I’m twisting my brain in knots on how to actually use this. I’ve got it all set up and understand the concept of rollover, but I’m trying to figure out what the reasons will be for me doing a budget or a savings adjustment in a given month. I should also add that I’m attempting to do a zero-based budget. So that Income - Expenses = 0. I include savings as expenses. Here’s a few scenarios that illustrate how I think I’m supposed to be using the savings budget, please let me know if I’m doing it right!
Scenario 1: I’ve got a gas budget of lets say $100 a month. In May I spent 120. So when I’m looking at my savings budget, I’m 20 in the red. Because Gas is a variable expense that I expect to even out over the entire year, AND the 20 dollar overage is within the range of expected monthly gas bills, then no budget or savings adjustments needed here.
Scenario 2: In the same gas category I fluctuate for an entire year, sometimes over, sometimes under. At the end of the year though, I’ve spent 50 dollars more than I’ve budgeted for the entire year. The “Available” Column for December reads -50. Because the year is now up, and I want to start a fresh budget, I will make a budget or savings adjustment. I will add +50 to the December gas budget and do a -50 from another budget, preferably from the Transportation Group. This seems reasonable to me - to do an end of the year settle up, and have all your spending categories “available” column = 0. But does it even matter?
Scenario 3: In this scenario, I have an income or an expense that I truly do not expect to be repeated and did not account for in the original budget. Like lets say I won 5k in the lottery in May. I would increase the income budget by 5k for that month only. Then I would increase the expense budget by 5k as well (just for May). Similarly if I spent 300 in May on gas because I had to take an emergency cross country trip to help with family ,that overage is beyond the normal range of variability. So I might increase the gas savings for May, and decrease the savings in my “slush fund” category.
Scenario 4a: In my budget I save 100 a month for a Trip to Mexico at the end of the year. If I want to do zero based budgeting, I have to actually make a transfer of 100 from my checking to a savings account, and code the transaction of -100 in my checking as an expense for the category “Trip to Mexico.” The transaction of +100 in savings gets marked as transfer. In the savings budget, it will say 0 “Available,” since I budgeted 100, and “spent” 100. When it comes time to buy a plane ticket, say for 300, I’ll have to code that as an expense in a different category. Something like “Trip to Mexico - Expense.” If it was the same category as my savings, then my actuals would be all messed up.
Scenario 4b: I budget 100 a month for a Trip to Mexico at the end of the year. If I make a transfer of the 100 from checking to savings, I code both transactions as transfer. My savings budget will show +100 in the Available column. Through October, I’ll have +1000 in the Available Column. If I buy a 300 ticket, I’ll code that transaction as an expense to the “Trip to Mexico” category, and in November I’ll have 1000 savings+ 100 budget - 300 expense = 800 available. This is ideal, but it totally messes with the zero based budget. For example, lets say budgeted cash flow is 0, and in the Month of may, my actual expenses are exactly the same as my budget expenses… but since I didn’t mark my 100 savings for the Trip to Mexico as an expense, it will show I have a +100 cash flow for the month. I guess I could do a quick calculation and every month take the actual cash flow, and subtract any savings accrued in my “Goal Savings” group that would include things like “Trip to Mexico” or “Apple Watch.”
Scenario 5: Would love feedback on this one. I’m thinking I will have a category “Slush Fund” as a goal category like in the above scenario. I budget 1,000 a month in this category. In general this is the category that I will tap into if I need to increase budget/savings for another category. In the gas example, I would add 100 in savings to gas, and -100 in savings to the slush fund in a given month. This would also be the primary source for balancing out things at the end of the year. What I’m thinking for this one is, I’d love for the “Available” number to equal my actual savings account balance at the end of every month. Is this possible? You’d have to account for interest, and add savings at the first month of the budget to reflect the accounts starting balance.