Is there a better way to budget and pay accounts in Quicken

Question

I have used Quicken for more than 20 years, and I still learn new procedures from Quicken Community members. In the past, when I asked for advice, some replies critically focused on my not using Quicken as designed. To me, that is like saying a screwdriver should only be used for screws and never to pry open a paint can lid. The procedure below has worked for me for years, even though it may be unconventional. I am wondering whether there is a better method I have not learned.

Each month, I budget set amounts for expenses such as groceries, gasoline, clothing, and household items. For simplicity, I will use made-up amounts.

When I receive a $3,000 electronic deposit, I enter it in Quicken. I then record budgeted amounts as expenditures—such as $100 for household, $100 for clothing, and $100 for gasoline—until the full $3,000 has been allocated. At that point, my Quicken register shows a $0.00 balance.

I use credit cards for most purchases and maintain those credit card accounts in Quicken. For example, when I buy gasoline with my Chevron credit card, I enter the charge in the Chevron credit card account.

As noted above, I have already entered $100 for gasoline as an expenditure in my Quicken checking register. When my Chevron statement arrives with a $10 payment due, I enter that payment in the checking register. Because the register balance is always zero, this puts the account $10 in the red. I then record the $10 payment in the Chevron credit card account.

Next, I return to the gasoline budget entry in the checking register and reduce it from $100 to $90, bringing the checking register back to a zero balance. I follow this same process for each budgeted category and have not had any problems reconciling either my checking register or my credit card registers. If I do not spend the full budgeted amount in a category, the unused amount carries forward. For example, if I spend only $10 of the $100 gasoline budget, that category becomes $190 the following month.

If I use a debit card or write a check, I use the same process in the checking register: I enter the transaction and then adjust the related budgeted amount.

Since I pay my statements as soon as I receive them, is there another way to handle this?

The Keeper · Answer

In your comment you stated, " One of the things I do that probably no longer makes sense is to always have the transfer transaction for the next credit card payment in my checking account register. As I spend money using the credit card and the credit card balance increases, I adjust the payment transaction to cover the credit card balance."

I may not have explained my procedure very well but that is somewhat similiar to what I am doing. I may not have explained my process clearly, but it is similar to what I am doing. Because I rarely exceed my budget, I usually have enough money in each category to cover the credit card bill, and any unused funds roll over to the next month. For example, I have long budgeted $100 per month for gasoline, but since I am elderly and drive much less now, that category has grown to $3,000. I should reduce the monthly gasoline budget, but I have simply left it unchanged.

If I exceed my budgeted amount for "gifts" one month, I have a category titled "Living Expense" where I can use funds in that account to cover the excess.

RichardSchreyer · Answer

I use transfer reminders for all credit card accounts based on the historical average of spending in that account and adjusted annually for inflation.  As actual transactions are posted to the account it automatically shows me the balance left for the month vs expected spending.  I post the reminders for the next few months so I can see impact on cash based on expected spending.  I also use reminders to future post all identifiable expenses and income not handled thru credit cards so that i can have a pretty clear picture of where cash will be in future months.

mshiggins · Answer

@The Keeper what goal or benefit does your current method provide? Does it help you stick to your budget? Monitor your cash flow so you will have enough funds in your checking account to pay all upcoming bills? Something else?

If we understand what your current method helps you to do, we can perhaps recommend alternate methods to accomplish the same goals.

One of the things I do that probably no longer makes sense is to always have the transfer transaction for the next credit card payment in my checking account register. As I spend money using the credit card and the credit card balance increases, I adjust the payment transaction to cover the credit card balance.

I started this practice back when you could get some seriously high interest in high yield savings accounts and would religiously sweep extra funds from checking to savings if there was a buffer. This was back before the feature to show reminders layered onto the account register existed. Nowadays with lower interest rates, it's not as lucrative to sweep all the extra funds from checking to savings, but I'm still sticking to the habit of keeping those future-dated credit card transfer payments in my checking account.