Tracking Money in Savings Account

[Mike or Penny Novack]

Wayne Bird wrote:

> Michael,
>
> > Bookkeeping is about ACTUAL transactions, not transactions that 
> might or
> > might not occur. For projected transactions (planning) we use a 
> "budget".
>
> So, it sounds like you do not create subaccounts for future 
> transactions (i.e. saving for a car), but use a budget.  I haven't 
> used the budget feature in GnuCash, does it work well?
>
Not necessarily. You might indeed want to have (within savings) a number 
of dedicated sub accounts. But that wouldn't be related to the original 
question about ACTIVE "envelope" sub accounts. I did describe accounting 
for "funds" as would normally be done and your example would fit that 
category.

You would create a sub account under savings and into this account you 
would deposit funds on some regular or irregular basis. For example, 
when you made a deposit to your savings account you might decide this 
should be split, so much of that deposit into "general savings" and so 
much into "car fund". You TOTAL for the "savings account" parent account 
would should match the statements you get from the bank. But see, you 
would NOT in the ordinary course of things be making withdrawals from 
this fund and certainly not frequently (there might be an emergency 
situation where you had to accept a setback in car savings to pay some 
emergency bill -- so you credit that transfer from the savings account 
to the checking account from the "car savings  rather than the "general 
savings").

In my example the fund was money contributed toward a certain class of 
expenses. The point I was making is that the expenses would actually be 
paid form the checking account (like any others) but no attempt to 
adjust on the fly but just once a quarter (or in my specific case, once 
a year for the 3rd quarter report as expenses of this class would be 
seasonal). Thus in the treasurer's report to the board the amount 
remaining in the fund would be correct because there was ONE transfer 
from this restricted fund to unrestricted funds (for the total of that 
class of expense). See, nothing prevents us from spending MORE than what 
is available in that (restricted) fund. We just shouldn't be using THAT 
money for something else, it's restriction applies until we have 
expenses that qualify for its use. But money is considered "fungible" so 
doesn't matter which  account the actual dollars came from.

So called "envelope budgeting" is another matter where you pretend that 
the envelopes are physical envelopes from which you take physical 
dollars to spend for THAT purpose (and can't if they "aren't there"). 
Intended as an aid for those who find it difficult to stick to a "paper" 
budget.

Michael D Novack