Budgeting - Let's decide what we want!

[Phil Longstaff]

On Sat, 2003-08-30 at 13:29, Matthew Vanecek wrote:
> On Sat, 2003-08-30 at 11:32, Jack McKinney wrote:
> > Big Brother tells me that Stewart V. Wright wrote:
> > > 
> > > In summary VAs are a imaginary asset/liability/expense 
> > > source that are used to divide income and expenses as 
> > > defined by the user. The major difference from regular 
> > > Accounts is that a leaf VA will mirror all expenses to 
> > > the first (real) Account that sits above it. VAs will 
> > > not contribute to the calculation of assets, 
> > > liabilities or expenses of the Accounts under which 
> > > they are leaves.
> > 
> >     I wrote an accounting system that accomplishes this without the
> > special accounts, which might be useful here.  It is a web based
> > accounting system... perhaps I'll set it up on my external web server
> > and post a u/p here.  I have completely switched to GnuCash at this
> > point, but I miss my budgeting.
> >     What I did was this: subaccounts work exactly like gnucash subaccounts.
> > Even for reconciliation: you have to enter a subaccount to mark an entry
> > has having cleared.
> >     What is different is twofold:  Firstly, I allow the user to enter the
> > date that it cleared the bank instead of just yes/no.  Secondly, there is
> > a link called "register" that brings up all uncleared transactions for an
> > account and all subaccounts in a single window.  An uncleared transaction
> > is one that has a nonzero change outside the parent's hierarchy.  So, of
> > the tree transactions below, "Salary" and "Rent" would show up in the
> > register for Cash in Checking, but "Budget" would not:
> > 
> > 2003/09/01 Salary
> >      Income.GnuCash Inc                           -$1000.00
> >      Assets.Cash In Checking.Main                  $1000.00
> > 
> > 2003/09/01 Budget
> >      Assets.Cash In Checking.Main                 -$1000.00
> >      Assets.Cash In Checking.Required               $500.00
> >      Assets.Cash In Checking.Living                 $200.00
> >      Assets.Cash In Checking.Fun                    $200.00
> >      Assets.Cash In Checking.Savings                $100.00
> > 
> > 2003/09/01 Rent
> >      Assets.Cash In Checking.Required              -$300.00
> >      Expense.BLFH Properties                        $300.00
> > 
> > 
> >    To clear the Rent transaction, I could either go to the "Required"
> > account, or click on the register button for Cash In Checking. The
> > Budget account has a net change in Assets.Cash In Checking of 0, so
> > it would not show up on the register page.
> >    The only other significant difference between gnucash and my system
> > (as far as clearing transactions goes), is that you do not have cleared
> > fields on EVERY account.  Any account that can have cleared transactions
> > has to be marked as a "register" account.  Thus, my Assets.Cash In Checking
> > and Liabilities.Credit Cards Payable.GnuCash One  accounts would have the
> > register turned on.  This means that any display of the register accounts
> > or their subaccounts would have a cleared column, and the top account would
> > have a register button on the chart of accounts (and ONLY the top account).
> >    
> 
> I don't get it.  You're using the register to reconcile your budget to
> the actual cash flow?  I don't fully understand how the above relates to
> budgeting vs. reconciling with a bank/CC statement...however, feel free
> to read on.
> 
> I think too many people are trying to tie a budget too closely to
> existing Gnucash accounts.  That's a mistake.  Budgets categories and
> Accounts really have very little in common.

I agree with you here regarding asset/liability accounts, but not
income/expense accounts.

>   You don't use a Budget to
> reconcile transactions; you use it to verify if you are spending too
> much or too little on a particular expense or asset, or to see if you
> income exceeds expectations or if you have less cash coming in than
> planned.  You can also use the budget to map out various paths for you
> future finances: Do you want to spend more or less money on food?  What
> happens if I start putting x dollars in savings, or stocks?  A budget is
> a tool to help you plan where you want to go.  Accounts are tools to
> track where you've been.  You don't want or need budget editing built
> into accounts--that would be a grave mistake and highly unscalable.  Not
> to mention it mixes two completely different sets of data.
> 
> Your budget is going to tell you that for the month of August, you need
> to put $200 in savings for unforeseen auto repairs.  Your accounts will
> tell you that you have only put in $100.  The difference is reported on
> a report.  There is no transaction clearing involvement or anything of
> that sort with this concept.

> In short, budgets are planning and compliance tools.  Accounts are
> tracking tools.  You don't need accounts to create a budget; conversely,
> you don't need a budget to use accounts.  When you have both available,
> and can compare your actual to your planned (reports), you can really
> take control of your finances.  However, they *are* separate.

They are separate, but one major reason to split income and expenses
into different accounts is for budgetary purposes.  In that sense, it
should be tied to the accounts.

> Now, for display purposes in the register, I'm sure there are ways to
> make it all nice and pretty so that you can see at a glance your
> performance against your budget.  That, however, is GUI related, and
> separate from the data implementation.  The GUI should never, ever drive
> how you store your data.  Separate the view of the data from the storage
> of the data, and then you can create a really kickass system. :)

Phil