Tracking Money in Savings Account

[Wayne Bird]

Dennis,

I sent you a response to your first e-mail, these e-mails must have crossed.  My e-mail that I already sent has a response to "you must pay some time in the future."

Yes, I understand your points below.

> No need for a tax savings account here, you just write a check
> for $tax and book it as a transfer from Savings -> E:Income Tax

This implies that you actually have the money to pay these taxes, and you better if they are due that quickly.

> Case 2: you must pay the income tax in 6 month time.
> Instead of writing a check right away, you decide to
> get some interest for the money instead and keep it
> on your savings account. However, you know you have
> to pay $tax in 6 months time, so you transfer the money to
> your "income tax" envelope.

Again, this implies that you already have the money in your account and you just want it to collect interest.  That's a great idea.  But know, let's say you don't actually have enough to pay it all, so know when you get paid you'll need to allocate some of your paycheck to this account, is that correct?

Wayne


> From: brakhane at googlemail.com
> Date: Fri, 17 Dec 2010 01:37:28 +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
> 
> Reading my mail again, I think my point did not
> come across quite right, so I try again:
> 
> On Fri, Dec 17, 2010 at 1:23 AM, Dennis Brakhane
> <brakhane at googlemail.com> wrote:
> > 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.
> 
> The important bit which I omitted is "you must pay some time in the future".
> For example, suppose your employer would not automatically substract
> your income tax for you and you would have to pay it yourself.
> 
> Case 1: you must pay the income tax in the same month.
> No need for a tax savings account here, you just write a check
> for $tax and book it as a transfer from Savings -> E:Income Tax
> 
> Case 2: you must pay the income tax in 6 month time.
> Instead of writing a check right away, you decide to
> get some interest for the money instead and keep it
> on your savings account. However, you know you have
> to pay $tax in 6 months time, so you transfer the money to
> your "income tax" envelope. This way, while your bank statement
> still shows the full amount, your GC bank account only shows the
> amount of money you really have.
> 
> (Another way to handle case 2 - and probably more correct in
>  pure bookkeeping terms - would be to make a transfer from
>  Expenses:Income Tax to Liabilities:Income Tax and in 6 months
>  time, write a check for the tax office and book it as a transfer from
>  your normal Savings account to Liabilites:Income Tax)