Layout:
Home > Large purchase throwing my budget for a loop

Large purchase throwing my budget for a loop

August 3rd, 2008 at 03:13 pm

I'm sure I'm making our money management more complicated than it needs to be. About twice a month I sit down for an hour or so to get the budget caught up to our spending. We're pretty comfortable financially so I don't have to keep as close an eye on the day-to-day spending as many do, but I like to have a rough idea of where we are so I can pull back the discretionary spending before it gets too out of line. Unfortunately this month I've made a large purchase which, although I know we have the money to cover it, is throwing my accounting system for a loop.

The problem is that I've got the cash money (non-investment) divided up into so many accounts (3 checking, 2 savings, 1 money market), and the budget divided into so many catagories (10 master catagories, 46 line items) that it sometimes gets tricky to confirm that the budget and the total amount of money is in sync. I'm in the process of consolidating the checking and savings accounts, so that should help matters significantly. On the budget I really like having the granularity of all the line items (for instance separate lines for phone, electricity, water rather than a single line for utilities), so I don't think I will change that much.

I use YNAB as my budgeting tool, and while on the whole I highly recommend it, you can't verify at a glance that the register and budget are in sync. They are disconned by design (which is helpful for people snowballing a large cc debt), but if you're not careful the amounts in the budget and the register can get out of sync. I finally set up a spreadsheet where I list all my account balances, add up the budget numbers and calculate the difference. The large purchase is throwing everything off because it ought to be paid for by money that is currently outside the budget software. According to the software I have used up all my primary income for August and am $3k overdrawn.

Currently we have $38k cash in hand, and a $17k credit card bill to pay in full this month ($13k due to the large purchase.) We normally have $10-$12k coming in each month. I need about $7k/mo to cover normal montly outflows. I save $835/mo toward semi-annual purchases, and set aside 40% of my contracting income each month toward taxes.

Currently my budget includes the following balances that absolutely need to stay in savings:
Taxes: $9k
Semi-annual bills: $5k
House/car repair reserve: $1k

I also have $9k earmarked toward near-term goals -- vacation, Christmas, updating the wills.

$4k of cash needs to go to last month's credit card bill, and we will spend our usual $7k this month.

I still haven't decided exactly where the money for $13k purchase is coming from. The original plan was to sell stock from my taxable investment account (currently $350k). But the market's been down and I've been debating about trying to cash-flow it instead, repaying my cash accounts when the market is a little more favorable. DH's ESPP just made a purchase, and the stock is currently on the high side, so another option would be to sell, which would bring in $12k. I don't track the investment account or the ESPP in the budget, so either way would represent an inflow.

I think I have enough on hand to be safe paying the cc bill out of current cash, but I haven't figured out how to represent paying it and then paying the budget back. Loose ends like this really bug me!



3 Responses to “Large purchase throwing my budget for a loop”

  1. frugaltexan75 Says:
    1217789087

    You could always do a Supplemental Income deposit of the 13k for August, which would balance you back to 0 - unless you're tracking the various savings/stock accounts in YNAB.

    If some of the 13k is tracked in a budget line item which has built up from month to month, you can do a negative budget in that category. So, if you have $500 built up in a budget category, you would put -500 in the budget column, and that would give you that money back in the Available to budget area.

  2. zetta Says:
    1217802383

    That does seem to be the simplest solution. I think I may do that, placing the fake income in the Unassigned account, then create a "Loan to self" account with a balance of -$13k.

  3. frugaltexan75 Says:
    1217812464

    Sounds like that might work - good luck. Smile

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]