Budgeting - Let's decide what we want!

[Phil]

On Sun, 31 Aug 2003 09:59:58 -0500, Jack McKinney <jackmc- 
gnucash at lorentz.com> wrote:

> Big Brother tells me that Phil wrote:
>> >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.
>>
>> You seem to be describing payables, not budgeting.  Every month (or 
>> payday) you incur an expense, but instead of crediting cash you credit 
>> accounts payable.
>
> No.  When I get the bill in, I add a transaction:
>
> 2004/02/10 2004H1 Auto Insurance Bill
> Expense.Cars                                         $900.00
> Liabilities.Accounts Payable.Acme Insurance         -$900.00
>
> Then, just before 2/1, my Car subacconut of Cash In Checking should
> have $825 in it.  On 2/1, I get paid again, and put another $75 into it,
> bringing it up to $900.  I can then send the payment off (due on 2/10)
> and credit the Car subaccount of Cash In Checking.
> It has to be this way, because you don't always know how much the bill
> is going to be in advance.  For example, the electric bill will vary from
> month to month (higher bill with A/C in the summer, etc.).  Suppose it
> averages $100.  I can't put $50 each paycheck into L.AP.Joe's 
> Electricity,
> because I don't really owe Joe $50.  Instead, I put it into 
> A.CinC.Utilities,
> and then there will be $100 in it when the bill is due.  When the bill 
> comes
> in, it is only for $73, so I credt L.APl.J's E $73, indiciating that I 
> owe
> him $73.  When the bill is due, I pay it out of my utilities budget, 
> leaving
> $27 in there.  Over the winter, this excess accumulates, so that I have 
> $300
> in that account in the summer, when my bill is around $150/month.  The 
> A/C
> will slurp the extra in the budget back down to zero.

My view on budgeting is that, if done well, then the cash will be there.

>
>> By using payables, you can compare your actual revenue and expense 
>> account activity with your budget.  Then, you can tell whether you're in 
>> the black or red.  You're right - you can't tell by looking at your cash 
>> account balance whether you have money to spend or not.
>
> "compare" == after the fact.

Not necessarily.  You can look at your budget _before_ making a purchase.  
Similar to looking in your wallet before ordering lunch.  That's how I use 
budgeting - to keep spending inline.

> A lot of people seem to want after the fact budgetting.  I don't
> understand it because I can live with it; no one is going to force me to
> use it!
> However, providing mechanisms for both is not difficult.  All the
> before-the-fact envelope method needs is the ability to present all of 
> the
> uncleared transactions at once.   Gnucash does not really provide this in
> a useful way.
> Specifically, the only way to use it is to actually use the statement
> reconciliation feature with the subaccount checkbox.  I never use this.
> Every day I check with my bank online to find cleared transactions.  As
> long as Gnucash displays the cleared balance for me, I can reconcile it
> by spending five minutes going over my books.
> However, I cannot mark a transaction as cleared until I find it, which
> means I have to go through several accounts or use the General Ledger, 
> which
> is harder to use to find transactions.
> I'll try to get my web-based accounting system onto my public web site
> today to demonstrate my solution to the problem.
>

Phil

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