Capturing actual expenses with transfers

MikePierce1963

I've created a budget based only on one account, my primary checking account. And generally, the actuals vs. the budget work very well. It's essentially a cash flow report for me.

My issue is that when I, for example, pay my mortgage, and split the amounts to Principal, Interest, I want to "transfer" the principal amount to the corresponding liability. But when I do that, the principal amount is not recorded as an "expense" for budget reporting purposes. I've set up a "category" called principal, and have the liability account in the transfer column, but for some reason that transfer amount doesn't come over to reduce the principal, and if it does, I can't show the principal expense.

Found the same to be true with Credit Cards. If I charge something on a card, and then immediately go to pay it (for point purposes), I want to reflect the "dining" or "entertainment" expense, while transferring the payment to the credit card. Can't seem to do both. It seems like it's one or the other.

What am I doing wrong??

Jon

For a credit card, the ideal way to do that (in my opinion) would be to have an account for the credit card, and each expense on the card would be a transaction in that account with the appropriate category. Payments to the credit card would then be transfers from checking (or whatever account you use to pay off the card) to the credit card account with no category needed. This is the method I use.

Some folks will not bother with a separate account for the credit card, and will instead use a split transaction to record credit card payments, Each line of the split represents a purchase and gets the appropriate category; all the splits add up to the amount paid to the card. This is a bit more difficult in my opinion since you have to know which specific purchases you're paying off with each payment; I don't know how you would even make this work if you carry a balance & don't fully pay off your card each month (though it sounds like maybe that's not an issue for you).

Either of those methods should work fine with a budget.

As for the principal portion of the mortgage payment, you can include transfers in your budget but you have to manually add the specific accounts you want to be included. Click the Edit button in the upper left of your budget, then click Select Categories in the lower left, then scroll down to the "Transfers Out" section and find the line that says "TO" followed by your mortgage account and check the box. This should add a budget line for transfers to your mortgage account.

You could do something similar for your credit card account but in my opinion that would not be ideal since you wouldn't be able to track the categories of the individual expenses, all expenses on a specific card would be lumped together under one transfer category.