budgeting

[cbbrowne@localhost.brownes.org]

On Mon, 01 Oct 2001 20:32:59 PDT, the world broke into rejoicing as
Josh Sled <jsled@asynchronous.org>  said:
> On Mon, Oct 01, 2001 at 04:04:12PM -0700, nigel_gnucash-devel@unos.net wrote:
> 
> | Maybe what we should really be talking about is the *function* of a
> | budgeting subsystem.
> 
> Definitely; see follow-on mail.
> 
> | In my mind, the purpose of a budget is to tell me how much money I have
> | left to spend in a given period on a given type of item.  That's what I
> | want the budget to do.
> 
> Seems right.
> 
> [I think we have different ideas about a) what level of detail it
> includes and b) how the implementation works to tell you those things,
> but "yes". ;) ]
> 
> | I'm not interested in a budget that calculates interest on float,
> | calculates finance charge interest on purchases, tells me which account
> | to put my savings in, or any of that.  
> 
> Well, I've always thought that these were optional, second-order functions.
> However, it maybe useful to think about them now --- if it turns out that
> a simple change now can make integrating that functionality much easier
> later, we should probably do so.

I'd anticipate it being about as easy to cope with "predictable finance
values" as it is to cope with other stuff.

> | I want to know if, given the
> | constraints that *I* have set, I can afford to buy a DVD player this
> | month without adversely affecting my ability to pay rent, buy groceries,
> | etc.
> 
> What are the nature of the constraints?
> 
> Is that decision made with knowledge of [available] lines of credit?
> Should the budgeting system [be able to] tell you: "if you charge it,
> but you don't have enough savings ATM".
> 
> If you plan to buy the DVD 6-months in advance, should the budgeting
> system encourage/help you to save up that money for it?
> What about Christmas gifts?
> Or a vacation?

Furthermore, what's the appropriate window for evaluation of such items?

Should I be:
a) Planning to pay cash, when I have cash immediately?
b) Planning to use credit, and use the ~21 day float that gives me?
c) Planning to save up cash over the next 
    (member months '(1 2 3 4 5 6 12 24 36 48))
   months?

For a $200 DVD player, it may not take too much forethought to come up
with the plan "Buy it now; cash will be in place to cover the credit
card charge when it comes in."

On the other hand, saving $1800 for the trip to Tahiti may require 6
months of keeping $300/month aside.

And on still another hand, buying a house is likely to involve incurring
a couple hundred $K of debt.

All three of those scenarios are "wise," in different contexts.

> | I'm not suggesting that all those other features are boring and useless
> | - far from it!  Some of those calculations are *extremely* interesting
> | to me (especially the interest on float one).  It's just that I don't
> | think those features belong in the budgeting subsystem.
> 
> Or, maybe not in the first cut of a budgeting system...  or, you may very
> well be right.
> 
> In the follow-on mail, let me know if you think that my Workbench idea
> should be part of a "Budgeting" system, or part of something else... and
> if so, what else?

The "Workbench" seems not insensible.

> | Why does a business user use a budget?
> 
> This is a very interesting question... while nothing jumps out at me as
> being substantially different between personal and business budgeting
> [except the size and granularity of the numbers involved], I could be very
> wrong... hopefully someone can grab {small,medium,large}-business-finance
> friends of theirs and get a one-two-page "business-budgeting
> summary"... though I know this is asking too much.

The thing is, business budgeting tends to be _highly_ cycle-driven,
with the cycle being 1 year.

Personal budgets tend to have bigger variations in the oddities during
the year, such as:
 -> A bunch of money flowing in/out in late April for taxes
 -> Summer holiday spending
 -> "Winter-Commercial-Festival-of-Gifts" spending (well, it _could_
     be called Christmas, but that would imply some sort of religious
     connection that is _vastly_ outweighed by the commercial
     implications these days...)
 -> Someone else got married
 -> RRSP investments flowing out in late February (401(k) tends to
    be more consistent across the year)

There's a good argument for the notion that "personal" finance is
more complex than "business" finance; there tends to be more varieties
of spending on the personal side, unless we're talking about a huge
organization...
--
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http://www.ntlug.org/~cbbrowne/lsf.html
I can see clearly now, the brain is gone...