Enquiry about budgets

[Fiona - software]

I love all this feedback I am getting.  It is wonderful to see - so much 
better than the response I get from Quicken in customer support.

We too have  "savings accounts" for both our essential bills and maintenance 
bills.  When my husband is paid, his company has his pay automatically  put 
the pre-determined budget amount into each of the accounts each month and 
the remainder goes into a joint account for all other expenses.  These 
figures were determined on historical data over a 12 month period to give a 
monthly average.

In Quicken Plus 2008 when I entered in an expense that was covered under one 
of these budgets, Quicken would evaluate if the amount was still within the 
limits of that expense's budgeted amount.  If it wasn't, it would prompt me 
as to whether my budget figure for that expense is to be updated to reflect 
the new figure.  If it did, I would review the overall budget total to see 
if we were still allocating enough to that particular budget savings account 
each month.

>From what I understand, for each expense that falls under a budget, I have 
to set up two accounts for each one - one for recording the actual account 
transaction, the other for budgeting purposes.

Most items are paid for on credit card.  This credit card is paid off in 
full each credit card cycle using the money in those budget savings accounts 
as well as any required from the joint account.  If anything is paid for in 
cash, the joint account is reimbursed at the same time, so only one amount 
is withdrawn each cycle from the budget accounts - this is to maximise the 
interest earned as well as minimise any fees incurred.

As I already have my two savings accounts to cover the two different 
budgets, will I still need to set up virtual "Asset budget accounts"?  Or do 
I still have set them up due to the credit card cycle payments?

As a matter of interest, is there a limit on the number of 
accounts/sub-accounts you can have?

Thank you so much for all your feedback so far.


----- Original Message ----- 
From: "John R. Carter, Sr." <john at jrcarter.com>
To: "Dennis Muhlestein" <djmuhlestein at gmail.com>
Cc: "gnucash" <gnucash-user at gnucash.org>; "Fiona - software" 
<feesmailbox-software at yahoo.com.au>
Sent: Saturday, January 03, 2009 2:26 PM
Subject: Re: Enquiry about budgets


> Dennis, in your write-up comments in your website where you talk about 
> using GnuCash for budgeting, you asked,  "should budget accounts count  as 
> a liability on your balance sheet?"  The answer is yes. Any money  set 
> aside for a future use is a current liability and must be  subtracted from 
> assets in the balance sheet. The equation is: Assets -  Liabilities = 
> Equity. So to know how much Equity you have (not to be  confused with 
> liquidity), you must follow that equation.
>
> Even though the money is sitting in a savings account or some  investment 
> pool, it is technically not available for spending on  anything other than 
> the allocated budget. Naturally, you can muck  around with your budget all 
> you want to. Big Business does this all  the time with your retirement 
> funds that they contribute to or invest  your money in. That's why Big 
> Business comes up short for pensions  when they go bankrupt. If they 
> didn't muck with the pension budget  money, it would still be there when 
> you need it even if they went out  of business. Oh! I guess I'm really 
> talking about the government and  the Social Security funds.
>
> So, in your case where you have created an accounting system that 
> balances income and expenses against a budget as an account, the same 
> thing can be managed by using separate savings accounts for each  budgeted 
> item. The money placed in the appropriate savings account  would 
> accumulate as needed. The savings account doesn't actually have  to exist 
> except on paper (but it wouldn't accrue interest that way). I  have 
> separate real bank savings accounts for separate purposes that do  accrue 
> interest. When I get a paycheck, I transfer the funds to the  different 
> "budget" accounts. That transfer process is automatic in the  sense that I 
> have a scheduled transaction to remind me and even make  that transfer in 
> gnucash (but without the gnucash online banking  established, I have to 
> have a scheduled transfer set up with my bank  to move the money for me). 
> Making changes in a budgeting savings  account is easy. Any expense drawn 
> from the budgeted savings account  shows me instantly what is left to 
> spend from that budget. Actually  drawing money from that budgeted savings 
> accounts requires a transfer  from the actual bank savings account to my 
> bank checking account. That  kind of "hassle" is what prevents me from 
> making those god-awful spur  of the moment emotional purchases (like that 
> new laptop I gave myself  for Christmas) from a given budget.
>
> Happily, I don't need to use the gnucash budget system. I know the 
> balances I have in each of my "budgets" (savings accounts) at all  times. 
> I can't overspend from a budget because the money simply won't  be there 
> to spend. Such a transaction would require that I draw money  from some 
> other "budget" (savings) to cover the expense. If I did  that, I would 
> then also know how that transaction affected my other  budgets instantly. 
> If I need to adjust the monthly "budget" in an  account, I do that by 
> changing the automatic transfer with my bank.
>
> Now the beauty of using savings accounts for budgeting is that I can  have 
> a joint savings account with my girlfriend that we can both add  to on a 
> monthly basis and draw from occasionally for our joint  expenses, like 
> when I pay for fixing something in the house and draw  the money from that 
> account to reimburse myself. And we each have our  own accounting systems 
> to track that account. (She uses Quicken, I use  GnuCash. And we both use 
> the same monthly account statement from the  bank to update our accounts. 
> So we're never more than a month away  from knowing what's going on in the 
> joint account.)
>
> On Jan 2, 2009, at 8:59 AM, Dennis Muhlestein wrote:
>
>> Fiona - software wrote:
>>> It was suggested that I forward this email onto your group by John 
>>> Carter to help with my enquiries.  He has been very quick in  responding 
>>> to my queries but hightlighted that is not a developer,  only a user.
>>>
>>
>> Your comments and screenshot reminded me about everything I didn't  like
>> about Quicken.  I used Quicken for probably 8 years and recently
>> switched to GnuCash because I'm no longer willing to run Quicken in a
>> virtual machine and GnuCash has an acceptable online banking 
>> implementation.
>>
>> Actually, though, I like GnuCash better than Quicken anyway because of
>> it's double entry accounting system.  I chose to implement budgets  with
>> my own set of accounts instead of using the built in budgeting tool.
>> This lets me do all the things you talked about.  For instance, I  can 
>> have
>>
>> Expenses:
>>   Fuel
>>     Car
>>     Truck
>>     Van
>>
>> Budget:
>>   Fuel
>>
>> Where my fuel budget is for all the fuel accounts.
>>
>> I've set up what is sometimes referred to a 0-based budget system.  It
>> very similar in concept to what mvelopes.com does.  There is added
>> overhead to record your expenses since you also need to record which
>> budget account you are spending at the same time but for me at least,
>> the overhead is extremely worth the benefit I get by always being able
>> to see exactly how much money I have in a given budget account without
>> needing to run a report.
>>
>> Anyhow, I currently have this article on my blog and haven't got  around
>> to getting it transferred over to the gnucash wiki yet.
>>
>> http://allmybrain.com/2008/12/15/better-budgeting-with-gnucash/
>>
>> -Dennis
>
> --
> John Carter
>
>