Budgeting and negative balance

[Edward Doolittle]

Oh I see. In the budget tool, if you wish to transfer to a liability you
use a negative number. So a payment on a car loan of $200 would be -200 in
the loan account line for the appropriate budget period. Similarly a
deposit of $200 into a savings account would be +200 in the appropriate
cell.

So in the budget you have created, it looks like you are paying $1000 to an
asset account and paying $1000 to a liability account, for a net loss of
$2000, or -2000 in the total. That is correct as far as the budget tool is
concerned.

However, that is not what you want. The problem is that some transactions
shouldn't appear in the budget. Buying a car on credit is just such a
transaction. Think about it this way: you walk into the car dealership with
a wallet full of cash. You drive out an hour later with a car and the same
wallet full of cash. You haven't spent anything yet!  So you don't need to
budget for the purchase transaction. What you do need to budget for is the
monthly payment. For example, suppose you paid $200 per month for six
months for your car. Then in each of those six months, there should be a
transfer -200 to Liabilities:Loans:Car Loan .

Alternative:

The budget tool may not be the best way to get a view of the future using
GnuCash. What I recommend trying instead is entering the transactions into
the appropriate accounts, not the budget, using appropriate *future* dates.
Then you look below the blue line for a view into the future, which allows
you to make all kinds of predictions. If any of the transactions turns out
to be inaccurate, correct them as soon as you know. So for example, if you
plan to purchase a car for $1000 on May 1, 2015, enter the transaction

May 1, 2015
Dr. Asset:Fixed Asset:Car $1000
Cr. Liabilities:Loans:Car Loan $1000

Then if you later decide to go for the deluxe model instead, change those
numbers to $10000 each. When the dealer talks you into considering the $500
rustproofing, change the transaction to

May 1, 2015
Dr. Asset:Fixed Asset:Car $10000
Dr. Expenses:Car:Maintenance:$500
Cr. Liabilities:Loans:Car Loan $10500

And so on, as you gradually settle on a scenario that becomes actual. Or if
you decide not to buy the car after all, just delete the transaction.

As your predicted loan principal changes, your monthly payment and interest
payments will change too. You could enter them manually but a large number
of transactions would change every time a loan parameter changed. What I
would do is just enter future predicted payments to the end of the year
until you have finalized the loan terms, then you can enter the exact
payment information for the lifetime of the loan, plus the interest
expenses from an amortization table or spreadsheet.

You can also enter your future salary projections as future transactions
between Income:Salary and Assets:Chequing , predictions about utility bills
as appropriate future transactions, etc., etc. After you enter predictions
for all your regular income, expenses, and transfers, you will then have a
comprehensive financial plan. When actual bills arrive, you just revise the
predictions to reflect the actual bill. If your predictions are accurate
enough, you won't need a budget. (And if your predictions are not accurate
enough, a budget wouldn't help anyway.)

Sadly, my French is not very good ... but I can appreciate what Louis XIV
has to say. :-)


On 10 March 2015 at 10:42, Nicolas Belgium <nicolas at fairon.net> wrote:

> Thank you for your reply.
> I didn't took the car loan yet, I plan it with budget. I understand the
> transaction with double legs.
>
> To better understand what I am struggling with, I started a simple new
> project without anything else than a car loan with 2 accounts, 1 for
> liability 1 for asset. No transaction, just budget.
> On budget sheet I plan on 05/01/2015 a car loan:  Liabilities:Loan:Vehicule
> Loan. I write there 1000.
> On same sheet, same day I write 1000 in Assets:Fixed Assets:Vehicle.
> Transfers shows 0, same for total, which is normal, assets = liability
>
> But when I do Reports > Budget > Budget Balance Sheet, I got -1000 in
> Liabilities:Loan:Vehicule Loan, 1000 in Assets:Fixed Assets:Vehicle (only
> thing correct in this sheet), -2000 in Unallocated assets and -1000 in
> Total
> Assets.
>
> So I guess it's because Budget is to define where you want to put money,
> 1000 in liability is to reimburse liability not to create it, so I change
> Liabilities:Loan:Vehicule Loan to -1000 in order to create a liability.
> Now the Budget Balance Sheet is correct: 1000 in Total assets and 1000 in
> Liabilities, but my budget sheet shows 2000 in transfers and -2000 in
> Total.
> And now I am totally lost, how is it possible to have a total of -2000 for
> a
> 1000 car? Am I missing some budgeting principle? Is there a bug?
>
> Thank you for your help
>
> NB: Saw you are from Canada and your message signature in French, my mother
> tongue, but I will continue in English as I guess the solution may benefit
> to others.
>
>
>
>
>
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-- 
Edward Doolittle
Associate Professor of Mathematics
First Nations University of Canada
1 First Nations Way, Regina SK S4S 7K2

« Toutes les fois que je donne une place vacante, je fais cent mécontents
et un ingrat. »
-- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI