Budgets - how does the community want to use them?

[Edward Doolittle]

Thank you for taking an interest in the budget facility of GnuCash. I think
it's an area where some improvement can definitely have an impact.

I am no expert, and I get the feeling there's something I'm still missing
with respect to budgeting. Nonetheless, I'll share some of my thoughts,
with the hope that someone else might be able to sort it all out.

First, I think it is a good idea to ask, what is the purpose of a budget? I
have done budgeting in both a business (actually, academic) context and in
a personal context. In both cases, budgeting serves as a way of controlling
overspending in a given period.

However, in the business context, budgeting serves another purpose: to
control underspending in a given period as well. Budget/funding/grants may
disappear if not used/reported by a certain date; budgets are a way of
coordinating with other planning processes (e.g., management of human
resources) so that spending takes place at appropriate times. I suggest
that it is the requirement to spend by deadlines that distinguishes
business from personal budgeting.

Another difference between business and personal budgeting is the need to
deal with encumbrances in the business context. Typically a manager will
authorize spending on one date and the actual spending will be reflected on
a variance report a month or several months later. In the meantime, the
money can no longer be spent, but (in a poorly-designed system) there will
be no indication of that other than memory. That complication typically
does not occur in a personal context.

Consequently, I suggest that we consider designing two different systems
for budgeting in GnuCash: personal and business. I suppose that business
budgeting could be used for personal purposes, but it would be less
confusing if the business features could be hidden or turned off until
needed.

I myself have not used the budget facility in GnuCash for the past year, as
I have been experimenting with another method. I scheduled most of my
periodic transactions, and then set the scheduler to enter the transactions
366 days in advance. That gives me a very clear picture of my cash flow
(controlling overspending), which is adequate for my personal book. Here
are some of the issues I've encountered, and some of the ways I've
addressed those issues:

====

- Accuracy of estimates for income

My pay varies throughout the year. Sometimes I get pay raises, sometimes
things like charitable donations are deducted directly from my pay, and
sometimes I have to pay the Canada Pension Plan premium (only for about the
first half of the year). I handle this by scheduling a slight underestimate
of my pay, and then correcting the transaction manually when I get my pay
advice slip (stub).

If a permanent change to my pay occurs, like a pay raise, I change the
scheduled transaction. A problem that may occur is that I will have 12
months of incorrect transactions in my chequing account. I handle that by
duplicating the most recent nearly-correct transaction, editing that
manually, and then deleting the scheduled transaction for that month. (If I
really wanted to get fancy, I guess I could schedule a nearly-correct
transaction one month in advance, coupled with a reversing transaction for
the incorrect transaction, but it doesn't matter as long as I
under-estimate my pay.)

How changes to GnuCash could help: If I could batch edit future
transactions that were entered into my account by a scheduler, instead of
editing them one at a time, I would be most grateful. For example, future
transactions could be taken from a budget, and if the budget changed, all
the future transactions would change too.

- Accuracy of estimates for utilities

I find that most of my bills are in a definite range, so that a small
overestimate of most bills, coupled with manual correction when I receive
the bill in the mail, is adequate. The one exception for me is natural gas
for home heating in the winter. I just bump my December-March estimates up
manually when I think of it, but I could also have 12 different scheduled
transactions for my natural gas bill, one for each month of the year.

How changes to GnuCash could help: Again, pulling the future estimates from
a budget instead of from the transaction scheduler would give more accurate
estimates of utility bills.

- Discretionary spending

I put most of my discretionary spending on one credit card, then schedule a
monthly transaction estimating total expenses from the card to a dummy
expense account. I guess I could reduce the estimate as actual spending
occurs throughout the month, but I don't bother; I just delete the
estimated expense when I reconcile my credit card account each month.

I also estimate credit card payments (transfers from my chequing account to
my credit card) which match my estimated monthly expenses. I delete the
estimated payment when I make my actual payment.

How changes to GnuCash could help: Again, pulling estimates of various
types of expenses from a budget (e.g., 4 trips to the grocery store, each
of a certain amount) would better reflect my actual spending in general,
but this one's trickier than dealing with utilities. Some items are more
discretionary than others (e.g., books vs. groceries). Some expenses are
highly irregular (e.g., a night on the town). Maybe there could be a way
for each user to specify the level of detail differently.

On the other hand, I could probably just different credit cards for
different categories of expenses, and schedule estimated transactions for
each card separately.

- Sometimes I use a second credit card, which isn't reflected in the system
I've set up with scheduled transactions.

At the moment I just keep track of this in my head, which is a minor
irritation. Another way I could deal with it is by paying the second credit
card right away, before I get a bill.

How changes to GnuCash could help: The budget system could automatically
reduce estimates for discretionary spending based on expenses already
incurred.

- There are a lot of future transactions in my chequing account

I have to scroll up for a long time to reach the blue line dividing past
transactions from future transactions in my chequing account.

How changes to GnuCash could help: it might be nice to be able to compress
the display of future transactions. Alternatively, a keystroke sequence to
jump to the blue line would be helpful.

====

So far, I'm pleased with the way this method has helped manage my cash
flow. It has essentially replaced budgeting for my personal accounts. I get
a month of advance warning of overdraft on my chequing account, which I can
deal with by reducing discretionary spending or by temporarily borrowing
from my savings account or line of credit.

However, I can imagine how a budget system could fine-tune the estimates of
future transactions in the manner I mentioned above ("How changes to
GnuCash could help").

E


On 26 December 2015 at 18:30, Matt Graham <matt_graham2001 at hotmail.com>
wrote:

> G'day GNUCash users,
>
> I would like to improve the way Gnucash implements budgets, to make
> them more useful in a personal context. However, I want to get feedback
> on how people want to use a budget so that this effort can make the
> software better for everyone.
>
> Please let me know (by posting to gnucash-user at gnucash.org) how you
> think budgets can be improved. For example:
> - what information do you want to see on the budget display?
> - Should Gnucash pull in your actual expenditure after the period has
> passed, Allowing you to see actual vs budgeted?
> - what (if anything) should Gnucash do if you don't spend your budgeted
> amount - increase the budget for the next period automatically? Or just
> drop it off?
>
> Thoughts appreciated - I only use Gnucash for personal finances, so
> especially keen to hear what businesses think and would find useful.
>
> Cheers,
>
> Matt G
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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