Budget questions. (wordy)

[Derek Atkins]

Chris,

most users I would bet enter a CC->Expense transaction when the
transaction occurs.  So you enter your $2000 HDTV expense when
you buy the TV, not when you pay off your credit card.  However
if you're maintaining a balance on your credit card (or house loan,
or student loan) you want to include that "cash flow" in your
budgeting process.

No, paying down a house loan or a student loan is not an expense
per se, but it is cash flow..  And many people want to budget for
cash flow.  I consider this a must-have feature for a budgeting
system.

-derek

Quoting Chris Shoemaker <c.shoemaker at cox.net>:

> 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
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-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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