Possible improvement to budgets using budget rules

[Bryce Poole]

I'd like to start out by thanking the gnucash team for all their hard
work.  You have made a truly great product, and I am very grateful for
it.

Background:
Long story short.  I have used both gnucash and QuickBooks.  Both seem
focused on tracking income/expenses.  While useful, this doesn't tell
me "Do I have the money to go out to eat or not today?"  (I do
recognise that gnucash does have some budgeting available.  This would
be an enhancement to the amounts per month.)

Money management, which would answer this, is made up of two parts: an
expense tracker (which gnucash does swimmingly) and capital
allocation. Capital allocation meaning, I have X dollars for going out
to eat per month.

I want a money management system that meets the following goals:
  - I want to understand what my current state of affairs are this
moment so that I can make decisions about what to do today.  (Do I
have enough to buy x? Am I living within my means?)
  - I want a system that helps manage extra money that comes in
occasionally.  (What do I do with this bonus?  Do I blow it completely
or do I use it to buy down my mortgage?)  I don't want to make these
decisions in the heat of the moment.  I want to make them when I am
calm and ready.
  - I want to save for future expected expenses and build up a buffer
to take care of life's unexpected events. (Like Thanksgiving comes
around and my grocery bill goes up for a month.  I want money in the
account accumulated and ready for this.)

What I came up with is the following:
  1. Everything is an expense account.  I have both real expenses and
planned expenses.  Real expenses are groceries.  Planned expenses are
"My new car when I save up $10,000".
  2. I create a "budget" that is just a set of rules.  Rules determine
how much of my income do I put into the account every month.  (These
are allowed to change every month.)
  3. Accounts are allowed to accumulate balances over the months.
Last month's unused surplus is added to this month's available amount
or vice versa.
  4. I "balance" my budget every month.  If I spend more than the
total accumulated surplus, I have accumulated a deficit.  I am
expected to move money from an account with a surplus to make up for
the deficit.  This keeps me honest with my budget.  (This may not be
everyone else's requirement.  Keeping a negative accumulated balance
should be perfectly acceptable from the software's standpoint.)

This is how I think this can be implemented:
(I am about to use "examples" from my life, but I am going to use
fictitious numbers.  Any resemblance to actual numbers is
coincidental.)

Accounts:
Every budget account is an "expense" account (from gnucash's
standpoint).  Accounts have three relevant values:
 - actual amount posted against the account for the month (I bought
$85 worth of groceries this month),
 - budgeted amount for the month (I allocate, using a rule, $95 for
groceries this month)
 - accumulated amount for this month (I have $10 this month of surplus
which is added to the $105 from the running total of previous months
meaning next month's available amount starts with $115.  I will spend
this surplus at Thanksgiving to buy a REALLY big turkey.)

My "savings" accounts are simply "planned expense" accounts that
accrue a balance waiting for me to save up to a specific amount before
I spend it.

I had difficulty at first wondering, what about assets?  My best
solution is to create an account that can accumulate money toward an
assets, such as a mortgage.  I could create an account called "Extra
Mortgage Payment" that I save up money to pay against my mortgage.
Once it is large enough for my bank to accept, I write a check and
post it against the "Extra Mortgage Payment" account.

Budget Account Rules: (This is probably the most different thing that
doesn't currently exist.)
The rules encapsulate my decision of how much to allocate toward an
account per month.  These are set up hopefully when I am sane and
before I receive extra cash and my logic gets all blurry.  This helps
take away the emotion of highs and lows in my income stream.  (Even
though the latest technology entices me, I don't forget the fact that
I want my mortgage paid down AS WELL AS buying the latest in
technology.)  The rules that I create form a master plan.  They are
executed each month by the software without my emotions (good or bad)
getting in the way. (I still do want the ability to change the rules
at anytime, even retroactively due to life changing events.)

Rules can be both static and dynamic.  For example, I know that my
water bill is static.  I pay $15 every month.  So I make a rule for
the MONTHLY FIXED amount of $15.  My groceries are fairly consistent
also, but I want to save up an extra $50 for Thanksgiving.  So
normally I spend $100 per month.  So I add $10 per month for a MONTHLY
FIXED of $110, but I set an ACCOUNT MAX of $50.  Over the months as I
keep my grocery expenses below $110 per month, the surplus will begin
to accumulate, but it will be capped at $50, I know that any more than
$50 would be too much.

Once all the static accounts are added up, it is subtracted from the
income to determine the remaining income.  This remaining income is
money that can be managed (or in other words, I can choose where to
put this portion of my money).  So the dynamic rules come next.  By
way of an example, let's say that I have a mortgage and that I want to
put a portion of the remaining income against it.  I would take 5%
(PERCENTAGE) of the remaining income for the extra payment up to $500
per month, or MONTHLY MAX.

Now I can put these four values together (MONTHLY FIXED, ACCOUNT MAX,
PERCENTAGE, MONTHLY MAX) to make some really useful decisions/rules.
For example, I want to save up for the annual car insurance payment.
It is $1200 per year.  I have a slightly variable income so I can't
just say put $100 per month in the insurance account, but I could put
a guaranteed $80 per month expecting my extra income to make up the
rest.  So I put a MONTHLY FIXED amount of $80 in the account.  Add 5%
(PERCENTAGE) of the remaining into the account, not to exceed $1200
ACCOUNT MAX.  Also, don't put more than $300 MONTHLY MAX into the
account.  Just like that I can join all four parameters into a
powerful rule that controls the budgeted/planned amount for the
account that takes into account my variable income and it happens even
when I have unexpected income.  As a bonus, the ACCOUNT MAX also
serves as a reminder of how close I am to the goal.

For clarification, I assume the percentages are actually just a
weighted average.  So if all the accounts add up to 78% (not 100%),
78% is made equal to 100% and all of the remaining income is allocated
using the weighted average.  This means that the user doesn't have to
re-calculate the percentages every time one account's rule changes
it's percentage.

Also, I envision the percentage to be part of one of two items: an
absolute percentage of income (like Richest Man in Babylon's pay
yourself first 10% of your income first) or of the remaining income
after fixed expenses are taken into account (5% of my manageable
income for an extra house payment).

The last rule is "just accept the expense".  I pay taxes every month.
I don't plan the amount.  It accumulates as an expense and is removed
from the total income when calculating the remaining income.

So what did I do?
I created a sample application that demonstrates the principles that I
have discussed here.  It takes a gnucash database and displays the
income and expenses.   It allows the user to create rules based on the
criteria above: account max, monthly max, percentage of remaining
income, and monthly fixed.  (I didn't include the ability to switch
the percentage between Total Income and Remaining Income.  But I did
do an automatic tithing calculation which is 10% of the Total Income
for the Richest Man in Babylon calculation.)  These rules are valid
for one month for one account.  They are stored back in the SQL
database in a table "budget_rules".  It dynamically calculates an
accumulation based on the rules, the income, and the expenses.

One bit that may interest people is how I rendered the rule.  I have a
two line rule.  The first line is the ACCOUNT MAX and has a three
sided box above it to indicate it is the maximum.  The second line has
the MONTHLY FIXED, the additional PERCENTAGE, and the MONTHLY MAX that
looks like this: $100+5%<$200.

I have also included the sample database I played with to demonstrate
this.  It's small but I think it gets the point across.

What do I want from the community?
I would love some feedback. Do you like the idea?  Should we add it to
gnucash or should it exist as a "sister" app?

I potentially could add this feature to gnucash, but it would take me
quite a while.  (I would have to learn the underlying library, the
gnucash way of doing things, determine how to properly architecture it
to fit the current architecture, and the like.)  For the record, I
would LOVE to see gnucash incorporate these ideas and add summary
accumulation and planned columns to the accounts on the summary page
to make money management more accessible.

More work that could be done:
 - The budget rules could be extrapolated into the future and the
expenses averaged to see the current situation X months from now.
 - Multiple budgets could be added for evaluating different life
decisions (what would my life look like if I buy this $150,000
property).

The Sample Implementation:
Data storage
I am using a SQLite database from the latest version of gnucash 2.3.x.
 The rules are stored in a table "budget_rules".  The table is
comprised of rule_guid, account_guid, month, monthly_fixed,
monthly_max, percentage, and account_max.

WARNING: THIS WILL ADD A NEW TABLE TO YOUR SQL DATABASE.  YOU WILL
HAVE TO RUN SQLITE3 AFTERWARD AND TYPE: DROP TABLE budget_rules;  to
get rid of it.

*************** Always use a copy of your database if you run this
against something that matters to you. :) *************

Library:
I am using Qt because I happen to know it.  I don't know the library
gnucash is based on.  I respect their choice and make no complaint of
it here.

Sample App Architecture:
The sample revolves around the class, BudgetClass.  The BudgetClass
includes a vector of AccountClass.  The AccountClass queries the
database to determine what the total expenses were for a month.  It
has a vector of float that record the accumulated amount for the
account.  The AccountClass also has a vector of RuleClass.  The
RuleClass is in charge of creating/updating/deleting rules as they are
used by the account.

Qt specific:
There is a BudgetModel that interacts with the BudgetClass.  There is
also a delegate that colors the table and renders the rules in their
special way.

Log:
There is a cool (to me) logging class called LogClass with helper
Logger.h/c.  It is a macro that takes a domain that calls into
Logger.h/c.  The logger function formats the call and sends it to the
LogClass.  The LogClass evaluates the domain add determines if the log
message is allowed.  Currently the domains are specified in the
LogClass creator and it only outputs to cerr.  It is simplistic, but I
think it could easily add a file for specifying domains and alternate
outputs.

To build the sample:
Download the QT SDK.  Open the gnufinance.pro file from within
qtcreator.  Build.  Run.  Enjoy.

Known Issues:
- It doesn't update the budgets when a rule has changed.  Just restart
the application.
- If compiled for the Mac, the rule editor doesn't stay up, it closes
immediately.  If you use the debugger and walk the portion of the code
that displays the rule editor (in the delegate), the editor will stay
open and you can modify the rule's contents.  This is not a problem on
Ubuntu.  I have not tested this in Windows.
- I highly suspect that there are several calculating bugs still in
the code.  DON'T USE THIS WITH ACTUAL MONEY!  THE ALGORITHMS HAVE NOT
BEEN VERIFIED.

If you have read all the way down here. THANK YOU!  I appreciate your
consideration and feedback. What do you think?

Bryce Poole

My employer is Intel, but they are no way involved in the development
of this sample.  Nothing I say or imply should be a taken as a
reflection of the attitudes or opinions of Intel.
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