Alright, so I have an idea about how I would use the savings budget. A side benefit of this approach is that I can use the “available” column to do a check on whether the budget reflects the actual value of my bank accounts. I got the idea from @matt 's post and would love feedback on it. Ok so here goes:
Set Up Two Kinds of Expense Categories
I think the best way is to describe this through an example, so thats’ what I’ll do. I have two kinds of expense categories.
-
True expenses (Things like Gas, Groceries, Taxes, and in my case, Retirement Savings). True expenses are categories that I expect to show 0s in the “Available” Column at the end of December.
-
Goal Categories (Things like Trip to Mexico 2022, Slush Fund, Apple Watch, Minimum Balance). Goal Categories are things that I want to have a positive balance in the “Available” Column, as opposed to a 0 balance. I have one single Category Group that contains all these Goal Categories. The rest of my category groups are considered to be “True Expenses”
- Within these goal Categories, I have two categories “Minimum Balance” and “Slush Fund” whose monthly budget will be zero. I am not trying to save any money towards these categories, I just want to maintain a certain balance.
Mentally Link Goal Categories to Actual Accounts
I have a checking account (AAA Checking) and a savings account (AAA Savings). I designate each of my Goal Categories to a specific account. Multiple Goal Categories can be linked to the same account. So for example,
-
AAA Checking
- Category: Minimum Balance (Goal is to always have 10k in my checking account)
- Category: Slush Fund (Goal is to start the year with 1k in my checking account. Any available balance left at end of year goes towards retirement)
-
AAA Savings
- Category: Trip to Mexico 2021 (Goal is to end up with 5k by Dec 2021)
- Category: Apple Watch (Goal is to have 500 by Dec 2021)
At the Start of the Year “Seed” the Goal Categories so that the “Available” Column equals your actual account balance as of Jan 1
This idea came from this post by @cculber2. So for the AAA Checking account, lets say my current actual balance is 11k. In the Savings Budget, I choose how to divide this money amongst the Categories that are “linked” to this account. So I’ll make two adjustments:
- +10,000 in savings to the “Minimum Balance” Category
- +1,000 in savings to the “Slush Fund” Category.
Wait to make any Adjustments to Savings Budget until after a month has been completed
For example, you should wait until February 3 before you make any adjustments to the January Savings Budget. Waiting a few days after the end of the month should allow any transactions that occurred in January to post to your actual account, and also be imported by Tiller Feeds.
When adjusting the savings budget every month, follow these principles:
- If an individual category is plus or minus a reasonable amount, then just leave it. In other words, if the difference in actual vs. budget is something that you think can still end up as 0 at the end of the year, then just let it ride.
- If you add up all the numbers from the “Available” column for the “True Expense” Categories for the month, it should come out to zero. If it doesn’t, lets say you have a -100 net “Available”, then do a savings adjustment by using slush fund or other category with a significant underspending:
- -100 from “Slush Fund”
- +100 to a “True Expense” category of your choice.
- Do the same for all the “Income” Categories. You want the sum of the numbers in the “available” column for income to equal zero. If not, use the slush fund to balance.
Compare Actual Account Balance to “Available” Column
In my scenario, I budget so that my budgeted income equals my budgeted expenses. In other words every month I expect a cash flow of 0 (I include retirement savings as an expense). So because of this, I just need to make sure that at the end of January my “Available” Income - “Available” Expenses = 0, and then I’ll know I’m balanced.
There’s a catch though, because in my Goal Categories, I am INTENTIONALLY accruing a positive balance in the “available” category. For example, in my “Minimum Balance” Category, I might have 10,000 in “available” funds. As a result, even if the net of all my other expenses and income was 0, when I do the “Available” Income - “Available” Expenses calculation, I would get -10,000. To account for this, the appropriate zero based budget check is to do “Available” Income - “Available” Expenses - “Available” Goal Categories.
So if that is zero, then in theory the sum of the “Available” columns for all “Goal Categories” should should equal the actual ending balance for January in AAA Checking + AAA Savings (without accounting for interest).
Summary
Sorry for writing an extreeeemly long post, but I was trying to be as clear as possible. Would love feedback, or any identifications of flaws in my logic. Also if anyone has any cool ideas on how this might be integrated with the “Savings and Debt” Spreadsheet that would be great to. I’m thinking there might be a neat way to relate the “Available” column for categories that are also in the “Savings and Debt” sheet.