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My wife and I keep track of our budget on a spreadsheet. We save $200 dollars a month to spend on furniture. The money is transferred automatically into a savings account. We want this money to appear on our budget so that we can make sure there is room for it, so we have a line called "short term savings", which includes this $200 as well as savings for a couple other categories. However, we would also like to include on our budget the actual cost of the furniture when we buy it. How can we do this without those costs appearing twice on our budget sheet?

Thanks.

  • Why do you want to include it when you buy it? You can't include it in both places without including it in both places. One approach would be to not budget the savings as "short-term savings" but as "furniture", so that you consider yourself to have "spent" the money on furniture when you put it in the savings account. – BrenBarn Apr 18 '15 at 19:23
  • I suppose i want to include it when I buy it so that we can later look back and easily see what we spent the money on and how much it cost. – Robert Apr 18 '15 at 20:30
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    There's a difference between a budget (which shows what you intend to spend money on in the future) and a ledger/transaction record (which shows what you spent money on in the past). It sounds to me like what you should do is list the saving on the budget (so you set aside money for it), but record the actual purchase in a record of transactions (so you can see what you bought and how much it cost). – BrenBarn Apr 18 '15 at 20:47
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What I've found works best when working on my personal budget is to track my income and spending two different ways: bank accounts and budget categories.

Here is what I mean: When I deposit my paycheck, I do two things with it:

  1. It goes into my checking account, so the balance of my checking account goes up by the amount of my paycheck.

  2. I also "deposit" the money from my checking account into my various budget category balances. This is separate from my bank account balances. Some of my paycheck money goes into my groceries category, some goes into clothing, some into car fuel, entertainment, mortgage, phone, etc. Some goes into longer range bills that only happen once or twice a year, such as car insurance, life insurance, property tax, etc. Some goes into savings goals of ours, such as car replacement, vacation, furniture, etc.

Every dollar that we have in a bank account or in cash in our wallets is also accounted for in a budget category. If you add up the balances of our bank accounts and cash, and you add up the balances of our budget categories, they add up to the same number.

When we make a purchase, this also gets accounted for twice:

  1. The appropriate bank account (or cash wallet) balance gets reduced by the purchase amount.

  2. The appropriate budget category gets reduced by the purchase amount.

In this way, we don't really need to worry about having separate bank accounts for different purposes. We don't need to put our savings goal money in a separate bank account from our grocery money, if we don't want to. The budget category accounting keeps track of how much money is allocated to each purpose.

Now, the budget category amounts are not spent yet; the money in them is still in our bank account, and we can move money around in the categories, if we change our mind on how to allocate them. For example, if we don't spend all of our gas money for the month, we can either keep that money in the gas category, or we can move it to a different category, such as the car replacement category or the vacation category. If the phone bill is more than we expect, we can move money around from a different category to cover it.

Now, back to your question:

We allocate some money from each paycheck into our furniture category. But the money is not really spent until we actually buy some furniture. When we do, the furniture category balance and bank account balance both go down by the amount of the purchase.

All of this can be kept track of on the computer in a spreadsheet. However, it's not easy to keep track of so many categories and bank balances. An easier solution is custom budgeting software designed for this purpose. I use and recommend YNAB.

  • Thanks for the response. I hadn't heard of YNAB but I'll definitely look into it. For now I broke up the 'short-term savings' category into individual items on the budget sheet and track purchases in those categories on another "transactions" sheet. – Robert Apr 21 '15 at 18:12
  • I also use and recommend YNAB. – briantist May 22 '15 at 2:22
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However, we would also like to include on our budget the actual cost of the furniture when we buy it.

That would be double-counting. When it's time to buy the new kit, just pay for it directly from savings and then deduct that amount from the Furniture Cash asset that you'd been adding to every month.

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