Budget questions. (wordy)

[Chris Shoemaker]

On Tue, Nov 08, 2005 at 04:47:27PM -0500, Tim Wunder wrote:
> How would a user then budget for $X to be spent paying down Credit Card (or 
> loan) balances? Or are Credit Cards different from Liability accounts?

CCs are liabilities.  I know it seems like the most direct thing to do
is budget for a decreasing liability account.  After all, that's where
you look when you want to see how you're doing.  But what I would do
depends on whether or not the CC debt is "on the books".

The key point is that a cash budget is for planning what you spend and
what you earn -- NOT what you borrow or pay back.  If the CC debt is
"on the books" then when you charge stuff it hits an *expense* account
and the liability account.  Thus, you never have to budget the CC debt
per se, you just budget all the things you're charging.

OTOH, if the CC debt if off the books, say because you started
bookkeeping with CC debt so you have a starting balance on the
liability account, then I'd create a special expense account to
represent the actual expense that incurred that liability.  That
expense account would start at zero and grow as I paid off the debt.
In that case I'd just budget for that account whatever I planned on
paying toward decreasing the liability.

Neither one is more correct than the other.  Which you use depends on
whether you want to track the individual expenses that incur the CC
debt, or just the aggregate.

Hope that helps.

-chris