Monthly budgeting for non-monthly expenses

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Monthly budgeting for non-monthly expenses

Dan Werner-2
Hi, I've been using basic functionality in gnucash for a while, and
I'd like to start getting more out of it.  A specific thing I've been
wondering about is: how do you budget for something monthly that you
only pay for once or twice a year?

As an example, I pay auto insurance in June and December, but I'd like
to budget in the partial, yearly expense for that each month.
Meaning, I'd like to take the expected yearly expense for my car
insurance, divide it by 12, and move money from my checking account to
some fake (bank?) account in gnucash.  Then, when one of the payments
was due, I'd create an expense in the fake acct to pay the bill.

Is it correct in a gnucash/accounting sense to do something like that,
or should I abandon the idea?  If it sounds okay, what type of gnucash
acct should the fake acct be?

Thanks,
Dan
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Re: Monthly budgeting for non-monthly expenses

Phil Longstaff
Dan Werner wrote:

> Hi, I've been using basic functionality in gnucash for a while, and
> I'd like to start getting more out of it.  A specific thing I've been
> wondering about is: how do you budget for something monthly that you
> only pay for once or twice a year?
>
> As an example, I pay auto insurance in June and December, but I'd like
> to budget in the partial, yearly expense for that each month.
> Meaning, I'd like to take the expected yearly expense for my car
> insurance, divide it by 12, and move money from my checking account to
> some fake (bank?) account in gnucash.  Then, when one of the payments
> was due, I'd create an expense in the fake acct to pay the bill.
>
> Is it correct in a gnucash/accounting sense to do something like that,
> or should I abandon the idea?  If it sounds okay, what type of gnucash
> acct should the fake acct be?

It's definitely OK from an accounting point of view.  I would make the
"fake" account be a liability account which is for money owed to someone
else (or some other company).

Phil

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Re: Monthly budgeting for non-monthly expenses

Randy Orrison-3
In reply to this post by Dan Werner-2
Dan Werner wrote:
> Hi, I've been using basic functionality in gnucash for a while, and
> I'd like to start getting more out of it.  A specific thing I've been
> wondering about is: how do you budget for something monthly that you
> only pay for once or twice a year?
>  
I use a real savings account (i.e. at the bank - it gets better interest
than my checking account) for exactly this, using gnucash's subaccounts
to keep track of what portion of the account is for which purpose.  I
have a scheduled monthy transfer in gnucash from my checking account
(shortly after payday) to the various sub-accounts in the savings
account (it's a big split), which matches a transfer from my checking
account to the savings account.  It's a bit of a pain to reconcile (the
bank statement of course shows the total of the transfer, but gnucash
only shows the individual splits, not the total), and has to be set up
manually (I've set the Description field for each subaccount to show the
annual total target and montly deposit), but it works great.

Even if you weren't going to use a separate savings account, you could
experiment with using subaccounts of your checking account.  Then you
could see the available balance of your checking account, and the total
would show the real (bank) balance.

Randy

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