Why is saving considered an expense

STUDIO_809

I would like to know why saving is considered an expense since it comes from the income category and it helps grow my net worth. It seems like savings should be a neutral category.

Jim_Harman

Where are you seeing this? I don't see Saving among QWin's default Categories.

Normally if you have a savings account in Quicken, money that is deposited in the account from outside of Quicken would have an appropriate Income Category. This will increase your net worth.

If you are moving money from another account into a savings account that you are tracking in Quicken, you would enter that as a Transfer, which has no Category and does not affect your net worth. 

Boatnmaniac

If you used a generic category, such as, Deposit to Savings or IRA Contribution, it is considered to be an expense because it reduces an income (like paycheck deposit amount) or an asset (like a checking account balance).

If you have your "savings" set up as an account in Quicken and the money deposited to the savings account came from another account or from a Paycheck Reminder you can change the transaction to a transfer (the account name inside brackets like [Savings Acct]) and it will not show up as an expense.  It will be treated like a "neutral category".

STUDIO_809

Ok the quicken Mac has payroll check in the income category of the budget and saving in the expense category. This is the default settings. When I deposit my paycheck it goes in the income category of the budget, I save 10% of my incomes. When I make the money moved from checking to savings it’s fills the savings budget (goal) which is found in the expense section for the budget? So why is it an expense?

Frankx

Hi @STUDIO_809

In general accounting or bookkeeping terms - "saving" is not considered an expense.  Rather it is an activity or process through which one might use to put funds aside for a specific purpose, or for future use.

When I first saw  your post, I wasn't sure where you could be seeing this in Quicken, so I checked the "Category List" in my main Quicken datafile to make sure there wasn't such a "standard" category there with that specific name - there was not.  I then went to my latest "test" datafile, which is a much more recent file I setup just to test transactions and reports related to my involvement in the Quicken community.  And sure enough - in that test datafile there was/is a category entitled "Deposit to Savings" which is listed as an Expense category in the "Personal Expenses" group.  Also interesting about this entry in the Category List is that it has a "description" that reads "A deposit or transfer to your savings account."

I am very surprised and don't have an answer as to why this category exists or how it happens to be only in this newer datafile.  I also noted a few other categories that don't make sense - such as "Cash & ATM".

But, all that being said, my view is that there should not be a category for "saving" or "savings" in the list, because - as I noted above - savings is not a category; it is an activity, and I would suggest that you not use this category and perhaps delete from the list.

Get back to me with any followups.

Frankx

Boatnmaniac

@STUDIO_809 - Did you mean to post this as a Quicken Mac question or a Quicken Windows question.  It is currently posted as a Quicken Windows question and it is tagged for both Mac and Windows.  Please clarify so others with the right expertise can weigh in here.

Jim_Harman

Update:

I now see "Deposit to Savings" as one of the default Expense Categories in a new QWin file.

I think you should only use that Category to track money you are sending to an account that you are not tracking in Quicken. If a savings account is tracked in Quicken, you should treat money sent there from other Quicken accounts as a transfers.

It appears that Quicken automatically adds default Categories depending on what types of accounts you have set up in the file. It also looks like Categories are added if you are using the Paycheck Wizard. For example, in a test file that includes Banking accounts, I see an Income Category "Money Deposited" that is not present in another test file that includes only investing accounts.

STUDIO_809

here is screenshot so you can see the saving is counted as an expense. I am using the Mac version.

Boatnmaniac

Ah, so this is a Budgetary question, not an actual transaction.  I can understand how a savings account in a budget could be viewed as an expense if the savings account is not in the budget as a spendable resource.  In this case you are removing cash from a spending account and setting it aside in an account that is not be used for spending.  In this regard, I do agree that it should be classified as a budget expense.

On the other hand, if the savings account will still be included in the budget as being spendable, then it should not be classified as being an expense.

In other words, when it comes to Budgets, it all depends on what the intent of the account is. 

In the Quicken Windows Budget tool accounts & categories can be selected for inclusion or deselected for exclusion. 

I am not sure how that works in Quicken Mac.  So, I have requested a Moderator to recategorize this post thread under Mac, instead of under Windows.  Hopefully that will help get someone with Mac expertise to jump in here.

garysmith87

Both Quicken products, Mac and Windows, are fully customizable for the user experience.

Therefore, pick out or create ANY category you deem necessary.  If you're transferring money from a checking account to any savings type account, then that's a transfer...and not an expense.

In Quicken Mac, make sure in the register views you have customized to register to show the "Transfer" field.  Then, just select the account you are transferring money to from your checking account.  The Category field will then "pre-fill" with the correct transfer account... and a corresponding entry will automatically be made in the savings account.  

As to the BUDGET module, once again the budget is customizable.  You can include or exclude transfer accounts in your budget as you see fit.  Some people want to see Cash Flow in a budget.  Others do not.  It's up to you.

No one is forcing you to use Quicken's "standard" categorization or budget categories.  

Despite what you may think, Quicken does require some manual setup and intervention on the users part.  

STUDIO_809

Ok @Boatnmaniac the question is “why” so why is it an expense. Quicken doesn’t have a YNAB equivalent on YouTube to explain the budgeting theory or philosophy. Now following the default settings for saving as an expense it’s creates problems for future expense such as a car repair. I sent aside X amount of money per month for a future expense. When the time arises as it did last week, I take money from my car savings account (sinking funds) to pay for a repair I knew was coming. Now this month I am over budget, (WTF?!?!) that is what I do not understand? In my budget for 2021 I am over budget in 8 of the 12 months it’s looks like I’m going in crazy debt at first sight but in reality I’m debt free. If I delete the savings budget (goal) and just transfer money into my savings account then maybe just maybe everything will balance out.

jacobs

First, these appears to be categories you created, not Quicken defaults, correct? Nothing wrong with that; I just want to make sure I'm understand what I'm seeing correctly.

Next, I'm curious how you are using this category. If it is it just in your budget, then it would always show you missing your budget -- so I'm guessing you're using it on actual transactions. Is that right?

Quicken doesn't have the YNAB approach to "envelope" budgeting, or allocating income to multiple buckets for future spending. So however you're trying to emulate that, you're fighting against the way Quicken is designed to work. Again, there may be a way to make it fit your needs, but we need to understand what you're trying to do.

As you explained it above, you budgeted a certain amount for car repair. Now you had a car repair expense. How did you enter that expense in Quicken? Normally in Quicken Mac, you would enter a payment to XYZ Autos in your checking account (if you wrote a check) or credit card account (if you charged it), using the auto expense category. In your budget, you would see this actual spending compared to your budgeted spending.

But you're trying to use a sinking fund savings account, so how are you putting money into and taking money out of that account? When you deposit your paycheck, it increases your savings account. You say you're setting aside money each month for future expenses; howe are you doing that? If you transfer money in Quicken from your checking account to a savings account, then your checking account won't match the balance in your checking account in the real world. So how are you putting money into the savings account?

Or are you not using an account in Quicken, and trying to do this with categories? Are you doing this in a split in your paycheck deposit. Normally, you;'d enter a deposit for the net pay your received, have one split for your gross pay, and then several additional splits for your tax deductions (which are expenses). Are you creating a split line for savings here? If so, how are you doing so without messing up the transaction amount?

If you explain what you're doing to create savings and to pay expenses out of savings, we can better advise you. 

Boatnmaniac

OK, now I understand that the intent of the savings is to fund future expenses.  In this case the intent is not that the savings is an expense, it's just a reallocation of funds between accounts.

Did you use a general category for "Savings" or did you use a transfer category?  If you use a general category for taking money from a paycheck or from a spending account the money essentially goes into a hole and disappears so in Quicken's logic it is an expense, just like what happens with any other general category expense transaction.

If the transaction is set up as a transfer it should not show up in reports or in Budget as an expense...it should be that neutral transaction that you mentioned.  And to make sure it shows up in Budget correctly, make sure you have the savings account set up in Quicken (so you can use a transfer category instead of a general category) and make sure both the savings account and transfers to and from it are selected to be included in your Budget.

Regarding Budget goals:  I don't use them so I'm really not able to provide comment regarding them.  All I know is that if you do the transfers to/from your savings account and include the savings account and the transfers in your Budget it should balance out better for you.