Is Money Added from External Accounts Considered Income?

  • 1
  • Question
  • Updated 1 year ago
I am on the free version and as far as Good Budget is concerned I use only 1 account. I use my annual envelopes for bigger items like car maintenance and home maintenance. Typically I make these envelopes have a zero balance in Good Budget. However, when I have car repairs I record those expenditures in Good Budget and tag it to the appropriate annual envelope. Then instantly I "Add Money" to that envelope from an "external account". The money added from this external account already exists in another savings account I have.

My question is... is this additional money from the external account considered as "income" on reports? If it is, can situations like this (adding money from an existing account) not be tagged as "income". It's money previously saved not actual income from this year.
Photo of Scott Andreasen

Scott Andreasen

  • 4 Posts
  • 1 Reply Like

Posted 1 year ago

  • 1
Photo of Colin Grant

Colin Grant

  • 376 Posts
  • 109 Reply Likes
I think you are using Goodbudget the wrong way around. It is a budgeting program and the idea is to put money aside in the envelopes to cover future expenses. Personally I cannot see any value in using it any other way. Let us say you have a savings account with 100.00 in it and let us say 50 of that is for car expenses and 50 for groceries. That allocated cash would be held in corresponding envelopes Groceries and Car with 50 in each. When you spend out of the envelope the balance reduces. The way you are doing it is no different to running a basic cash ledger it seems.
Photo of Scott Andreasen

Scott Andreasen

  • 4 Posts
  • 1 Reply Like
Hmm. Not sure the confusion is due to a difference in approach or due to a poor explanation on my part. Still I didn't see an answer the actual question--which I will reword. Is all money added to Good Budget considered Income? Additionally, can I tag quantities when I "Add Money" as "income" versus "transfer from an external account" (money that has not recently been earned).

And to your comments, I think I use the 10 freely available "Every Two Week" envelopes like you describe--we focus the main Good Budget Account on our families "variable expenses" checking account (Gas/Food/Entertainment/Kids/Clothing etc). We haven't layered in our "fixed expense" checking account yet (Mortgage/Utilities/Debt Payments). My paychecks direct deposit is split between these two checking accounts. Further, I consider saving for Car Maintenance and Home Maintenance more of a fixed expense and those money go directly to a separate savings account from the "Fixed Expenses" checking account. What I hope to do is compare the "income" to the variable checking account (actual money received to that account) to "spending" which I want to include Car Maintenance and Home Maintenance to make sure I can appropriately forecast those expenses and can adjust the direct deposit amounts. Perhaps what I want to do is a poor budgeting idea or it is unsuitable for the free version. Either way, I think it will help me understand how I am spending and saving. And it makes sense to how my wife and I think about our budget. Colin, can what you suggest above be accomplished with the free version (only 1 account)? If yes, how?

We are going on 6-months using Good Budget and like it a lot. Still not sure if we are ready to go full Good-Budget on the paid version and attaching all my checking and savings accounts. I like the simplicity of Good-Budget and that it mimics the envelope system that our family used before Good-Budget. I value the simplicity of Good Budget and hope to not paralyze usage by complicating it beyond what I'm ready for.

I need to get a handle on current spending versus current income. I recently accepted a new job and took a paycut. I anticipated dipping into savings to pay for certain things while we transition to the new budget. I can't depend on the savings indefinitely to supplement the income. With a true envelope system, I physically have to withdraw cash from the bank to insert the cash into envelopes when spending exceeds anticipated amounts and can record those amounts. I want to a report to quantify the "figurative" amount of cash needed from external accounts for that months budget.  That is why I want to know if "income" and "external account transfers" are categorized the same in Good Budget and/or if they can have separate tags. Ideally I 'd like a report to show the amount of money used from the external account is going down each month to zero.

Wow. That was a lot of text. Complicated getting it down on paper. :) Thanks for your consideration.
Photo of Colin Grant

Colin Grant

  • 376 Posts
  • 109 Reply Likes
Just because cash is on a fixed savings account does not mean it should/can not be reflected in one or more envelopes. I do that all the time. You can even group envelopes so that they are representative of a particular account. Remember the cash does not leave a bank account when placed in an envelope - an envelope is just a reflection of the cash within your accounts in terms of the expenses to which that cash is allocated. The cash leaves your account (and the envelope) when expenses are paid for out of that envelope. 

I am using paid for GB so have more flexibility I guess. I really do recommend it.
Photo of Wayne Woodbury

Wayne Woodbury

  • 224 Posts
  • 172 Reply Likes
Scott,

My kids use the free version as well and I have been trying to work with them to find the best way to track things as they have more than one account as well.  I'm curious to know what works best for you, so I hope you will post your solution when you find what you like.

To one extent, Colin is right; the software is build around the concept of tracking all of your expenses.  Any expense you record in Goodbudget (GB) is tied to an account.  Each account in GB should represent an actual bank account, be it a checking, savings, or credit account.  You should be able to reconcile your GB accounts with your bank statements to ensure you have recorded every transaction accurately.  Where you have only one account in GB, you have to decide how you are going to manage your budget.

My recommendations depend on how you are using GB.  Do you intend to track all of your expenses with GB? 

(1) If you do not want to track all of your expenses in GB, then I recommend that the account you have in GB represent a single bank account, we'll say your checking account for this discussion.  Any time you add money to the checking account, you record it as income, even if you are just transferring it from a savings account.  All transactions recorded in GB should all be checking account transactions.  The total balance of all your envelopes should reflect your checking account balance.  If you want to transfer money to your checking account from your savings account, record it as income in GB and distribute it to the envelopes you want.

(2) If you want to track ALL of your expenses in GB but spend from multiple accounts, then I would use the account in GB to represent all of your accounts combined.  You can add #checking or #savings to the comments in each transaction to determine where it came from.  This may will help later if you need to reconcile your bank accounts with GB.

The problem with either of these options occurs when you spend money on a credit card.  How do you record that?  One thought I have is to create a "Goal" envelope to represent your credit card.  When you spend money on the card, transfer money from the desired envelope to your credit card envelope.  Don't record an actual expense until you make a payment on the credit card.  Assuming you pay your card off every month and don't accrue interest, your credit card balance should equal the balance in your credit card envelope.  When you pay the card, record the expense and select the credit card envelope in the transaction.  The one big disadvantage I see to this is that reports in GB won't be able to tell you what your are spending in each envelope.

If you want to track all of your expenses, I would recommend you pay for the product for a few months to try it out.  If you decide it is not worth it, you can always discontinue.

Good luck, and please let us know how you end up handling this.
(Edited)
Photo of Scott Andreasen

Scott Andreasen

  • 4 Posts
  • 1 Reply Like
Thanks Wayne. Option (1) above describes exactly how I am doing things currently. That is a nice validation of my process. I think Option (2) would be too confusing for me. And obviously, Option (3) would be to go and get the paid for version that ties everything together.

Here is a bit about my budget strategy. Perhaps it can be useful to your kids. But maybe not.

I've made a conscious decision not to track fixed expenses like Mortgage, Utilities, Car payment, insurance etc in Good Budget because these expenses are largely fixed and all happen automatically. A big chunk of my direct deposit goes into a separate checking account that I refer to as my "fixed expense" account. And these get paid automatically through autopay and scheduled transactions for online bill pay. I rarely check the balance on this checking account and deposit a fair amount of extra so I confidently know that if I'm getting paid--all these accounts are properly paid for. This simplifies my life a great deal and I can't see immediate value to going through the effort to enter these in good budget when my bank statement is a very clean list of fixed expenses with around 12 transactions per month. 

The rest of my paycheck gets deposited into another checking account that I refer to as "variable" expense account. This is the account I use for Groceries, Gas, Kids Money, Clothes etc. I use Good Budget in association with the Variable account and try to squeeze some money out of this account to pay extra on debts. I like that the balance shown in Good Budget is reflective of the actual account balance in the checking account so I can check Good Budget if I fear I am in danger of over-drafting. 

Now, going back to the "Fixed Account". From direct deposit, I put a bit extra in the Fixed account than I need. Similarly, Gas, Water and Electric bills fluctuate from month to month so tracking every dollar here could be tedious. Instead, I periodically look at that account through online banking and transfer money from the "fixed spending account" to one or more savings account I already have set up. I have my savings account earmarked for specific things...like Savings account X from Bank A is for Car Maintenance. Savings account Y from Bank A is for Health Expenses, Savings Account Z from Bank B is for Taxes, Savings Account W is for Christmas, and another for trips and another "deep savings" etc. etc. I end up with a bunch of different savings accounts (some are even free checking accounts) with 250-1000 in each. Some probably would say having many of low balance savings accounts is ridiculous--but for me it helps me know that I can encounter disasters in each of those categories--and understand what my capacity would be if disasters hit in all categories at once.

Take the case of car maintenance. Oil changes, new tires, engine maintenance, even windshield wiper replacements are not unexpected expenses. The date and the cost for these items are variable and significant. When they happen,  I want to record these expenses in Good Budget so I can see them in my pie graphs. To do this, I have annual envelopes for each category set up with zero balance. When I need new tires, I will likely put this on a Credit Card, then add a Good-Budget transaction for the cost of tires which removes money out of the annual envelope (taking the balance negative) and then in Good Budget I'll "Add Money" to this envelope equaling the negative balance and the "payer" is "External Account". I will then pay off the CC balance using the Savings account set up for Car Maintenance. I like this because I can generate reports showing my spending that include money spent from those external bank accounts. But I suspect this method breaks down when looking at any reports that show INCOME. Hence the reason for starting this thread.

I know I could do all the above mentioned actions with the paid-for version of Good Budget. But feel like the value would not be worth the extra effort--except for when I view reports showing Income. I hoped there was some work-around. I think I'll begin tagging my actual income transactions as #Income and see what that does to my reports over time.

Lastly, our household has only one source of income, so that simplifies things. We also don't spend use our Credit Cards often opting for Debit Card usage instead. When CC usage is unavoidable (like when purchasing on Amazon) we charge the Credit Card, enter the amount spent under the appropriate Good Budget envelope and then immediately open Online Banking and pay off the balance from the Variable checking account. I've read on here the strategies for dealing with CC and using a CC envelope. But we don't do it that way. My wife and I are not only committed to not carrying a balance on our credit card month to month but also day to day (or more realistically--week to week). To me this also makes using Good-Budget even simpler.

I guess my whole budgeting strategy is now public. Feel free to make recommendations to help me. Thanks
Photo of Wayne Woodbury

Wayne Woodbury

  • 223 Posts
  • 171 Reply Likes
You sound very disciplined and I like the way you handle credit card payments (pay it every time you spend).  I will definitely share that one.  This actually makes your reports work for credit card expenses.  I budget largely the same way you do, but I use Goodbudget to do a lot of the things that you do with savings accounts.  I have automatic payments for all of my fixed bills using Bill Pay through my bank.  I let a few services charge my credit card, but only a select few that I trust.  I set up automatic transactions in Goodbudget to match those.  This allows me to see/track all of those transactions and see them in reports, but I never have to enter them manually.

I have savings envelopes for things like car maintenance and other irregular expenses that don't occur frequently.  I use regular envelopes for other variable expenses like groceries and gas.  Another reason I pay for GB is because I have way more envelopes than the free version allows.  I also set up annual envelopes for things like Christmas, which allows me to set aside a fixed amount each month so that I have the desired amount come November/December when the shopping madness begins.

I also pay my credit card off each month, but I use it regularly for the points.  I track every expense to that account and use a "Transfer" transaction when I pay it off each month as opposed to an "Expense" transaction like you do.  Same end result (all of those expenses show up properly in reports and graphs and I don't pay interest).

I think you are managing things the right way.  The only suggestion I would have is to put more money in your variable checking account up front for those annual envelopes.  Rather than going in the red in those envelopes, use GB to estimate how much you need to set aside each month in those envelopes and get a positive balance in them before you need to spend from them.  This ties these expenses directly to your variable checking account and you can handle the credit card payment the same way you do all of your others (you don't have to fudge on your checking account balance while you juggle money from one account to another).  It also gives you ready access to your car maintenance balance in GB without having to log into your bank account.  This really isn't much different than what you are doing, but may offer a slight improvement.
Photo of Scott Andreasen

Scott Andreasen

  • 4 Posts
  • 1 Reply Like
It's been a long haul.. The best part is that my wife and I are on the same page financially. Thanks Wayne.