Accounting for saving money to pay credit card monthly

[Matthew Vanecek]

I second what TC has to say.  Use Gnucash to track what you did, and a
budget to track what you want to do.  Fill in the actuals column in your
budget to reflect what you've spent so far, and you'll know how much you
have left to spend on whatever.

Check out Dave Ramsey (www.daveramsey.com)--a pretty popular theorist on
the subject of finances (although it's mostly just a matter of common
sense with a coupla spreadsheets thrown in)  The key--Keep It Simple.

Also, you generally tend to spend more freely with a credit card than with
cash or a check card (witness avg. levels of credit card debt in US
today).  In any case, budget to plan, checkbook to maintain history...

ciao.

<quote who="TC">
> Oh boy do I remember working my way through this question. Forgive me,
> but what follows is long :-)
>
> When I first taught myself double-entry book keeping years ago, this was
>  exactly the sort of thing I wanted to do. Rather than reserving money
> for a credit card, I was wanting to make sure that if I budgeted to
> spend 500 on food and 100 on clothing, then I wanted some mechanism to
> stop me eating (forgive the pun) into the food 500 if I was tempted to
> overspend on the clothing. But it was the same idea - having some way of
>  reserving money for one thing, so I didn't use it on another thing.
>
> Eventually, after much messing about, I realised that I was doing it all
>  wrong.  This is a budgeting problem, *not* a book-keeping one.  You
> CANNOT do what you're trying to do within the the overall ledgers of
> Gnucash (or any other proper book keeping tool) and still have your
> books be accurate.  For example, you proposed:
>
>  >                               DB      CR
>  > liabilities:credit card:            $50.00
>  > expenses:whatever:         $50.00
>  > assets:checking:                    $50.00
>  > ??? assets:hold?           $50.00
>
> And in fact that is "correct" in terms of what you're trying to achieve.
>
>   But since that $50.00 on line three hasn't really moved out of your
> REAL checking account and into your "assets:hold" account, the books are
>  now wrong.  Wrong. WRONG!
>
> Of course, you could perist with that approach and simply ignore your
> REAL checking account.  Then, when you actually paid money from your
> checking account to your credit card you'd have...
>
>                                      DB      CR
>        liabilities:credit card:    $50.00
>        ??? assets:hold?                    $50.00
>
> ...thus clearing both of those accounts. And, precisely because you were
>  ignoring your REAL checking account, you would appear to have less
> money  to spend (i.e. in gnucash's assets:checking).  And so you would
> achieve  that protection-from-spending-on-something-else that you're
> looking for.
>
> But it's all at the cost of having inaccurate books from time to time
> (realistically, they'd be wrong pretty much all the time, although
> they'd hover around reality depending on how much you used your card and
>  when it was paid off each month).
>
> I have two pieces of advice for you, born of long experience on this
> front.
>
> First, keep your books spot on accurate.   They tell you what you *did*,
>  not what you're going to do. Then, in parallel, use a spreadsheet to
> budget - i.e. to tell you what you're going (or are aiming) to do.
> Then, stick to that budget, tracking actuals versus budgets even on a
> weekly basis if that's what it takes.  DO NOT - this is the key - rely
> on the fact that there is money in your checking account when trying to
> decide if you have money to spend.  The fact that there is money sitting
>  in your checking account should mean nothing as far as answering the
> "can I buy X" question is concerned. Your budget (and your current
> performance to budget) tells you that.
>
> Now of course that can be hard.  You go to an ATM a week before the
> credit card payment goes off and think "Wahay! Loadsamoney!".  So you
> can trick yourself into thinking you have no extra money (which of
> course you don't - because it's already pre-allocated to paying off that
>  card).  Trick yourself by predicting what your card repayment is going
> to be, and at the start of the month, shove that much (plus a wee bit)
> into a real other account that you don't look at.  Leave it there until
> a day or two before the payment comes off, then shove it back into the
> checking account.  This way, whenever you look at your chekcing balance
> (at the ATM say), you'll think you have less money than you do, so you
> won't spend! :-)
>
>
> But my second piece of advice is even better:
>
> Just don't do what you're trying to do.  Ignore those tempting reward
> points.  Forget that frequent flyer faff.  Pay with a debit card or
> cheque or cash and keep it simple.  So, you lose some air miles.  So,
> you don't get a $0.000273 rebate on gas.  So what. You avoid the real
> danger of missing the payment, or causing an overdraft because your
> auto-payment does go through but you've ignored my earlier advice about
> budgeting :-)  All it takes is a couple of overdraft penalties, or a
> couple of months of interest, and you wipe out any benefits.
>
> Just by $53-worth :-)
>
> tc
>
>
>
> Christopher Scott wrote:
>> Scenario:  I have a credit card that pays me "reward points" for each
>> dollar I spend.  I would, therefore, like to maximize the use of this
>> card.  However, I want to pay off the balance on a monthly basis.
>> Therefore, I want to be able to automatically account for money out of
>> my checking account so that I don't spend it on something else.
>>
>> How do I account for this?
>>
>> Example today:
>>                               DB      CR
>> liabilities:credit card:            $50.00
>> expenses:whatever:         $50.00
>>
>> Going forward:
>>
>>                               DB      CR
>> liabilities:credit card:            $50.00
>> expenses:whatever:         $50.00
>> assets:checking:                    $50.00
>> ??? assets:hold?           $50.00
>>
>> Is this correct?  What kind of account is this (still an asset
>> account, some sort of accounts/payable account, or something else)?
>>
>> Thank you.
>>
>> =====
>
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> https://lists.gnucash.org/mailman/listinfo/gnucash-user


-- 
Matthew Vanecek
perl -e 'print $i=pack(c5,(41*2),sqrt(7056),(unpack(c,H)-2),oct(115),10);'
********************************************************************************
For 93 million miles, there is nothing between the sun and my shadow
except me.
I'm always getting in the way of something...