Budgets - "Budget Transactions"

[Matt Graham]

G'day Again Dale,

Now that we have agreement on your point 1 (wrapper 'accounts' for
budgeting), I have come back to your email to ask more questions!


> 2. Allow creation of budget transactions. Budget transactions could
> involve> budget accounts or transaction accounts. These would be for
> anticipated> actual transactions. These would resemble scheduled
transactions but
> would> not require an exact date but only a budget interval, e.g.,
the month
> or> the quarter. The purpose would be to encumber funds for use in
cash
> flow> forecasts and possibly to provide some enforcement of budget
limits.


So, basically you are suggesting that the user should be able to plan
exact transactions that are expected to occur. I think the best way to
discuss this is with an example.

E.g. Lets say I plan to spend $2.50 every work day on the bus, and this
comes out of my "Transport" expense account (and paid out of my cash
account). Let's say there are 20 work days in the month of interest. I
could create 20 budget transactions of $2.50 each, which would add up
to auto-magically put $50 extra budget value in the 'transport'
account, but this is tedious and unlikely to be done. Most, I imagine
would create one budget transaction of $2.50*20 = $50 for that month.
But instead of using budget transactions, why not simply add $50 to the
overall budget for the 'transport' account? Because then it wouldn't
differentiate between the money for the bus, and the money for the car,
and the money for the wife's train ticket to work (for example). 
The real question: Why don't we just create sub-accounts to the
'transport' account instead? So I would have a 'Bus' sub account with a
budget of $50, a 'Car fuel' sub account set to (for example) $10 per
month, and a "train" sub account with a budget of $40. Entering nothing
in the 'Transport' Account would then have it auto-magically add the
sub-accounts up to show $100 that month for transport. This is a much
better way of managing this situation, but requires some extra sub
-accounts to be added to the tree (they would need to be actual expense
accounts in your main tree). => for this situation there is little to
now advantage to budget transactions.

The real key understanding with transactions (and hence the possibly
large advantage of budget transactions) is that they link the effect on
both cash flow, and equity. In our example, a budget transaction would
show that in this month I plan to CR $50 out of my cash account to DR
my 'transport' expense account (or bus sub-account if I want it). In
other words, I am now more easily planning not only my future cash
flow, but my future balance as well. Without budget transactions, we
are forced to plan out our expenses (based on the artificial sub
-account method I highlight above), then plan out where this money is
going to come from - Income, or an Asset or Liability account. So in
our example if we don't have budget transactions, my monthly transport
budget was DR $100 (either through sub-account or direct allocation). I
then need to manually enter in a $50 balancing CR to my 'Cash' account,
and perhaps another $10 CR to my Credit card liability account (for the
fuel) and then another $40 CR to my wife's cash account for her train
tickets. Note that I call them credits/debits, but they are entered by
the user as positives/negatives to the various accounts. This all
sounds easy enough, but could get annoying noting that we are unlikely
to want to create artificial sub-accounts for the two cash accounts and
credit card account (so no auto-magic adding up - we need to sum all
the expected monthly CR's and DR's ourselves for that account and enter
the total in the total against that account...

So sounds like (on the face of it), budget transactions could be very
useful to people, but only for people who are budgeting for more than
just cash flow. Cash flow people are more likely to simply plan out
their expected income for the month, then keep on increasing the
budgeted expenses until they balance (or have planned them all). Note
that it would be best if this feature were to be included with the
future transactions => that way you enter it once, and then can use it
in both your budget and also to reconcile up expected transactions with
actual expenditure. Doing this would force you to set an expected date
for the transaction though. I don't currently use the future
transaction feature, so hopefully I am not misunderstanding it too
badly...

Thoughts from all are very much appreciated on the above line of
thinking - I'm more brainstorming than outlining an intended way ahead.

Cheers,

Matt G