Accounting for saving money to pay credit card monthly

[Robert Uhl]

TC <tc at emailetc.co.uk> writes:
> 
> 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.

Not true; I've been using GnuCash to handle budgets for several years
now.  What I do is make my budgets sub-accounts of my chequing and
savings accounts (chequing, since that's where the majority of my money
comes from, and savings because for long-term budgets it makes sense to
earn better interest).  When I pay for an item, it's either via cheque
or credit card.

In the case of a cheque, I simply credit the chequing sub-account for
that budget category and debit the appropriate expense account.  Money
moved from chequing to expenses--this doesn't make the books inaccurate.

In the case of a credit card purchase, money moves from the sub-account
into the main (non-earmarked) chequing account, and from the credit card
into the expense account (using a split to keep all this in a single
transaction).  Again, the books are still correct: there is $X in my
chequing account; I owe $Y on my credit card and I spent $Z on some
expense.  It also means that I have enough money at the end of the month
in chequing to pay the credit card bill.

The thing is that the amount in chequing is not simply the amount in the
parent account, but rather that in the parent and all sub-accounts.

This year I've added savings-based budget items; I was stockpiling quite
large sums of money in a low-interest account, costing me to the tune of
$120/year in lost interest.  What I'm going to do now for transactions
from savings is similar to what I'd do for a credit card purchase: money
moves from budget sub-account to parent savings account and from either
chequing or credit card to expenses.  Then if there should be a
shortfall in the amount I have in chequing when it comes time to pay the
card, I'll just transfer in some round sum from savings.  This shouldn't
be an issue, though, as I plan to leave enough of a cushion therein to
cover anticipated bills regardless.

> 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.

Ugh--that's _way_ too much work.  Having to track the same data in two
places is a royal chore, and error-prone.  My method has the advantage
of being accurate both in terms of what's available and in terms of what
the budget allows (a simple glance at the sub-account balance tells me
whether I can go for a beer run or not; a simple glance at the chequing
account total tells me how much money I have therein.

Now, the ideal would be not to have to always entering splits.  It's a
real chore compared to normal transactions.  What would be nice is if
GnuCash supported budgeting, but a few moments' thought reveals that
it's a harder nut to crack than it appears.  Not all budget items are
expenses, for example: the principle part of my mortgage is not an
expense, but it's certainly a budget item.  Should every transfer of
money affect a budget?  At first one says yes, but what about simple
transfers of surplus one way or another, or of corrections?

-- 
Robert Uhl <http://public.xdi.org/=ruhl>
Ever wonder if taxation without representation might have been cheaper?