Budgeting cashflow (and not simply income and expenses, Q Mac)

Bourbon

Hello. Every month I transfer money into a separate account as a reserve of cash in order to pay out property taxes, hydro, renovations etc etc. When comes the time to pay my taxes, I simply transfer that amount back into my checking account and pay from there. The issue I have is that this makes it difficult to understand budget management in the sense that my income is all of a sudden much less than my spending, I have to look in each category to understand what happen this specific month, sometimes having to export into Excel. Are there any members that have a suggestion to go about this?

jacobs

@Bourbon I'm confused. If you know your tax bill is due in March and May, you should budget the anticipated amount in March and May. When your actual spending in those months matches your budgeted amount, you will not be in the red; you will be on target in those months and year-to-date.

Of course, your "bottom line" (income minus expenses) will be negative in months with such large expenses, just as it will be positive in other months when you are cash-positive and saving for the biggest expenses to follow.

In terms of your budget, you would typically focus on year-to-date actual and year-to-date budget to gauge how well you are actually doing relative to your budget. Unfortunately, Quicken Mac has no way to print a simple year-to-date report, and I dearly hope the developers will address this because it's been something budget users have complained about for years. But you can view YTD budget versus actual on the screen, and if you're a little adept with spreadsheets, you can export the budget and get totals for YTD budget versus actual you can print.

If you're trying to take things to the level of doing "envelope budgeting", where you earmark your savings for future expenses, Quicken doesn't really support budgeting in that way. Some people use various work-arounds with dummy accounts or adjustments, but I'm not in favor of creating fake transactions for the purpose of tracking how I'm doing relative to my budget.

I'm not clear why you're creating adjustment transactions. When you transfer money from checking to savings each month, you said you're categorizing them as expenses, and then when you pay the actual bill, you're categorizing that as an adjustment? Why not this instead: make your transfers to savings simple transfers; when you pay the large bi-annual bill, record that as a regular expense. In your budget, you'd budget the full amount of the expense in the months it will occur. As for your transfers to savings, if you want track that in your budget, you can add selected transfers to your budget. In the budget Select Category list, scroll down to find the Transfers In and Transfers Out categories. you might add Transfers In:From Checking or Transfers Out:To Savings in your budget, so you can budget for your monthly transfers, and compare them to actual.  

Chris_QPW

It think the problem is stated right in the tile “Budgeting cashflow”.

Budgeting and cashflow are two different operations.

Quicken’s budget is a budget, not cashflow, if one tries to turn it into a cashflow system you are going to fail, or at best create a very complicated workaround.

Some people use transfers for some very special cases like paying a mortgage in their budget, in reality transfers shouldn’t in budgets because they are just moving money from one pocket to another.  If I have a budget to spend $300 a month on groceries, it doesn’t matter if the money came from a credit card, checking account or savings account.

Projected Balance is about cashflow.  I don’t that Quicken Mac doesn’t have them, but Savings Goals is another system that people tend to use for what you are talking about.

Austin@

@Bourbon, I do something similar to what you are trying to achieve. I'm not saying that this is the best way to handle the situation or that there aren't other ways, but I've found this works for me:

Like you, I also have a separate (real-life) account set up where I transfer set amounts of money to on a monthly basis to save up for bills or other expenses that are not paid on a consistent monthly basis. When I transfer money from my main checking account into this other "holding" account (or sinking fund, as some refer to it), I use the "Transfer" column to record the transaction as a linked transfer. I also tag the transaction with the name of what I'm saving up for (ex. Travel Fund, Property Taxes, Auto Insurance). I can then run a report that lists out each tag and the balance of of each within that account. I'm essentially creating envelopes or savings goals just by using tags and report.

Now on to the budget side of things: When you configure categories in your budget, you can add transfers to an account as an expense, and transfers from an account as income. I set my budget up to treat transfers into the holding account as an expense, allowing me to budget a consistent amount of money that I am moving into that account each month to save for irregular expenses. When it comes time to spend money from that account, I transfer it back to my main checking account (using a linked transfer, and again applying the associated tag), and then I treat money transferred from my holding account into Checking as income on my budget. That way the income that my budget sees for a given month will be higher to accommodate for the unusually high spending that is associated with an irregular bill.

Because the budget has been padded with additional income (money being transferred from the holding account back to checking), I can then bump up the amount for the actual expense category on the budget, and voila: all the numbers balance out without going into the red even though I'm spending more than usual that month. It helps me know that the money I am spending each month is either available in my checking balance or being covered by previously budgeted funds from my holding account, thus helping me always know that I am not spending more than I am making.

I understand that this method requires more tinkering with the budget/transfers between accounts than many people may want to mess with or attempt. So again, I'm not suggesting this is a perfect workaround or that there aren't drawbacks to using Quicken this way. Just that it works for me and my needs  

Quicken Jasmine

Hello @Bourbon,

Thank you for contacting the Community with this question. 

In order to further assist you, I require some more information. First, are we dealing with investment transactions? Second, when you discuss transferring money are you referring to doing so outside of Quicken, and are you trying to track that?

I look forward to hearing your response. 
Quicken Jasmine

Bourbon

Hello Jasmine, I realize my explanation requires more detail.

My goal here is to keep the budget function simple and visually in line with current functionality of what your software offers, and so COSTLY bills create an issue with the current functionality of Quicken's budget. Let me try to explain, God I hope I'm in the left field somewhere and that you have a better way that I.

Physically with my Bank Accounts (not Quicken accounts), I transfer money monthly from a checking to savings account in order to build a reserve in order to pay off COSTLY bills that can't just be covered by my bi-monthly pay check (i.e. taxes), of course without use of credit in any way or form. In Quicken I mimic the exact same thing as per my Bank Accounts, every month I transfer money from my Quicken checking to savings account.

When the time comes to pay the residential taxes (twice a year in my case, i.e. March and May), I would off course pay the bill through my bank account, i.e. pay a bill of a couple of thousands of dollars. In Quicken, I input a transaction under category "Home:Taxes" for that same amount.

On a budget's perspective in Quicken, this way of proceeding makes it difficult to easily track and follow a budget on a monthly basis. The reason is that budgeting is based on expenses that are structured through use of "categories", and so the "Transfer" part from one account to the other is not part of the process. The effect is that every time a huge expense passes through, the top part of the Budget report in Quicken under title "Summary - Income/Expense/Difference" goes immediately in the RED, i.e. "Difference" under "Summary" is Negative because you spent more than you made that month! Although I spend more that given month, I actually buffered for that expense accordingly through monthly transfers.

Now using budget function in Quicken to make sure you on track on a monthly basis becomes even more confusing when you buffer for let's say half a dozen reasons such as home renovations, family vacations, electricity bills, unforeseen costly car repairs, and any expenses that can be planned ahead, because they can not be covered through your regular by-monthly income, without use of Credit which is my goal. I find myself trying to isolate all the categories in "RED" that were actually planned out vs a category that I actually overspent on because I did not respect my monthly budget. In a case where I actually overspent, I would need to reduce it the following month so I don't bust my yearly budget. Being in a position where I can look at my budget in a comprehensive way so that at the end of the month, the quarter and or the year, I hit my target!

The only way I found to fix this (just this week-end), is that when each month I transfer money from my checking account to my savings account on my on-line Banking services, in Quicken I actually pass a transaction for each category i.e. "Home:Taxes" on a monthly basis in my checking account. In my Quicken Savings account I simply pas an "Adjustment" transaction increasing my savings account amount so it remains in Sync with my real banking savings account. When comes time to pay the big bills, I just do a negative adjustment in my savings account. When I look at the budget report, it is less confusing.

There must be an easier way..... but I haven't yet found one that helped me simplify and actually made good use of the budget function in Quicken.

jacobs

@Bourbon I'm confused. If you know your tax bill is due in March and May, you should budget the anticipated amount in March and May. When your actual spending in those months matches your budgeted amount, you will not be in the red; you will be on target in those months and year-to-date.

Of course, your "bottom line" (income minus expenses) will be negative in months with such large expenses, just as it will be positive in other months when you are cash-positive and saving for the biggest expenses to follow.

In terms of your budget, you would typically focus on year-to-date actual and year-to-date budget to gauge how well you are actually doing relative to your budget. Unfortunately, Quicken Mac has no way to print a simple year-to-date report, and I dearly hope the developers will address this because it's been something budget users have complained about for years. But you can view YTD budget versus actual on the screen, and if you're a little adept with spreadsheets, you can export the budget and get totals for YTD budget versus actual you can print.

If you're trying to take things to the level of doing "envelope budgeting", where you earmark your savings for future expenses, Quicken doesn't really support budgeting in that way. Some people use various work-arounds with dummy accounts or adjustments, but I'm not in favor of creating fake transactions for the purpose of tracking how I'm doing relative to my budget.

I'm not clear why you're creating adjustment transactions. When you transfer money from checking to savings each month, you said you're categorizing them as expenses, and then when you pay the actual bill, you're categorizing that as an adjustment? Why not this instead: make your transfers to savings simple transfers; when you pay the large bi-annual bill, record that as a regular expense. In your budget, you'd budget the full amount of the expense in the months it will occur. As for your transfers to savings, if you want track that in your budget, you can add selected transfers to your budget. In the budget Select Category list, scroll down to find the Transfers In and Transfers Out categories. you might add Transfers In:From Checking or Transfers Out:To Savings in your budget, so you can budget for your monthly transfers, and compare them to actual.  

Chris_QPW

It think the problem is stated right in the tile “Budgeting cashflow”.

Budgeting and cashflow are two different operations.

Quicken’s budget is a budget, not cashflow, if one tries to turn it into a cashflow system you are going to fail, or at best create a very complicated workaround.

Some people use transfers for some very special cases like paying a mortgage in their budget, in reality transfers shouldn’t in budgets because they are just moving money from one pocket to another.  If I have a budget to spend $300 a month on groceries, it doesn’t matter if the money came from a credit card, checking account or savings account.

Projected Balance is about cashflow.  I don’t that Quicken Mac doesn’t have them, but Savings Goals is another system that people tend to use for what you are talking about.

Chris_QPW

As I think about your case, Savings Goals aren't needed.  Savings Goals are to do what you are doing, but in virtual accounts.  As in putting away money for a big expense.  In the case of Savings Goals, the money never is transferred in the real account, only to a virtual account to "hide it from the original account" until needed.

Since you are actually transferring between real accounts this isn't needed.

What Quicken provides for cash flow is the Project Balances and reminders.

Austin@

@Bourbon, I do something similar to what you are trying to achieve. I'm not saying that this is the best way to handle the situation or that there aren't other ways, but I've found this works for me:

Like you, I also have a separate (real-life) account set up where I transfer set amounts of money to on a monthly basis to save up for bills or other expenses that are not paid on a consistent monthly basis. When I transfer money from my main checking account into this other "holding" account (or sinking fund, as some refer to it), I use the "Transfer" column to record the transaction as a linked transfer. I also tag the transaction with the name of what I'm saving up for (ex. Travel Fund, Property Taxes, Auto Insurance). I can then run a report that lists out each tag and the balance of of each within that account. I'm essentially creating envelopes or savings goals just by using tags and report.

Now on to the budget side of things: When you configure categories in your budget, you can add transfers to an account as an expense, and transfers from an account as income. I set my budget up to treat transfers into the holding account as an expense, allowing me to budget a consistent amount of money that I am moving into that account each month to save for irregular expenses. When it comes time to spend money from that account, I transfer it back to my main checking account (using a linked transfer, and again applying the associated tag), and then I treat money transferred from my holding account into Checking as income on my budget. That way the income that my budget sees for a given month will be higher to accommodate for the unusually high spending that is associated with an irregular bill.

Because the budget has been padded with additional income (money being transferred from the holding account back to checking), I can then bump up the amount for the actual expense category on the budget, and voila: all the numbers balance out without going into the red even though I'm spending more than usual that month. It helps me know that the money I am spending each month is either available in my checking balance or being covered by previously budgeted funds from my holding account, thus helping me always know that I am not spending more than I am making.

I understand that this method requires more tinkering with the budget/transfers between accounts than many people may want to mess with or attempt. So again, I'm not suggesting this is a perfect workaround or that there aren't drawbacks to using Quicken this way. Just that it works for me and my needs  

Bourbon

@Austin@
@jacobs
@Chris_QPW

Wow, this is amazing feedback from you all! It’s obvious that although what I’m doing sort of works for me, it’s counter productive and has many downsides, but it works, weirdly, but inefficient. Thanks for clearing up the semantics of my second response, I was mixing up budgeting and cash-flow management as per Jacobs insight on the matter. I will revert back and try both Jacob’s and Austin’s suggestions and look into Chris’s comment about Saving Goals. I’ll keep you posted

Thank you gentlemen!

Bourbon

Thank you gentlemen, that is amazing feedback. I will revert back and use approach mentioned by @jacobs and @Austin@ and look into the Savings Goals function mentioned by @Chris_QPW.

Thank you gentlemen

Chris_QPW

Bourbon said:

Thank you gentlemen, that is amazing feedback. I will revert back and use approach mentioned by @jacobs and @Austin@ and look into the Savings Goals function mentioned by @Chris_QPW.

Thank you gentlemen

Quicken Mac doesn't yet have Savings Goals.  Here is a workaround, but like said if you are doing this in real accounts you shouldn't need it:
https://community.quicken.com/discussion/7908088/converting-from-windows-to-mac-savings-goal-work-around

Here is a link to vote for Savings Goals for Quicken Mac:
https://community.quicken.com/discussion/7333033/qmac-savings-goals-110-legacy-votes

Bourbon

@Chris_QPW
I do transfer money to a single savings bank account to manage many goals but in one bank account. I’m puzzled by blog on Windows to Mac transfer which leads to a question. In Windows you mentioned having some 20 saving goals. Now, back in Mac, do you create a Quicken Account to manage each goal separately, but with only one single Bank account? How does that work?

Chris_QPW

Bourbon said:

@Chris_QPW
I do transfer money to a single savings bank account to manage many goals but in one bank account. I’m puzzled by blog on Windows to Mac transfer which leads to a question. In Windows you mentioned having some 20 saving goals. Now, back in Mac, do you create a Quicken Account to manage each goal separately, but with only one single Bank account? How does that work?

I suggest you post on that thread for the workaround.  I'm not the one that posted it.  That person had 20 Savings Goals in Quicken Windows, and then converted to Quicken Mac and came up with their workaround.  I don't use Savings Goals, so I can't really properly talk about that person's workaround.

Chris_QPW

Just to be clear on what Quicken Windows does for Savings Goals.
For every Saving Goal it creates another account.  When you "contribute" to that savings goal it is actually done as a transfer from the main account to the savings goal account.  And the reverse when you take the money out of the savings goal.  On top of that there is special handling of those transfers in the main account.  One can select to show them in the main account or not.  Not showing them allows the user to "pretend" that the money doesn't exist in the account.

Bourbon

@Chris_QPW
I get it, but that’s in Windows. Back in Mac, I asked Miss_E how she does it as this process is not yet available.
In the meanwhile, I reverted back to what was suggested in my earlier post and I get it now, I understand how to look at the reporting side of Quicken budget reports. I’m now trying to understand how to manage cash-flows.

Bourbon

@Austin@

I like your suggestion, but trying to apply it. Refer to picture I attached.
In Quicken, I transfer money from checking account to savings #481, I use the category column to move the money.
What I don’t get in the following comment that you made “I use the Transfer column to record the transaction as a linked transfer”. What is a “linked transfer”? Is that what permits you to use this in Budgets as an expense and an income?

Austin@

I like your suggestion, but trying to apply it. Refer to picture I attached.
In Quicken, I transfer money from checking account to savings #481, I use the category column to move the money.
What I don’t get in the following comment that you made “I use the Transfer column to record the transaction as a linked transfer”. What is a “linked transfer”? Is that what permits you to use this in Budgets as an expense and an income?

@Bourbon, you are setting it up correctly. A "linked transfer" is where you have the category set to "Transfer:[Account Name]" or the name of the destination account in the Transfer column of the register. Entering it either way does the same thing (you'll notice that if you enter an account in the transfer column, the category updates to "Transfer:[Account Name]" and vice versa).

When a transaction is set up this way, Quicken creates the "other half" of the transaction in the destination account for you. For example, if I am transferring $500 from Checking to Savings, I would create a new transaction in my Checking account with an amount of -$500 and set the category to "Transfer:[Savings]" (or enter "Savings" in the Transfer column--again, they achieve the same end result). Quicken will then create a transaction in my Savings account with an amount of positive $500, increasing the balance in my Savings account. The category on this transaction would show as "Transfer:[Checking]" and the Transfer column would read "Checking".

Hopefully that made sense. In short, a linked transfer transaction has two sides, one in the source account and one in the destination account.

When you edit your Budget categories, you will notice that you can add transfers TO an account as an expense and transfers FROM an account as income. Linked transfers will count toward these if they are added to your budget.

Bourbon

@Austin@

Works like a charm for budgeting. Just need to nail the reporting side now.