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I created a personal budget with a savings section but I'm not sure if it is considered an expense. Is it an expense, and how do I account for it?


Thank you all for your great insights.

I decided its money allocation for an expense/goal (the goal can be the saving itself). but both, the allocation and expenses amounts would be deducted from the income.

id like to share my simple budget template

budget template

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  • is it general savings, an emergency fund, or for a specific know expense like your property taxes? Jun 14, 2022 at 12:15
  • @mhoran_psprep all 3
    – user117582
    Jun 14, 2022 at 14:58
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    What do you think "an expense" means in your budget?, and what is the purpose of giving "Saving" that label, or not? If it has a specific purpose and meaning, then ... does "Saving" satisfy that? If you don't really know what it means or why you're labelling some things as expenses ... they I'd start by answering that question for yourself. Labelling things for the sake of labelling them won't tell you anything.
    – Brondahl
    Jun 14, 2022 at 23:42
  • @brondahl expense is something that will take some amount from an income and usually that amount is consumed. A saving section is there because its an amount that does get deducted but its not consumed. at least not in the short run. but its still being deducted from the income.
    – user117582
    Jun 15, 2022 at 10:53

5 Answers 5

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I have a saving section but I am not sure if it is considered an expense? and how do you account for it at the bottom of the budget

Budgeting approaches can vary. In my opinion, a zero-based budget is most effective as it is a plan for how every dollar will be used. If you use a template that has just Income and Expense sections then saving items will go in the expense section. Say you are putting $100/paycheck into an emergency fund until you hit a goal, you put that item in your Expense section. You could also break out a separate Saving section, but the impact on the budget is the same, it's allocation of your income for specific purposes. A lot of saving in your budget is likely planned future expenses like insurance payments every 6 months, a used car every 10 years, or vacations. So you budget $200/month for vacations even though you aren't actually spending that much each month. In that case, when you pay for the vacation those actual expenses don't show up on your budget because they are paid out of the vacation saving that resulted from your $200/month budget item.

So no, saving is not an expense or an outflow of your money but it is an allocation of your income, and as such for some budgeting approaches it is similar to an expense.

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  • " it's allocation of your income for specific purposes" what if it was just general savings. there is no specific goal
    – user117582
    Jun 14, 2022 at 16:28
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    @user117582 The point of the zero-based budgeting approach is that you plan what happens with the money coming in, giving a purpose to a dollar doesn't have to be very specific. If you just have a goal to save $x/month that's specific enough for your budget. It's better than saying "save whatever is left" even if you basically calculate the number by determining what should be left. The key to having a budget be useful is intent rather than reaction.
    – Hart CO
    Jun 14, 2022 at 17:28
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    For budgeting purposes, "money for general savings" is still an allocation, as the money has not been directed towards rent, dining out, saving up for a car or house, etc.
    – chepner
    Jun 14, 2022 at 18:53
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    @user117582 The goal is "Have a general savings"
    – Turbo
    Jun 14, 2022 at 20:27
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It could (and maybe should) be considered an outflow but I would not call it an expense. It's just moving money from one pocket to another. You might be saving up for a particular expense (car, furniture, whatever), but until you actually spend the money, it's not an expense.

Now I'm being a bit pedantic - the bottom line is, if it makes your budgeting process easier or more effective to think of it as an expense, that's fine. The point is that you actually set aside money for large expenses (whether planned or unplanned). What you call that activity is up for debate. The main goal is that your actual expenses plus any allocated savings is less than your income.

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If you are new to budgeting, and especially if you have not been diligent about saving money every month in the past, I suggest you treat your monthly savings amount as a regular 'expense'.

When used in conversation, typically 'expense' won't include amounts you are saving, but there is a benefit to treating this line as something mandatory. Otherwise, there is a risk that 'savings' just kind of sits at the bottom of your budget, whatever it happens to be for each month. But it is something you should plan for, track, and set goals around, just like other 'expense' items. The word you use for it might not change much, but the diligence around recordkeeping it as an 'expense' might be helpful if you are trying to build good habits.

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    "The word you use for it might not change much" -- interesting ambiguity between transitive and intransitive meanings of "change". :) It could be read as "might stay the same". Perhaps clearer for your meaning would be "might not affect much" or "might not make much difference".
    – nanoman
    Jun 15, 2022 at 7:22
  • @nanoman Maybe it was even an oblique pun given the subject matter at hand! (I will leave evaluation of said pun's humour, as an exercise to the reader). Jun 15, 2022 at 12:16
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Budgeting is just a miniature version of proper accounting, which uses a variety of reports to account for money movement.

Suppose you earn $1000, spend $600, "save" $300 and keep $100 as spending money.

On the balance sheet, or list of assets vs debts, it cancels out since the "saved money" is still your asset.

On the profit/loss statement, the money earned in excess of money spent shows up as profit, so $400 profit.

In your "cash flow statement", the $600 expense and $300 savings both count as negative cash flow against the $1000 cash flow.

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As "Grade 'Eh' Bacon" said: I would put it in as an expense. I have an account that my money goes into and whatever comes out is considered an expense for me.

I like to think of it as a "freedom" expense. Ultimately, one is saving towards a goal of being able to afford something or being able to move away and not have to worry. The point is: if one does not take it as an expense they'll think its an asset and spend it.

Mark it as an expense, take it seriously and worry more about how much you're saving every month versus how you are accounting for it.

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