positive numbers (e.g., +$3,500 for salary)
  • Represents money added to your account balance
  • Increases your net worth

💸 EXPENSE Transactions​

Use EXPENSE for: Money flowing out of your accounts for goods, services, or obligations

When to Use EXPENSE​

  • ✅ Shopping and purchases
  • ✅ Bill payments
  • ✅ Dining and entertainment
  • ✅ Transportation costs
  • ✅ Healthcare expenses
  • ✅ Taxes paid
  • ✅ Loan payments (interest portion)
  • ✅ Any spending that reduces your net worth

Common EXPENSE Category Groups​

🏠 Housing & Utilities​

  • Rent/Mortgage Payment
  • Property Taxes
  • Home Insurance
  • Electricity
  • Gas/Heat
  • Water/Sewer
  • Internet/Cable
  • Home Maintenance

🍽️ Food & Dining​

  • Groceries
  • Restaurants
  • Coffee Shops
  • Takeout/Delivery
  • Work Lunch
  • Special Occasions

🚗 Transportation​

  • Gas/Fuel
  • Car Payment
  • Auto Insurance
  • Car Maintenance
  • Public Transit
  • Parking Fees
  • Uber/Lyft

🛍️ Shopping & Personal​

  • Clothing
  • Electronics
  • Personal Care
  • Household Items
  • Hobbies
  • Books/Media
  • Gifts Given

🏥 Healthcare​

  • Doctor Visits
  • Prescription Medications
  • Dental Care
  • Vision Care
  • Health Insurance
  • Medical Equipment

💳 Financial & Fees​

  • Bank Fees
  • Credit Card Fees
  • Investment Fees
  • ATM Fees
  • Late Fees
  • Tax Preparation

🎯 Subscriptions & Services​

  • Streaming Services
  • Software Subscriptions
  • Gym Memberships
  • Professional Services
  • Insurance Premiums

EXPENSE Amount Conventions​

  • Negative numbers (e.g., -$50 for groceries)
  • Represents money subtracted from your account balance
  • Decreases your net worth

🔄 TRANSFER Transactions​

Use TRANSFER for: Money moving between your own accounts

When to Use TRANSFER​

  • ✅ Moving money from checking to savings
  • ✅ Credit card payments (principal portion)
  • ✅ Investment contributions
  • ✅ Loan payments (principal portion)
  • ✅ Moving funds between banks
  • ✅ Cash withdrawals from ATM
  • ✅ Internal account transfers

Key TRANSFER Concepts​

Net-Worth Neutral​

  • Transfers don't change your overall net worth
  • Money leaves one account and enters another
  • Total assets remain the same

Double-Entry Recording​

Each transfer creates two transactions:

  • Outgoing: Negative amount in source account
  • Incoming: Positive amount in destination account

Common TRANSFER Category Groups​

💰 Account Transfers

  • Checking to Savings
  • Savings to Checking
  • Bank to Bank Transfer
  • Cash Withdrawal

💳 Debt Payments

  • Credit Card Payment (principal)
  • Loan Payment (principal)
  • Mortgage Payment (principal)

📈 Investments

  • 401k Contribution
  • IRA Contribution
  • Brokerage Deposit
  • Investment Purchase

Special Cases: Mixed Transactions​

Loan Payments often contain both elements:

  • Principal portion → TRANSFER (moves debt, net-worth neutral)
  • Interest portion → EXPENSE (cost of borrowing, reduces net worth)

Credit Card Payments:

  • Payment of previous purchases → TRANSFER
  • Interest charges → EXPENSE
  • Fees → EXPENSE

🎯 Choosing the Right Type: Decision Tree​

Step 1: Where did the money come from/go to?​

graph TD
    A[Transaction Occurred] --> B{Money Source/Destination}
    B -->|Outside party to your account| C[Likely INCOME]
    B -->|Your account to outside party| D[Likely EXPENSE]  
    B -->|Between your own accounts| E[Likely TRANSFER]

Step 2: What was the purpose?​

If money came TO you:

  • Did you provide goods/services? → INCOME
  • Was it a gift/refund/benefit? → INCOME
  • Was it from your other account? → TRANSFER

If money went FROM you:

  • Did you receive goods/services? → EXPENSE
  • Did you pay a bill/fee/tax? → EXPENSE
  • Did it go to your other account? → TRANSFER

Step 3: Net worth impact?​

  • Increases net worth → INCOME
  • Decreases net worth → EXPENSE
  • No change to net worth → TRANSFER

🏗️ Building Your Category Structure​

Best Practices for Categories​

Start Broad, Get Specific​

  1. Begin with major category groups
  2. Add specific categories as needed
  3. Don't over-categorize initially
  4. Evolve your system over time

Keep It Consistent​

  • Use similar names for related categories
  • Follow naming conventions (Title Case recommended)
  • Avoid abbreviations that might be confusing
  • Group related items logically

Examples of Good Category Trees​

EXPENSE
├── Food & Dining
│   ├── Groceries
│   ├── Restaurants
│   ├── Coffee Shops
│   └── Work Lunch
├── Transportation  
│   ├── Gas
│   ├── Car Payment
│   ├── Auto Insurance
│   └── Public Transit
└── Housing
    ├── Rent
    ├── Utilities
    ├── Internet
    └── Maintenance

Category Naming Tips​

  • Be descriptive: "Auto Insurance" vs "Insurance"
  • Use standard terms: "Groceries" vs "Food Shopping"
  • Avoid duplicates: Don't have both "Gas" and "Gasoline"
  • Consider frequency: Common expenses deserve their own category

🔧 Advanced Categorization Features​

Split Transactions​

For purchases spanning multiple categories:

Example: $200 Target purchase

  • $120 → Groceries (Food & Dining)
  • $80 → Household Items (Shopping & Personal)

Automatic Categorization Rules​

Set up rules to categorize transactions automatically:

  • Merchant-based: All "Starbucks" → Coffee Shops
  • Amount-based: $3,500 monthly → Salary
  • Description-based: Contains "gas" → Transportation

Transfer Matching​

FinTrack can automatically match transfer pairs:

  • Outgoing transfer from Account A
  • Incoming transfer to Account B
  • Links them as a single transfer operation

📊 Reporting Benefits​

By Transaction Type​

  • Income Statement: INCOME vs EXPENSE over time
  • Cash Flow: See money in/out patterns
  • Transfer Analysis: Track fund movements

By Category Group​

  • High-level spending: Where does money go?
  • Budget tracking: Compare actual vs planned
  • Trend analysis: How spending changes over time

By Specific Category​

  • Detailed breakdowns: Exact spending patterns
  • Budget variance: Category-specific over/under spending
  • Optimization opportunities: Find areas to reduce costs

🚨 Common Categorization Mistakes​

❌ Wrong Transaction Type​

  • Credit card payment as EXPENSE (should be TRANSFER)
  • Tax refund as TRANSFER (should be INCOME)
  • Investment contribution as EXPENSE (should be TRANSFER)

❌ Inconsistent Categories​

  • Having both "Gas" and "Gasoline" categories
  • Using "Food" and "Groceries" for the same things
  • Mixing specific and general categories

❌ Over-Categorization​

  • Creating categories used only once or twice
  • Too many similar categories ("Coffee", "Coffee Shops", "Starbucks")
  • Categories that are too specific to be useful

❌ Under-Categorization​

  • Putting everything in "Miscellaneous"
  • Using only 3-4 categories for all expenses
  • Not distinguishing between different types of similar expenses

🎯 What's Next?​

After understanding transaction types and categories:

  1. Set up automation rules for consistent categorization
  2. Import your transactions and apply this knowledge
  3. Explore dashboard insights based on your categorized data
  4. Review and refine your category structure over time

Remember: Perfect categorization isn't the goal - useful, consistent categorization that helps you understand your money is what matters!

Happy categorizing! 🏷️