I have a category ‘Saving’ to track my saving goal. Generally, I would use this category for transactions such as transferring money from checking account to a saving account or brokerage account. However, there are certain transaction types that in my view need to be categorized as both ‘Income’ and ‘Saving’, for instance, my 401k contribution. I would like to track these toward my savings. I also want to include these transactions to track my overall income as well. How would you handle this type of scenario. What approach do you take?
You might consider this approach:
Set up two categories; one called Savings Out and the other called Savings In. When you move money from checking to savings, code the money leaving your checking account as Savings Out and the money coming into your savings account as Savings In. Regarding category type, you can code both as transfer or one as expense and the other as income. As long as both accounts are linked, the two Savings categories should net to zero.
When you spend these savings, there are many options as to coding the transaction depending on what you want to see.
When you get your paycheck, you will need to use the splitter tool to show your gross income and all your payroll deductions. This is how you will get your 401k deduction/contribution to appear in the transactions tab. Code it as Savings Out. If your 401k plan account is linked, then code the 401k deduction/contribution coming into that account as Savings In. This coding my vary based on what shows up on the transactions tab.
Blake
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I’m new to all of this but have been thinking about how to deal with savings… one potential solution for this is to create a manual bank account called “Virtual Bank”. Then add a manual transaction for the value of the 401k contribution, which would be categorized as income going to “Virtual Bank”. Basically you are accounting for the income of the 401k contribution because you technically are getting it as gross income. Then you would need to do a second Manual Transaction from “Virtual Bank” to the 401k account which would be marked as either a transfer or “saving” category depending on how you prefer.
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Hey, let’s talk through this. What you propose will work but you are spending lots of time adding manual transactions. What if I told you that you can accomplish what you want with no manual transactions? How? Use the splitter tool to get your 401k contribution into your income. Say your net paycheck is $1,000 and there is $200 taken out for the 401k. Split the $1,000 paycheck transaction into $1,200 and ($200). Call the ($200) what you want (maybe 401k contribution) and code it to expense. Link the 401k plan account to Tiller and code the incoming 401k contributions as transfers. I recommend everyone split out their paychecks. See where your salary is going. Below are the categories I use with the two paychecks I deal with. Yes, that’s 10 splits and 14 splits. PD = payroll/paycheck deduction.
Cheers,
Blake
| PD - Federal Tax W/H | Paycheck Deductions | Expense |
|---|---|---|
| PD - FSA | Paycheck Deductions | Transfer |
| PD - Kaiser Health Premiums | Paycheck Deductions | Expense |
| PD - Medicare Taxes | Paycheck Deductions | Expense |
| PD - Oregon Tax W/H | Paycheck Deductions | Expense |
| PD - Oregon Transit Tax | Paycheck Deductions | Expense |
| PD - PERS | Paycheck Deductions | Expense |
| PD - Social Security Taxes | Paycheck Deductions | Expense |
| PD - Union Dues | Paycheck Deductions | Expense |
| PD - WC Assessment | Paycheck Deductions | Expense |
| PD - 401(k) | Payroll Deduction | Expense |
|---|---|---|
| PD - AD&D | Payroll Deduction | Expense |
| PD - Dental | Payroll Deduction | Expense |
| PD - ESPP | Payroll Deduction | Transfer |
| PD - Federal Income Tax W/H | Payroll Deduction | Expense |
| PD - FICA | Payroll Deduction | Expense |
| PD - Medical | Payroll Deduction | Expense |
| PD - Medicare | Payroll Deduction | Expense |
| PD - Oregon Income Tax W/H | Payroll Deduction | Expense |
| PD - Oregon Misc | Payroll Deduction | Expense |
| PD - Oregon Transit | Payroll Deduction | Expense |
| PD - Oregon W/C | Payroll Deduction | Expense |
| PD - Supp Life | Payroll Deduction | Expense |
| PD - Vision | Payroll Deduction | Expense |
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Ah this is awesome! Great to find someone else who is accounting for the gross paycheck! Thank you thank you for the thorough explanation . One question on workflow, so every paycheck you do all these splits? One potential bonus about the manual transaction is that it seems like there might eventually be a way to create recurring manual transactions so that you’d only have to set it up once.
Also, can you say more about coding the 401k deduction as an expense? If you do that then transfers wouldn’t add up to zero since you are only coding the transaction that credits your 401k account as a transfer.
Ultimately I’m trying to find a way to really easily calculate my savings rate, and seems like either I do that by treating savings as its own expense category, or by tagging transfers as savings
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I am glad you are happy.
I suspect many users split out their paycheck.
Yes, I do that split every paycheck.
I think manual transactions will make things harder but you need to make that call.
Why do I code the 401k as an expense? Basically, user preference. The 401k above is a Roth. But if it were a traditional, I would do the same. I like to see the expense on my P&L. In the 401k account, I would code all in’s and out’s as a transfer. When the cash comes back into my bank at retirement time, I would code traditional to income and code Roth to transfer.
The nice thing is that transfers do not need to net to zero.
I did this a few months ago. An interesting project of mine. Maybe it helps.
Cheers,
Blake
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@Blake Thanks for the explanation on expense vs. transfer. The nice thing about your example is that if you include what happens in retirement, where the transfer from 401k to checking account becomes income… its effectively balanced out by the “expense” of saving years earlier. I like thinking about it that way.
Another thought on the splitting paycheck. I’m just trying to think of ways that the process could be most efficient. Assumming your paycheck is the same, it might be more efficient to have a template .csv file with all the split categories, and then import the csv (With only a change in dates) every time you get a paycheck. This would still be the manual transaction route, but once you create the spreadsheet it would just be one simple upload every paycheck. I’m not sure how well the .csv importer works but in theory this could save time.
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This is a good way to look at it but it will never balance. Obviously, the plan is to invest well and live long enough so your “income” exceeds your “expense”.
Probably too involved for me.
Blake
I know this thread is pretty old, but on the concept of 401k expense and then a 401k transfer category how does this work if the contribution shown in the 401k includes the company match?
Thanks,
Does splitting the transaction into income (company match) and transfer (your contribution) components help, @fost9508?