I include my monthly expenses things I budget for, paid with both cash and credit card.
If I do not pay off my credit card balance, how do I get the minium payment to be a expense too?
Right now, playing with the transfers option, I can get it, but it always pops up as an offset income amount wiht my salary
Also, what is the best way to treat payments of insurance and real estate tax from impound accounts.
Please give detailed help!
Hi, Mitchell.
Please don't confuse "payment" with "expense".
I've never been any good at budgeting and haven't used that part of Quicken. But you may be confusing cash flow with expenses. In the long run, total cash paid out might equal total expenses, but when we divide time into months and years, the expense often doesn't fall into the same month as the cash payment. Before you start your budget, you must decide whether you plan to track expenses or track cash flow.
For example, the payment on your credit card is not an expense, whether you pay the full balance or the minimum or some amount in between. The payment IS cash flow out. But only the interest portion is an expense, assuming you have already recorded the purchases made with the card at the time of purchase. Of course, if you record grocery (or whatever) expense when you buy it, you don't want to record it as an expense again when you pay all or part of the credit card debt for it. Payment of the previously-recorded expense is, as you suggest in your message, merely a transfer from an asset account (checking) to a liability account (reducing credit card debt). But the interest expense (by whatever name: finance charge, late fee, or whatever - it's all for your use of the lender's money) is an expense over and above whatever you've already recorded.
Payments into and out of your mortgage impound accounts are somewhat similar. On a cash flow basis, payments transfer from your checking account to the impound account monthly - and never return. But the payments from the impounds to the taxing authority and the insurance carrier are expenses only in the months paid out of the impounds; at least, that's when the IRS lets you deduct them. In recording the payments - as opposed to budgeting for them - the correct treatment is to treat the monthly payments into impounds as a transfer and then to record the payments out of the impounds as an expense; it appears you already know how to handle this.
If you like, you can divide your expected annual tax and insurance expense by 12 and budget for them each month. The mortgage company's estimate probably is close enough for this and can serve as the proxy for your own calculation. So you might use the monthly payment into impounds as the budgeted expense. The only fly in this ointment might be if the estimates are way off or if the expense-year is much different from your budget-year (like if you are budgeting for January-December but your insurance premiums are due in May and November) and the amounts vary a lot from year to year.
The income side of the budget is straightforward for some people and variable for others. You might need to budget for a bonus in some months; some teachers have to plan for no salary in the summer months. So you will have to decide whether to budget your income (perhaps 1/12 of annual salary) or your cash revenue flow (with peaks and valleys in some months).
First decide whether you want to plan for cash flow, or for expenses (and income). Then budget accordingly.
RC
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