Budget - Monthly or Yearly?

[R. Victor Klassen]

I would offer a contrary view.  If your budget is smooth and even, then annual is fine.  It’s when things are lumpy that monthly makes the most sense.  Then you can put the evenly distributed amounts on all months, but the once-or-twice-a-year things in the months when they happen.  Such a budget allows you to predict whether there will be cash flow issues, and also makes it easier to look forward when you have a larger-than-expected balance, to the month to come when the larger expense will eat that balance up.

On Dec 14, 2014, at 4:57 PM, Mike or Penny Novack <stepbystepfarm at mtdata.com> wrote:

> David Carlson wrote:
> 
>> On 12/9/2014 2:46 PM, Chris Henderson wrote:
>> 
>>> I’m setting up expense only annual budget for 2015 and would like some
>>> advice.
>>> 
>>> Is it better to setup the budget Annually or monthly? I only care about
>>> what I spend in total every year, not what I spend every month. Some items
>>> are hard to gauge monthly (even with the estimate option) - gas, grocery,
>>> postal, brokerage, clothes, parking etc.
>>>   
> Although I am not using gnucash for budgeting, we had that too.
> 
> If your income and expenses are regular on a monthly basis, if your cash flow is critical on a monthly basis, then monthly makes sense.
> 
> On the other hand, if your income is seasonally "lumpy" and major expenses are paid in lump sums annually, then annual makes sense.
> 
> Unfortunately, often not so simple, with some income/expenses monthly and others annually. What you have to do in that case is to decide which you will use and adjust accordingly. If you are doing an annual budget, you need to multiply the monthly ones by twelve and if a monthly budget, divide the annual ones by twelve. It is probably the latter which can seem confusing if you don't recognize that it will then be normal for (the annual) items to be either ahead or behind except in the month where they are actually received (if income) or spent (if expenses).
> 
> You can, of course, do more than one budget, including some things in the monthly budget and others in the annual budget.
> 
> Michael D Novack
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