Tracking Money in Savings Account

[Wayne Bird]

Dennis,

Thanks for the input!

> Yes, it does. I don't know anything about MS Money but it seems to me like you
> used envelopes both for budgeting as well as some sort of replacement for
> proper Expense accounts and therefore tend to mix them up.

That's correct, I didn't like doing this because Money wasn't designed to be used in this way, and because of this, I couldn't use other features in Money because I had the income and expense categories all screwed up.  That's why I started this thread -- to learn how to do it the "right" way.

> I'd use envelopes only for things you really save up for. Costs that
> you know you must pay,
> like taxes or insurance. This is money you don't have available, as
> you know you have to pay it. For
> these, it makes sense to put them into subaccounts/envelopes, because
> that money is not
> available to you for spending.

See, that's the thing with me, in my mind, I save up for everything.  I get paid weekly, my bills range anywhere from monthly to yearly, so I take money out of my weekly paycheck to set aside for my monthly to yearly bills.  So now it sounds like I'm back to square one, using subaccounts for, maybe not everything, but at least the majority of my expenses.  I must be missing something here.

> For example, let's say you allocated 10$ to the movies envelope and
> another 10$ to
> the book envelope. After you saw a movie, another movie opens that you
> just have to see, alas
> your movie envelope is empty. You would now have to move the 10$ from
> your book envelope
> to the movie envelope just to spend it on movies. Wouldn't it be
> simpler to simply have one
> envelope called "entertainment" Thinking this further, why do you need
> an entertainment envelope
> at all? After all, all your money in your account that isn't needed
> for something else is available to you,
> so your bank account is your "entertainment" envelope.

Somewhere along the way, if you really want to manage your finances, you have to budget these expenses.  With the above example are you using a budget to control your expenses or do you just spend and not worry about it?

> After all, all your money in your account that isn't needed

> for something else is available to you,

> so your bank account is your "entertainment" envelope.

Again, that's the issue, the difference in philosophy; all the money in my account is needed for something.  I don't view my bank account as a place that just has a random lump of money in it.  This is the issue I'm struggling with; it seems "standard" accounting views it this way and the "envelope" system views all the money in the bank account as already being allocated to a future expense.  (Please don't read into this that I'm defending the envelope system.  I don't want this thread to be a debate between these two systems, I'm just trying to wrap my peanut brain around these concepts.  Please forgive me for being slow.)  And, yes, you are correct in that it "actually limits you on how you spend your money."  But that's the whole point.  I want to have money available to buy books when I want to by books, but if I've already spent that money on a second movie, now I'm screwed and can't get the books I wanted.  Or worse yet, I go to the second movie and buy books anyways, now I'm really short and can't pay the phone bill.  Do you see what I mean?

> To make a long story short: Use envelopes for saving up for costs you
> know you must pay. I wouldn't
> create an envelope to save up for a TV, because that is nothing I
> absolute have to pay on a specific day,
> I'd just create a budget.

Wouldn't you create a budget for all your general expenses?  I thought budgets are designed for expenses that have specific due dates along with non-specific due dates.  If you don't create a budget for these general expenses how do you know if you're overspending in a particular area.  I know you can look at each expense account and subjectively say, "Wow, I spent a lot there."  But without a thought-out plan to compare your actual spending you're not really "managing" your finances.  Is this not correct?

Wayne




> From: brakhane at googlemail.com
> Date: Fri, 17 Dec 2010 01:23:20 +0100
> Subject: Re: Tracking Money in Savings Account
> To: wrbird at hotmail.com
> CC: adardis at gmail.com; derek at ihtfp.com; fireflys_98 at yahoo.com; warlord at mit.edu; gnucash-user at gnucash.org
> 
> On Fri, Dec 17, 2010 at 12:26 AM, Wayne Bird <wrbird at hotmail.com> wrote:
> > This is great, this is exactly what I'm talking about.  I'm just used to putting every expense into a subaccount
> > and then pull from that subaccount.  So, what I'll try now is having a subaccount for only certain amounts I have
> > to keep track of separately, i.e. the gifts my wife receives.  Before, I split every paycheck into specific
> > subaccounts, I won't do this anymore.  However, splitting my paycheck also acted as my budget because I
> > would split it in the same way I would have if I created a separate budget.  With the subaccounts, I could easily
> > see how I was doing with my spending.  Now it looks like I will need to create a separate budget so I can run a
> > planned/actual expense report to see how I'm doing.  Does this make sense?
> 
> Yes, it does. I don't know anything about MS Money but it seems to me like you
> used envelopes both for budgeting as well as some sort of replacement for
> proper Expense accounts and therefore tend to mix them up.
> 
> In Gnucash, you can simply see how much you spend
> where just by looking at the expense account in question.
> 
> As some have said, you surely could continue to split each paycheck
> into envelopes
> and therefore planning your spending beforehand, but at least I think
> this is overkill
> and actually limits you on how you spend your money.
> 
> For example, let's say you allocated 10$ to the movies envelope and
> another 10$ to
> the book envelope. After you saw a movie, another movie opens that you
> just have to see, alas
> your movie envelope is empty. You would now have to move the 10$ from
> your book envelope
> to the movie envelope just to spend it on movies. Wouldn't it be
> simpler to simply have one
> envelope called "entertainment" Thinking this further, why do you need
> an entertainment envelope
> at all? After all, all your money in your account that isn't needed
> for something else is available to you,
> so your bank account is your "entertainment" envelope.
> 
> I'd use envelopes only for things you really save up for. Costs that
> you know you must pay,
> like taxes or insurance. This is money you don't have available, as
> you know you have to pay it. For
> these, it makes sense to put them into subaccounts/envelopes, because
> that money is not
> available to you for spending.
> 
> Referring to your dental example: you only "need" an envelope for
> expected future dental expenses,
> not for paying off your debt. The money for your first doctoral visit
> is already gone and you
> are paying off the debt. I'd only use a dental envelope if I know a
> second visit to the doctor
> is unavoidable, so that I can save enough money to pay him immediately
> instead of having
> to take a "loan" from him.
> 
> To make a long story short: Use envelopes for saving up for costs you
> know you must pay. I wouldn't
> create an envelope to save up for a TV, because that is nothing I
> absolute have to pay on a specific day,
> I'd just create a budget.
> 
> But as also said by others: you are free to use GC any way that makes
> it most convenient to you.