Hello fellow budgeters! I have a few questions related specifically to my budget in regards to transfers, reimbursements and CC payments. I have scoured here and I think I understand the best option but I am hopeful to get some clarification.
I purchase groceries for my household but my partner often pays for half or sometimes all of it. Would it best be reflected as an income instead of a reimbursement to that expense/envelope to get a better understanding of how much we are actually spending on groceries?
How do you track transfers in the transaction sheet? For instance, I have an account for bills that automatically gets money twice a month for bill payments throughout the month. (I can’t pay directly from this account because it gets charged) So, I end up transferring it back out when payment day arrives.
After much reading, it seems like when a CC is used for expenses, I should not track the payment for this in my budget or it double counts? However for debt repayment purposes, I should track the interest payment and any additional payments for paying down the credit card?
For context, I have one card that is used for two subscriptions is at 28.00 dollars. This subscription charge is reflected under other expenses in my budget. I have another CC that is way too high and not used for anything that I am actively paying down thus the interest/additional payment question.
Lots of questions - happy to answer! If you and your partner have combined budgets, then there is nothing to record other than the cost if groceries. In essence, think of both of your incomes in a combined budget as a bucket. It then doesn’t matter where the money comes from, just the overall cost of the groceries.
If you haven’t got a combined budget, or you’re going solo, then it’s different. In that instance, I’d record the money from your partner as a minus expense. For example, let’s say your income is $1K for the month, groceries are $200, and your partner is going to pay you for half of that. I’d record groceries as $200, then when you are reimbursed by your partner, I’d record that as -$100. Recording the groceries as income would inflate your monthly income to $1,100, which is not what happened. Your budget bucket was only ever $1K; it’s just that you still have $900 left to use during the month.
How do you track transfers in the transaction sheet? I don’t track transfers. The only record should be for the two bills as an expense. Transferring money between accounts is not necessary. Consider the situation where you have two accounts of $500, with the bills costing $100 each. Your billing agency doesn’t care which account you use to pay them - just that they are paid. Similarly, budgets don’t care from which account the funds come from, only whether the money is an expense or income.
For CC expenses, you should track any charges or fees charged in addition to the original expense. If your interest expense is $200 for the month, you should budget for that and record it. For additional payments (principal), it’s not from an income and expense perspective. Nothing to record, as you’ve already made those expenses. But you can allocate that money as part of your budget, as it reduces the amount you have for your other expenses in the month.
Groceries: money from boyfriend assigned to grocery category. +$100 from him, -$200 for the expense, nets -$100 you need to cover. Transfers: not assigned a budget category because it is only moving money between accounts. The total $ does not change. So the transaction sheet for the credit card would show: +100 (in). The bank would show -100 (out). The categorization of the $100 would have happened on the credit card $100 expense, in this case, groceries.
Credit card payments: the payment itself as a transaction is still just a transfer. So you don’t assign it a category because the money you spent on the card was already assigned. Interest and annual fees: DO track this as a budget line item. This is over and above the cost of the thing you paid for. Let’s say your credit card was a 20% interest rate: $100 budget for groceries category, $20 for interest fee budget category (or whatever you call it). At the end of the year, it’s helpful for me to total how much you’ve paid in fees as a way to encourage avoiding debt. But, if you have debt, debt repayment can be its own budget category. It’s easier to think about a car loan example - if you make a payment to your bank for a car, you would categorize the payment as a car payment, not a transfer, because while it’s an existing debt, it’s a “new” expense in any given month.