What are Spending and Non-Spending Categories and their logic?

At Mafhoom, transactions are divided into two categories; Spending and Non-spending categories.  

Spending categories

Spending categories can be anything that includes needs and wants. Needs are an individual’s basic necessities in life. Bills & Utilities are basic needs; hence they come under the spending category. Wants, on the other hand, are desires which are not necessities but may improve quality of life such as traveling, entertainment, dining, etc.

Non-spending categories

Generally, the non-spending category includes Loan Payments, Credit Card Payments, Investments, Self-transfer, Savings transfers, and Ignore. However, at Mafhoom, with regard to creating and managing a budget, Loan Payments, Savings Transfers, and Investments are categorized as spending.

What is the logic behind categories?

We have explained below the logic behind categories that might seem tricky to understand.

Credit Card Payment

Credit card payments are considered non-spending. Once you connect your accounts, spending on the credit cards is already displayed in the different spending categories. Therefore, we don't count actual credit card payments as spending in order to avoid double counting.

Loan Payment 

At Mafhoom, loan payments are considered spending because a significant portion of your income is usually deducted from your account to pay the loan over a long period of time. 

Savings Transfer & Investment

Savings Transfers & Investments fall under spending categories, treated the same way as loan payments because we usually move regular income to save. Initially, the user has to manually change such transactions to “Investment” or "Savings Transfer".

Self-Transfer

Self-transfers or internal transfers within your own accounts are considered non-spending. "Self Transfer" transactions are not counted in your spending/income reports.

Refunds

At Mafhoom, we consider Refunds as spending. The amount refunded is considered as positive spending which nets the original negative transaction. This assists users in having a better overview of income/expense reports.

For instance, a user purchased a tablet for 2000 dirhams (-2000 AED) and returned it. Now the amount (+2000 dirhams) is reimbursed to their account (under Refunds) making the net spending 0. 

Ignore

The transactions you do not want to include in the income/expense reports count fall under this category. Simply go to the transaction you want to exclude and change the transaction category to Ignore.