Basic Accounting: Short Term vs. Long Term Expenses

[Beth Leonard]

On Tue, Sep 27, 2005 at 03:13:28PM -0700, Greg Novak wrote:
> Yes, of course I have an account set up for the credit card.  The problem 
> here is that I want there to be, at some point, a _single_ number that I 
> can look at and say "I'm $150 ahead for the month."

The problem is fundamentally that you want to know what your
credit card transactions for the month are before you receive
your bill.  In some way you have to enter these expenses at
the same time as you're balancing your checkbook in order to
come up with that single number.

You can either 1) Keep all your receipts and enter them as
expenses in advance, and include that in your liabilities
as a number to subtract from your bank account balance. Or
2) Download all the transactions so far that month from your
credit card company and pay in advance.  Different companies
have different download capabilities.  My credit card company
allows me to make payments as often as once every 24 hours
without problems.

So, assuming that your credit card bill normally shows up to
be paid on the 15th of the month, and your bank statement
comes on the 1st, then when you're balancing your bank statement
you just check on-line with the credit card company and see
that you have made purchases so far of $150.  You can pay that
as-is using on-line bill pay, the money comes out of your
bank account, and you can balance your bank account to the
$1000 as usual, but includes the credit card purchases.

Depending on how your card is billed, you may also have to
pay the credit card company at the regular time as well (for
the other $155 you charged in the other part of the month), it
depends on how many days they have in their grace period.

Another option you have is to ask your credit card company to
change what day of the month the bill is usually due so that
the CC bill matches with when you want to balance your checkbook.
The potential issue there is that because of the way credit
cards work, if you go with the amount due on your bill, that's
usually the expenses from the previous month, and you seem to
want to include the current month's expenses as well when
deciding if you are ahead or behind for the month -- thus you
have to look up that amount on-line as you balance your
checkbook.

> One solution is just to stop using the card, or use it only for large 
> expenses that I need to spread out over several months.

PS. For general wealth-accumulation purposes, never use a credit
card to spread out large expenses.  The extra fees you pay in
interest are crazy.  If you are at all capable of it, pay your
credit card off completely every month and if you want something
large use your savings as you have described above or take out
a larger school loan / home loan etc.  Keeping debt on a credit
card is about the worst possible place in the world to keep it.

--Beth 
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+                             Beth Leonard                          +
+       O say, does that star-spangled banner yet wave              +
+       O'er the land of the free and the home of the brave?        +
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