I set up the savings budget sheet and set up a couple of long term goals. The problem is i transfer my savings money to savings accounts. Eg: college money goes to a betterment account, other savings go into a separate savings account. Ive categorized the outflow from my checking account as “transfers” and the inflow into my savings account as “savings”. For betterment they are categorized as “college savings”. They both show up as negative in my actuals, messing up the available amount as budget - (negative saving amount), thus double counting the budget and inflating my savings for the next month. See screenshot - it is saying i have $23k available when i saved only $5400 to be added to last months savings. It is counting the budget amount in that 23k. How do i fix this without changing my workflow. I like to send my money to these different accounts as some of them are high yield or growth accounts.
The actual movement between accounts should be “Transfer” types on both sides. It’s a best practice that your transfers in your Transactions sheet should net out to zero. The Budget line is the correct (best practice) place to assign money to the category. There are technically other ways to do it but they are error-prone and more difficult to manage.
so I have assigned the movement from my checking account as “transfer”. But when it is received in the savings account , it is categorized as savings (+ve). Am i right in reading that whats “available” is my savings for the month? If so it is inaccurate right now. How do i reflect it in the budget so that the previous savings (11200) is added to what is saved which is 5400. Right now my savings is showing as 11200+(6550-(-5400)) and thats inaccurate as the budget is being counted in?
I just want to see what i saved this month and add that to my last months savings
anyone? i really need help here. I decided to move from the envelope budget to this one thinking this will be easier with compatibility to other sheets and i wanted to see monthly trends of savings category but if the savings show as inaccurate , it wont be useful useful.
Again these should both be transfer types. If you allocate funds to the category in your budget, and then also assign the transfer to the category, you’re essentially allocating more funds to the budget, in essence doubling the “available” over what you intended.
“Available” is Savings (what was “left over” from previous months) + Budget (what you allocated this month) - Actual (what you withdrew this month). So yes, if you’ve allocated and assigned everything correctly, it is your current total savings for that category.
However, if you assigned the positive transfer to this category then you’ve effectively allocated money to it. This can work if you also assign the originating negative transfer to the category that you’re allocating the money from, typically income. But if you mark one side as a transfer and the other side to the category, then you basically “invented” money that doesn’t exist.
Keep it simple: For the actual transfer of funds from one account to another, mark them both as a transfer type. Allocate money to the category in your budget, not in a transaction.
Thank you. I did change both to transfer (money out of the checking account and money into the savings account) and the available amount double counting the budget is fixed. So now it reads as Available =11200 + 6550-0 (as the actuals are all zero). While the available amount is fixed, i am still confused how this helps me knowing whether i saved enough this month or which month i dipped in the long term goals category. Like i can can always set my budget as 6550 but that doesnt mean that i can always afford to transfer 6550 to my savings accounts. Some months it may be less because of unexpected expenses. This way i wont be able to actually see that i didnt match up to my budget. Are you suggesting during those months, i just manually adjust the budget amount to maybe 5000 or whatever amount i actually transferred?
Also another question is if i add an account like “Betterment” as my savings account how do i categorize the positive dividends or any additional profit that comes into that account (shares repurchase or something). Do i classify that also as “transfer” or should i classify that as savings? Do you recommend not adding those kind of accounts?
Right, so the budget is more about your intentions. You intend to allocate $X to groceries, $X to savings, etc. As long as you are only allocating money that you’re actually receiving, you’ll be fine. But there is another sheet that will give you kind of a “reality check” to make sure you’ve really saved the money as you intended. It’s the Savings and Debt sheet and works alongside your budget sheet using your actual account balances to say, “yeah, you really have the money you’ve allocated for these goals” or not.
There are multiple ways to handle this. What is probably the “most correct” (and least used) way is to categorize all purchases as an expense, and all sales as income. Dividends are definitely income. A dividend reinvestment would be another purchase and thus an expense. You could even go so far as to categorize sales into five different income groups, Long Term Capital Gain, Short Term Capital Gain, Long Term Capital Loss, Short Term Capital Loss, and Untaxable Income. (You could also achieve a similar breakout using tags in your Transaction sheet.)
A lot of people don’t want to deal with these types of transactions though. Another option is to create a category called something like “Investment Activity” and mark them as Hide. Then they sort of “disappear” from the budget but the balances are still tracked for Net Worth calculations.
You can also adopt a hybrid solution, which is what I do. Some types of transactions I hide, some I categorize though I’m probably going to try something closer to the first solution starting in 2021. It would definitely make tax time easier.
I think it’s helpful to think of stocks or other investments as you would any other type of property. If you bought a car, that’s an expense. If you later sold it you have money coming in, so that’s income. It’s easy to not think of it as income because you’re almost certainly going to get less than you paid, but it’s money coming into your account that you’re going to spend on something. There are other ways to handle transactions but in my opinion, this is the most correct.
Thank you! this makes a lot of sense and ill definitely check out the savings and debt sheet. I like the approach of just allotting one big category to the investment accounts and hiding them temporarily but having a paper trail in the same sheet.