I don't think there is a "wrong" way, as long as you are consistent and realistic.
I don't count recurring bills, such as mortgage, utilities, etc, because I could be the best non-spender in the world, get everything via barter, and I'd still have to pay those (or move to an undeveloped country).
I don't count things that are non-negotiable:
-- regular bills
-- gas for car for reason above (about once every three weeks)
-- a new prescription if if I needed it immediately
-- an emergency car repair
I count the money I give DH as a bill, and therefore not a spend day. I could never keep up with his spending. He usually gets a 50 cent soda for lunch every day at work, but some days that is all he has for lunch. He works hard and spends less than $80 a month on all his stuff. If he is willing to work, and needs a candy bar, go get it (he works in a grocery store, so usually picks something up every day and brings part of it home to finish as a snack).
I also don't count gas.
I count groceries, drug store, convenience store pick ups, newspapers, fund raisers, church events other than regular tithes and offerings (money to buy children's church bells, etc)
I count as no spend the things that are paid automatically. These items come out of a separate account. I have my bills, utilities, insurance, church contributions paid from here.
Food, gas and other spending comes from "cash" money so I count it as spend. Even when these items are budgeted I count them. My purpose in this challenge is to stay out of the stores (I tend to buy more than I should) and to try and stay organized in my spending.
Just what works for me. Everyone is different.
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