Budgeting - Let's decide what we want!

[Dale Alspach]

>    I have seen this POV mentioned several times, and I just don't grok
>it.  What it seems to come down to is, spend the money, then check the
>budgets afterwards to see if you screwed up.=20
>    In other words, you can budget one of two ways: before the fact or
>after the fact.  The "envelope" system of having subaccounts of the
>main account is the before method.  If your mortgage payment is $800,
>and you are paid twice a month, then you can budget $400 into your
>housing subaccount every paycheck, and thus know that you will have
>enough for the mortgage payment on the 1st.
>    This is even better when you have to pay $900 for your car insurance
>every six months.  By putting $75 into your car budget every paycheck,
>then you'll have your $900 after six months.

>    With after the fact budgeting, you mark each transaction in some
>way and then do reports to see how you are doing.  What I don't grok
>in this method is how to see how much I have available to spend.  My
>account may say that I have $900 in it, but I don't know that $800 of
>it is "reserved" for the upcoming mortgage payment.  If I want to buy
>that new DVD burner for $150, GnuCash tells me I have it, but in reality
>I don't.  I have to run reports to try and figure it out.

>    It seems that there ought to be room for both methods...

I agree that there ought to be room for both but the two versions
are different in philosophy and the implementations will probably
need to be separate. 

What Matthew Vanacek is describing has a longer horizon and seems most
suitable for people and business which have fairly regular and stable
or at least predictable income and expenses.

The envelope method to me is really the conversion of expenses to short
term liabilities over time.  The information being sought is actually
a future cash flow report. The focus is on the size of liquid assets
available at various times in the future and the liabilities
(expenses) which are due at those times.

Personally I can see myself using both.

Dale Alspach