How to categorize money that is used to purchase investments

quixter

There may be an obvious answer to this but how does every categorize money from their checking account used to buy stocks etc. I've been using investment expense just because of a lack of figuring out how I should categorize it.

Tom Young

What version of Quicken are you using?  If it's the Starter version, that program has no built-in capabilities to account for investments (specifically, "securities"), while the more expensive versions do support those investment activities.

Assuming we're talking about "investments" that are occurring through a broker, the payment of money out of a checking Account would be accounted for as a transfer in Quicken from the checking Account to the brokerage Account:

Debit (increase) Cash in {Broker Name} Investment Account    $XXX
Credit (decrease) Cash in {Bank Name} Checking Account       $XXX

then the actual purchase of the security inside the brokerage Account would reduce the cash in the brokerage Account and be replaced with an equal amount (in dollar value) of whatever security was purchased, using the "Bought" (Buy) action.  Within the Account those two entries would look like this:

There is no "Category" per se for transfers.  In Quicken the word "Category" is reserved for what accountants would call "income and expense accounts."  A transfer is not an expense nor an income, it's simply moving money between your Accounts in Quicken.

Tom Young

"The thought of manually keeping track of my sofi transactions is daunting but maybe thats the proper solution. "

That's really the only solution if you want to keep up to date on how your investments are doing. 

If you simply want to track the money you're spending on "investments" you could still set up Investment Accounts for other financial institutions that don't allow for downloading of information and transfer the money into those Accounts, where it would just sit.  But that's not what most people want to do, they want to see "how they're doing" in the market.

Jim_Harman

To expand on @Tom Young's explanation, if you want to track or report on the amount you have transferred to or from your investment accounts, you can use the transfer account name in [brackets] in place of a Category. In the report customization, you will see the other accounts at the bottom of the list of Categories.

Tom Young

What version of Quicken are you using?  If it's the Starter version, that program has no built-in capabilities to account for investments (specifically, "securities"), while the more expensive versions do support those investment activities.

Assuming we're talking about "investments" that are occurring through a broker, the payment of money out of a checking Account would be accounted for as a transfer in Quicken from the checking Account to the brokerage Account:

Debit (increase) Cash in {Broker Name} Investment Account    $XXX
Credit (decrease) Cash in {Bank Name} Checking Account       $XXX

then the actual purchase of the security inside the brokerage Account would reduce the cash in the brokerage Account and be replaced with an equal amount (in dollar value) of whatever security was purchased, using the "Bought" (Buy) action.  Within the Account those two entries would look like this:

There is no "Category" per se for transfers.  In Quicken the word "Category" is reserved for what accountants would call "income and expense accounts."  A transfer is not an expense nor an income, it's simply moving money between your Accounts in Quicken.

quixter

Hi Tom, I'm using premier. That does make perfect sense for Investment accounts I currently track in quicken like Fidelity.I have a few accounts that I don't. I have yet to set up outside accounts like Sofi investments because you can't download into quicken. The thought of manually keeping track of my sofi transactions is daunting but maybe thats the proper solution.

Tom Young

"The thought of manually keeping track of my sofi transactions is daunting but maybe thats the proper solution. "

That's really the only solution if you want to keep up to date on how your investments are doing. 

If you simply want to track the money you're spending on "investments" you could still set up Investment Accounts for other financial institutions that don't allow for downloading of information and transfer the money into those Accounts, where it would just sit.  But that's not what most people want to do, they want to see "how they're doing" in the market.

Jim_Harman

To expand on @Tom Young's explanation, if you want to track or report on the amount you have transferred to or from your investment accounts, you can use the transfer account name in [brackets] in place of a Category. In the report customization, you will see the other accounts at the bottom of the list of Categories.

quixter

Thanks to both of you that does give me a way to handle both scenerios

NotACPA

In QWin, "categories" are used for Income or Expense items.  I.E., after you record income or an expense, your net worth is different.  You're either richer (income cat) or poorer (expense cat).

A transfer (between any 2 Q accounts) leaves you neither richer nor poorer.  You've just moved money from one pocket (say, checking)  to another pocket (say, Investments).

Likewise when you actually buy those securities, you're neither richer nor poorer.  You just moved the value from cash to the security.

AS the security changes value, you'll hopefully become richer ... but certainly can become poorer.