Budgeting methodology sanity check

My wife and I recently started working with a financial advisor, which naturally requires sharing details about our spending in order to accurately model our financial plan. I use Monarch to budget, but I’ve realized my methodology might be flawed, so I wanted to get a sanity check. My monthly strategy is to start with income from W2 paychecks only, not including interest, miscellaneous income, or side business income—let’s say that comes to about $10k. Then, I categorize the normal, non-sinking fund expenses like utilities, gas, subscriptions, food, shopping, etc., which typically range from $3-6k each month. After that, I categorize the expenses that come out of sinking funds, such as car insurance and maintenance, home insurance, vacation, dog expenses, and his and her fun accounts. I keep these separate from the monthly budget and pay them directly from the sinking fund. Anything left over after all this is distributed among the sinking funds or perhaps to a taxable brokerage. My issue is that I’m having trouble discerning what we are actually spending because the sinking fund expenses are ‘hidden’ from the monthly budget. Monarch only thinks we make $10k, spend $3-6k, and save the rest. So my questions are: Does my budgeting strategy make any sense? What could I be doing differently to more accurately record our spending? Thank you.

I don’t necessarily budget that exact way, but when I pay for something out of savings or a sinking fund, I add an income line for the transfer into my budget and label it as ‘Savings transfer.’ Then I record the expense as normal. For example, this month I moved over £300 from my savings to cover a car repair expense. I added a line to my income section for £300 labeled ‘Savings transfer’ and then recorded the car repair as an expense categorized as ‘Other’ since I don’t get super granular with my spending categories. I budget manually using a Google Sheet instead of an app.

Monarch has a rollover function for sinking funds. So, let’s say you budget $200 a month for car insurance. In six months, you’ll have $1,200 in the fund. When the bill comes, you pay $1,189.90 out of the category and you’ll see however much is left over.

For step 3, could you use 1/12 of your yearly sinking fund to fill out your monthly budget? It might help make your spending clearer each month.

Your strategy makes sense for managing cash flow, but tracking actual spending can get tricky when sinking funds are separated out. I once worked with a couple who had a similar issue. Their budgeting app showed huge ‘savings’ because their sinking fund expenses weren’t counted as spending. We adjusted their approach by categorizing those expenses as ‘transfers’ and creating a summary that combined both monthly and sinking fund spending. This gave them a clearer picture of their real expenses. Monarch works great for our clients once it’s set up that way.