šŸ¤” "Rollover Adjustment" in the new Savings Budget

The way I like to look at it, money that is being saved towards a goal is already as good as spent. By assigning that income to an expense category you are taking it out of circulation. If the goal is abandoned or overfunded, the money can be transferred to another categoryā€™s savings. The running tally doesnā€™t throw off my bookkeeping because at the end of the day itā€™s the actuals that will speak for themselves. My budget and savings are just the guardrails to keep my actual spending in check.

Of course, my view all falls back on the assumption of a zero-sum budget. To that end, I have two income groups: Primary Income and Passive Income. Primary Income is our monthly household salaries, and Passive Income is irregular earnings like savings account interest, statement credits, or private sales. I add irregular income to the overall income budget as it is earned, and then assign it to a category. I feel it gives me a better picture of my goals and their progress. If zero-sum isnā€™t something youā€™re worried about, I see no problem with letting unspent income accumulate in its respective income categories.

2 Likes

Rightā€¦ I look at it the exact same way. The only difference is until I have a specific goal to spend it towards, I donā€™t anymore.

Where this really got me when I held savings in an expense category was moving money to investment accounts. Iā€™d have actuals that greatly exceeded my budget. Itā€™s ultimately not a big deal but I felt like it skewed the reality of what was happening.

My budget is zero-sum in the sense that what I budget for and ā€œspendā€ into categories always balances out. The only difference is that instead of spending into categories that donā€™t have a specific purpose to hold ā€œexcessā€ income, I donā€™t budget it yet. Ultimately this started out of my practice of spending ā€œlast monthā€™sā€ incomeā€¦ Novemberā€™s budget is based on Octoberā€™s income. But in practice with a highly variable income, some sort of ā€œbufferā€ is required. I used an expense category for almost a year before changing it to keeping it in income.

The logical extension of using an expense in that way ultimately gets into a problem with what you consider income. One of the problems I was facing originally is that I would keep an ā€œinvestment savingsā€ expense category. If I bought a stock or something, it would deduct from that. But if I sold something, how do you think about it? I think a lot of people (if they donā€™t just hide those transactions) would categorize it as a negative expense, a credit to that category. Heck, if you think about it you donā€™t really need an income category at all. You could categorize all income as a negative expense. But really if buying a stock is an expense, selling it is income. Buying a house is an expense, selling it is income. So considering those as negative expenses runs into other problems down the line if youā€™re trying to keep a very comprehensive financial picture.

Ultimately both methods can work depending on your needs and purposes. Iā€™ve often thought that some third, neutral type of category is needed but I havenā€™t been able to work it out in my head yet. :joy:

2 Likes

Yeah, investments are the one area that is gray for me. Currently, Iā€™m logging the transfers from my bank to the brokerage account as a Bank Transfer, but any other transactions internal to the brokerage account are an often-unbalanced Investments transfer category. I hide this category from reports. I havenā€™t really put much thought into selling yet, but as long as it stays under Investments, I donā€™t think I need to worry too much. Basically, Iā€™m treating my brokerage accounts as black box accounts with a balance. What goes in and out of the account is balanced, but what happens inside is magic (though still logged). Iā€™m still holding out for more robust investment tracking features in the future.

Iā€™m doing a sort of hybrid right now, categorizing dividend income and reinvestments, and everything else goes into a hidden category. But Iā€™ll probably soon start categorizing all purchases as expenses and all sales as income in order to get a better picture within Tiller of my income and tax situation. Right now Iā€™m still doing a lot of calculating in outside spreadsheets for that.

A post was split to a new topic: Position History/Holding data features & ideas

2 posts were split to a new topic: Viewing New Year in Savings Budget

6 posts were split to a new topic: Comparing Savings Budget Available to Account Balances

Thanks Aronos!

Quick question, how do you use the rollover for income and how do you make adjustments to it? (Budget vs savings adjustments) I would like to hear how any of you make income adjustments regardless of how you use the savings budget!

Iā€™m trying to do more of a zero-based/envelope system. I donā€™t want my end of month adjustments to erase my bad spending habits or affect budget history.

I just tried using a new workflow, where I donā€™t adjust the savings and budget for the current month, but I adjust savings in the following month based off of the savings carried from previous monthā€™s. This makes it so I can see the negative available balances when I look at the previous month. The envelopes start out as zero before adding the current months budgets.

But Iā€™m not settled on what to with income adjustments. I was just subtracting the positive savings values from savings; however, when I have unbuffered income, I realized that I can budget for it in the next month, which reduces the available to zero, and helps fix my budget health.

Does that make sense to any of you? I know I could have explained this further and more clearly.

@randy @matt @matta

Income categories will roll over the same way that expense ones do. When youā€™re budgeting, itā€™s a good idea to work with the income you received the previous month unless your income is very predicable. So say I earned $100 in July. When Iā€™m setting up my August budget, I allocate $100 in spending. What I end up actually bringing in in August doesnā€™t matter until I setup my September budget. If youā€™re doing strict zero-based budgeting, then the amount will be the same as what is shown in the ā€œSavingsā€ column for the month youā€™re working with since that is what came in during July and rolled over (because in July you spent Juneā€™s income.)

I usually do it like this as well.

If you use the ā€œlast monthā€™s incomeā€ method with a strict zero-based budget then this issue goes away and I highly recommend doing it this way. I know it can be tough to start though because it essentially requires that you have a monthā€™s worth of income sitting in your bank account. Now of course you should anyway (and then some) but thatā€™s sometimes easier said than done. If you donā€™t, itā€™s a worthwhile goal.

1 Like

@hild.jay I do this also, it has worked well for me.

Iā€™ll admit I donā€™t have a great system for income budgeting. I think the strategy @aronos described, budgeting with the previous monthā€™s income, makes a ton of sense and Iā€™ll probably start doing that.

Iā€™ve actually adjusted my approach to irregular income in the past few months. Iā€™m no longer adding it to my income budget, leaving the budget to planned, reliable income. Similar to @hild.jay and @matt, I move savings from the irregular income categories, but I do it within the current month rather than waiting for the next month. This allows me to be a little more proactive in balancing income and spending.

1 Like

Iā€™m hoping you can all help me understanding how the Rollover Adjustments work in the Savings Budget. Iā€™ve read a TON of conversations, but I have not found an exhaustive and concise explanation of how the Rollover Adjustments actually work. Iā€™m really struggling to understand this, until this ā€˜clicksā€™ for me, I am unable to use the spreadsheet as I donā€™t fully understand how to properly use it. I think Iā€™ve narrowed down my confusion to Cash Flow, I donā€™t understand what happens when you have positive or negative budgeted cashflow or positive or negative actual cashflow. Iā€™ve created a list of the possible scenarios I can think of that Iā€™d like to understand. I get how rollover adjustments work for income and expenses and how they carry over to the same category the following month. Iā€™m really struggling to understand what positive and negative cashflows do. Does the money just disappear the following month?! Please help!

Can you all please help me to define the affect of these below scenarios?

Cause Affect
If actual income is greater than budgeted income the net surplus will carry over to savings in the same category
If actual income is less than budgeted income the net deficit will carry over to savings in the same category
If actual expenses is less than budgeted expenses the net surplus will carry over to savings in the same category
If actual expenses is more than budgeted expenses the net deficit will carry over to savings in the same category
If monthly actual cash flow is positive (actual income is greater than actual expenses) where does extra money go the following month?
If monthly actual cash flow is negative (actual income is less than actual expenses) where does the negative cash flow go the following month?
If monthly budgeted cash flow is positive (budgeted income is greater than budgeted expenses) where does extra money go the following month?
If monthly budgeted cash flow is negative (budgeted income is less than budgeted expenses) where does the negative cash flow go the following month?
If monthly budgeted cash flow compared to actual cash flow is positive how does this impact rollover adjustments?
If monthly budgeted cash flow compared to actual cash flow is negative how does this impact rollover adjustments?

Hi @randy, @aronos, @matta, @cculber2, and @matt, I know itā€™s been a while since the latest on this discussion. What do you think of my questions above?

Are you talking about columns K and L in the Savings Budget? Or the Rollover Adjustment in the older Envelope Budget (which has been deprecated)?

The general idea is that if you budget doesnā€™t balance (i.e. expense budget !- income budget) then the rollover adjustment has an accrual that is kind of like a loan (that eventually needs to be dealt with). For example, if your expense budget totals $2000 and your income budget totals $1000, you have a rollover adjustment of -$1000 * 3 = -$3000 that you need to eventually pay back.

@randy, Iā€™m not talking about the Envelope Budget, I have never used that spreadsheet, I am only aware that it used to exist, but Iā€™ve never seen it. I am referring to the newer Savings Budget, I am a new Tiller user as of just a month ago. Column K and L are with a group of other columns that are hidden by default. I assumed all of that was background data for the tool that was visible and not something I necessarily needed to look at to perform my budget from month to month. Maybe Iā€™m wrong on that.

I think the more I look at those columns though, maybe it is critical info I need to be looking at? So maybe a tutorial on Columns K and L would help me. There is some info above from @cculber2 that gives some definitions on Net Budgets, Net Actuals All, Net Actuals Savings, and Offsets. I will study those and see if I can piece it together.

I think I understand the loan concept, that looks like Net Budgets L13. In your example of -$1000 * 3, is that for 3 months? Just making sure I understand where the *3 came from.

I do want to make sure Iā€™m not wasting anyones time, so maybe I need to re-read some documentation that is already out there. For this loan concept from the net budgets value, where is it documented how to look at this number and apply it to a budget?

Also, if columns K and L are important to be looking at for balancing a budget, should they not be hidden by default? Should some of the more important values from Column K and L be displayed somewhere in the dashboard?

A few notes about your post, @Lieder:

  • Iā€™m confused by your request about the Rollover Adjustment in the context of the Savings Budget because Rollover Adjustment isnā€™t really a feature or acknowledged in the documentation of the Savings Budget. It is only part of the now-deprecated Envelope Budget.
  • While we often use hidden column on the right to perform background/support calculations, the (hidden) columns K & L in the Savings Budget are there to provide additional metrics on budget health similar to the Rollover Adjustment concept. (The columns further to the right drive the template.)
  • The discussion with @cculber2 in this thread about those metrics is what led to their creation. The documentation here is the best we have.
  • Yes: ā€œ*3ā€ is to account for three months.
  • TLDR; If you make sure your expense budget equals your income budget every month, you donā€™t need to worry about this budget health & ā€œrollover adjustmentā€ stuff. It is just there as a correction factor for people who have imbalanced budgets that lead to phantom savings that are not funded.
1 Like

Hi @randy,

Thanks for helping me calibrate my terminology. :grinning:

I think the fact that this discussion is called ā€œRollover Adjustmentsā€ in the new Savings Budget led me down the wrong path with my terminology. I think I understand now why ā€œRollover Adjustmentsā€ is in quotes. That was the name used in the old Envelope budget, now we are using the term Savings instead of rollover adjustments, but there is some similar mechanics.

Okay, I think Iā€™ve got everything balanced now, net transfers = 0, all transactions are categorized, and all expense budgets equal income budget every month. I have a good Budget Health for each month back to June.

The last piece Iā€™m trying to understand is how does the tool track overspending? Say my net budgets and offsets are zero, so I have good Budget Health, however my actual expenses is greater than my budgeted expenses? It looks like the answer to this is that the overspent categories will show a negative available savings the following month, which will have to be paid back eventually.

I set up a mock budget back to June where I did not include my seed savings and then throughout the subsequent months I have some very large purchases that exceed my monthly income. The Budget Health is good, however according to the numbers Iā€™m going into the red! I think I was originally thinking those Budget Health numbers were there to help me understand more about my Financial Health, that was just a misunderstanding on my part. I think I understand now, those metrics are just to make sure I donā€™t have erroneous data entry that would cause problems with balanced numbers.

If I want to look at overall financial health I probably need to be looking more at things like the Yearly Insights and Calendar Year Cashflow. I guess now I need to think about how I entered my ā€œseed savingsā€ data. I entered this in June as a savings adjustment, which helped to fund some large transactions since then. Because my initial savings account balances were not entered as an income transaction, now my cashflow numbers look bad.

Iā€™m looking for this type of solution but for Excel. Is there any way to get the Savings budget ported to Excel? Or is there already a solution for Excel that exists somewhere else on the site? Iā€™m just looking for Rollover budget categories to be included in the Monthly budget view.

Iā€™m not aware of a rollover/envelope budget built for Tiller in Excel at this time, @mu3484343. Envelope budgets are a little bit challenging to build because, not only do they need to roll forward balances, they require some way of logging envelope transfers which typically requires scripts.

Just my 2 cents from possibly a non-typical user who has only lightly read over some of the posts here. I only want to follow my expenses and budgeting categories, and I donā€™t care to track income and donā€™t care at all about cash flow from month to month. The savings budget, and particularly the Rollover Adjustment feature works really well for my use case as it is right now. My fear is that flagging ā€œerrorsā€ in checking actual income vs expenses may blow up my spreadsheet with errors.

Also, I do have investment accounts that i have linked and like to track for their current value, and those accounts throw off a lot of dividend transactions, as well as a lot of buy and sell transactions. I label them all as transfer as I donā€™t want them showing up in my budget at all, I just think of them as ā€œtransferringā€ savings from one form to another. In other words, my transfers will never add up to zero in any given month.