Old Dog, New Tricks

Patrick Doyle wpdster at gmail.com
Wed Dec 31 13:51:48 EST 2014


Hi John,
Thanks for the idea.  I started off thinking I would make the buckets
out of subaccounts of my Checking account, but got concerned about how
that would interact with credit card purchases.  Right now, if I buy
food with my credit card, or with my debit card, I treat it the same.
I think that still works with my proposed idea (keep in mind, I have
yet to actually try my proposed idea, I wanted to get some feedback on
it and think about it first, and then perform surgery on a QIF export
of my Quicken data to accommodate my proposed idea, then import my
historical data, and only, finally! then actually try my proposed
idea).

Where was I?  Oh yeah, with my proposed idea of using Equity
subaccounts to track the contents of my buckets, I think I treat
credit & debit card purchases the same.

Lance: Thanks for the links... I'll read through them tonight and see
how well they match my preconceived notions or if I can warp my
notions to match his ideas.

--wpd


On Wed, Dec 31, 2014 at 1:34 PM, John Morris <johnjeff at editide.us> wrote:
> Hi Patrick,
>   First off, I will say that you are not the only person who thinks this way. Your budgeting system is almost identical to the system we use for our household finances, including the buckets (we call them envelopes) and the magic that allows us to remove more money than is in a bucket. Our situation is also similar in that I started tracking my finances with a spreadsheet and moved on to Quicken, although I stopped upgrading in 2002. This summer, I also made changes to my system that required me to finally ditch the long reviled Quicken, so I started using GnuCash in July.
>
>   The main difference between your system and ours is that you actually track the buckets in your financial software. In contrast, I track our income and expenses fairly conventionally and then use a monthly reconcile with a spreadsheet to update the envelopes. Therefore, I have not tried to do what you are trying to do.
>
>   However, if I were going to do that, I think I would make one small change to the system you propose. I would try to use subaccounts of the checking account as the buckets. As I understand it, this would allow you to see the total balance of your checking account as well as the individual balances of the buckets. However, if you are in the habit of writing checks or making other transactions involving the checking account where there might be a delay between initiating the transaction and its completion, there might still be a difficulty. The issue is that I don't know how to make a parent account show the individual transactions of its children in the register. I think this should be possible, but I have not tried it so I don't know that it is. If it is possible, you could then mark transactions as cleared and track your balance against the bank's reports. If not, reconciling with the bank may be complicated.
>
>   Until I learn how to do that, I don't think I would try to use the bucket system in my main financial software. I find it too convenient to be able to keep tabs on my banks this way. Of course, this does leave me trusting that the bucket system is still working without intramonth tracking.
>
> Best,
> John
>
> On Dec 31, 2014, at 9:13 AM, Patrick Doyle wrote:
>
>> Greetings,
>> I have a fairly simple financial picture (checking account, savings
>> account, and 2 credit cards), and a fairly simple system for managing
>> my finances that I have used for the past 25 years or so.  I started
>> off keeping track of my finances with a spreadsheet, moved on to
>> Quicken, stopped upgrading Quicken in 2006 or so, and haven't made any
>> changes to my system in ages.
>>
>> Well, now I'd like to make a change to my system.  As you might guess,
>> part of that change involves changing my financial management
>> software.
>>
>> In a nutshell, my financial management system (regardless of the
>> software) looks like this:
>>
>> When money comes in (into my checking account), it gets divided up
>> into a bunch of "buckets".  (I am deliberately using the term "bucket"
>> here to avoid confusion with words like "categories", "subaccounts",
>> "classes", etc...)
>>
>> When money goes out, I take it out of a bucket.
>> -- If the money goes out in the form of a credit card transaction, I
>> take the money out of the bucket at the time I make the transaction.
>> Not at the time I pay my credit card bill.
>> --- Therefore, paying credit card bills doesn't count as "money going
>> out" of my checking account -- I've already accounted for that.
>>
>> The buckets are magic -- I can take more money out of them than I put
>> in -- as long as the sum of all of the money in all of the buckets is
>> positive (otherwise, my bank would get mad at me and start bouncing
>> checks).
>>
>> I like this system because, at any given time, I can look at how much
>> money is in, e.g. the "Food" bucket and know if we can afford to go
>> out to dinner this week or not.
>>
>> I can look at my record of paycheck deposits and see just how much
>> money I budgeted per-paycheck for Food back in 2003 compared to the
>> amount I'm budgeting for Food now.
>>
>> I can tell immediately if I am budgeting more than I earn -- if I try
>> to put more in the buckets than is in my paycheck, it's immediately
>> obvious.
>>
>> If you're still with me, first of all, thank you very much for reading
>> this far :-)
>> With all of that backstory, how can I adapt GNUCash to work with my system.
>> -- alternatively, how can I adapt me to work with GNUCash, but please
>> remember, I'm an old (and somewhat conservative) dog and don't like
>> change for the sake of change.
>>
>> Having read through the excellent documentation, here is the gist of
>> the plan that I think adapts GNUCash to work with my system:
>>
>> Set up Assets:Checking, Assets:Saving, Liabilities:MasterCard,
>> Liabilities:Visa in the traditional manner outlined by the User's
>> guide.
>>
>> Use Equity:Food, Equity:Mortgage, Equity:Utilities,
>> Equity:Discretionary, etc... as my "buckets".
>> -- I recognize that this departs radically from the traditional use of
>> GNUCash where these would be considered "Expense" categories.
>>
>> When I get paid, my split will be:
>> Debit: Assets:Checking (increases the balance)
>> Credit: Equity:Food, Equity:Mortgage, etc... (increases the balance)
>>
>> When I buy groceries using my debit card, my spilt will be:
>> Credit: Assets:Checking (decreases the balance)
>> Debit: Equity:Food (decreases the balance)
>>
>> When I go out to dinner and pay with my Visa, my split will be:
>> Credit: Liabilities:Visa (increases the balance)
>> Debit: Equity:Food (decreases the balance)
>>
>> When I pay my Visa bill, my split will be:
>> Credit: Assets:Checking (decreases the balance)
>> Debit: Liabilities:Visa (decreases the balance)
>>
>> It feels very weird to think of a "Debit" to my "Assets:Checking"
>> account as increasing the balance of that account, but that's what the
>> GNUCash guide says will happen, and the math all works out for keeping
>> track of my buckets as Equity subaccounts.
>>
>> And, for the second time, if you're still with me, thank you again for
>> reading this far.  I am writing all of this down partly to wrap my
>> head around it, and mostly to ask for feedback from the community.  Am
>> I really the only person who thinks of finances in this way?  It seems
>> like GNUCash will track my transactions the way I want, but it doesn't
>> feel like the "standard practice" used by everybody else.  Are there
>> major flaws with this approach?  Is there something better that would
>> provide the same capabilities?
>>
>> From reading the manual, it doesn't seem like the "Budget" feature
>> offers what I want -- I can't tell at a glance if I've budgeted more
>> than my net take-home pay, I can't tell historically when things
>> change, etc...
>>
>> What do you think?
>>
>> --wpd
>
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