How to balance the budget and add income that is not taxable

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I'm very new to Quicken (2018/Windows 10) and need some help. Some background . . . I moved to Quicken from a true envelope budget system which had me add my income, then tell each envelope how much money it needed each month until the income and envelopes were balanced, then I could go to each source of income and tell it to automatically allocate each paycheck into the different envelopes for me. To stay on budget, I just had to check the enveIopes to see where I was and enter any spending into the correct envelope. It carried the budget forward to all months and automatically broke down each paycheck into the appropriate envelopes.  I know this is different, but I don't understand how it thinks.

#1 - I have entered my paychecks in Income Reminders, but I also receive a monthly deposit that I need to include in the budget but it is not taxable income.
  • If I add it thru the Income Reminders, it looks like it's being treated as taxable income which will not be right at tax time. 
  • If I just enter the deposit manually in my checking account as a deposit, then it shows up as uncategorized spending (why spending...with a negative amount?), plus the budget still thinks I've overspent. (or do I  need to break down each paycheck into the different budget lines?
  • What do I need to do so the budget knows it's "income" but the tax reporting part thinks it's not taxable?

#2 - Should I first make sure that the budget is balanced?
  • How do I know if it is balanced? 
  • And is there any way that Quicken can automatically take each paycheck and drop the appropriate amount into the budget lines automatically?

I need to get this up and running, as I  need to manually enter all my transactions from January 1 of this year - - - and my old system is starting to malfunction, so I don't know how long I have until it quits, so it's been super stressful. I hate to enter hundreds of transactions when I can't even get the income in correctly.

Any help would be most appreciated!
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Nina

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Posted 1 month ago

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QPW

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I lot of questions in there actually, so most likely I won't get them all answered in one go, but I will add another comment later for anything I miss.

Quicken's budgets, and tax/not tax are category based.

When you created a paycheck it selected some default categories that most people would use.  For instance Salary or Spouse Salary.

These can be changed in the PayCheck wizard for future checks or in transaction entered into the register for the ones already there.  You can also select "Add Earning" to add another income source.  There are some defaults like Bonus, which will default the category to the most likely one.
But you can also use "Other earning" and change all of it while setting it up.

If you select Tools -> Category List, you can view/edit the existing ones or add a new one.
One of the properties of a category is the Tax Line Item.

The only difference between a taxable and non taxable category is if it has this tax line or not.

So for your income that isn't taxable you would just create a new income category and leave the tax line at the default of "blank".

If I just enter the deposit manually in my checking account as a deposit, then it shows up as uncategorized spending (why spending...with a negative amount?)

This is because you didn't select a category when you entered that transaction into the register.
Every transaction should have a category.

  • And is there any way that Quicken can automatically take each paycheck and drop the appropriate amount into the budget lines automatically?
As I stated above Quicken's budget's are category based.  So in your budget you state what categories you are budgeting, and for how much.  When transactions are entered into the register using that category they become the "actuals" in that budget category.

Note for future predictions, Quicken also has a budget option that treats future reminders as if they were already entered in the register, as as such are treated also as "actuals".

On the budget see Budget Actions -> View options

  • How do I know if it is balanced? 
Provided you put in your income and expense categories how much you budget for each category there are a couple of ways to think about "balanced".

There is a balanced budget and there is also a "cash flow balanced".

For the budget not being balanced isn't always bad.

A budget is a prediction of what income and expenses you will have.
Hopefully you get better over time on this prediction based on seeing where you were wrong in the past.

Say I put in a budget amount for my Salary of $1000, but instead I made $1200.  My budget isn't balanced, but that is good thing in this case.

So that is what the Balance column means.  The difference between what you predicted and what actually happened.  And then these can be totaled.

And a note about setting up the budget amounts in the first place.  Clearly at minimum you want to have enough income to pay your expenses each month.  So if I just look at the Budget column I would expect that the totals at the bottom (or least the grand total at the end of the year) be positive.
If not you have a budget this is setup to fail.

On "cash flow".  The budget numbers actually play no part in these numbers.  The reminders will if include (for future months).  This will tell you what is really happening.  As in not what you predicted, but what income and expenses you really had.  Note that there might be negative months, but of course the yearly total needs to be positive or else you are going to be going to savings to balance your income to expenses.  But even in that case that might be what you want if you are retired.  And you might budget in some transfer to cover the shortfall.

Please note I said nothing about envelope budgeting, which would require the ability to move transactions between different envelopes.  Quicken's budget isn't setup for this.  Some people have come up with ways to fudge this, but I know next to nothing on it.  Maybe others will point out those posts on the subject.

One last thing.  You mention hand entering the transactions from the beginning of the year.
If you can export those transactions in some way we might be able to suggest how to get them into Quicken.  Also you might be able to get them from your financial institution in the form of a Quicken Web Connect/QFX file.
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QPW

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P.S. on the negative amount in one category.  Quicken categories are marked income or expense.  If you are entering "income" in an expense category it will be negative.

An example of this happening would be say you bought some clothing and so the transaction gets the category Clothing.  Now you return the clothing for a refund.  You would enter the refund as a "income" in the Clothing category to offset it.

In a report that has the Clothing category in it, the refund would show as a negative amount.
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Nina

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Thank you so much for all the help and especially the detailed information! That really helps me understand how Quicken thinks!