Home Budget Tutorial
In Summary Home Budget is like an envelope (double entry) system where each
expense account is like a "virtual" account that allocates money
from the pool of funds (your bank accounts). You then spend from these accounts.
There are always two accounts involved, usually one represents a real
account such as a checking, savings, or credit card, while the other is the
"envelope" or virtual account that reserves the money (or
"Budgets") for expenses. These are the "Expense" accounts.
This simple tutorial takes 5 mins to try and helps you understand how
the Envelope system works.
To get started create a new database under Home Budget using the File menu
select "New", and the filename of "Tutorial" and then use
the New Account Wizard to create four accounts. Choose the type of account as
- A Income account called
- A Bank account called
- A Credit card account called
- An expense account called Groceries
Leave the starting balances at zero for the purpose of this exercise and
take the defaults for the starting dates.
When you are completed creating the four accounts proceed to the Budget
window which will open when you push finish (or can also be found under the
Double Click on the grocery expense
account and modify its amount to budget 400 per month.
Now assuming you get paid via direct deposit to your Bank account from your
employer. You record this transaction showing that amount being deposited into
"Bank" account and crediting your "Income" account.
Create a transaction to credit the Bank account by $1000. Note: the
income account does not really hold any money it just records these funds for
To enter a Transaction you press the left most button on the tool bar. Use
the TAB key or Enter key to progress along the line and press Enter to
complete the transaction and save the information. To abort a transaction at
anytime press the <Esc> key.
If you look at the NetWorth window now, you will see the total cash on hand
(your "Bank" account). It then subtracts the "allocations" (currently
zero) to show you the total "Unallocated cash".
Now open the Budget window under the Setup menu and click on Do Budget
and a transaction will be created in the Groceries
account. Go to the groceries account and have a look at it there. You will
notice that groceries has a balance of $400. This is like having a envelope
set aside with $400 in it, that you will use to pay for groceries. (This money
has been reserved for grocery spending.)
If you look at the Unallocated
cash, it will now show $600. As
it as subtracted the total of all the expense accounts or "envelopes of
money" from the Total Cash on hand (or total of all your Bank accounts).
Lets suppose you went out and bought
some groceries with your VISA card. To enter
this transaction go to the groceries account and
enter the transaction as paid by VISA and a amount of $125. (Tip: The shortcut
to jump to another account it Ctrl-G).
Your groceries account now will of
course show a total of $275. (400 allocated less the 125 spent).
If you look at the VISA account you will notice that the debit/credit is
reversed there as the VISA account is like an envelope that holds all this
money until the VISA bill arrives. When the bill arrives you will have all
the money needed to pay the VISA bill. You would enter this transaction as
debit under the VISA account showing the real account that paid it the bill,
(i.e. "Bank" for example).
The idea is, you develop a budget
that adds up as close as possible to your income. You enter your Income
amounts and use the "Do Budget" function to divide up the money into
the various envelopes.
If you are planning for an
expense that is say 8 months away, a
vacation for example, you can then
divide the total expected expense by 8 and budget this money into a holiday
expense account. The money will then be reserved "allocated" and
ready for when you need it.
For example assuming that was your only purchase using your Visa card for
the month when the bill arrives you pay it using your "Bank" account and record
it against your Visa account which is debited to Zero. You would typically
use the "R"econcile flag under Home Budget to check each item on
your statement with the one entered into Home Budget and clear the Rec Bal:
zero. For more information on reconciling see the online help.
The nice thing about Home Budget is you can enter the transaction in either
of the two affected accounts, i.e. if it is a Visa bill for groceries you can
enter it under the visa account and specify groceries as the other account or
visa versa. (The only thing to remember is for credit card accounts you reverse the debit
credit if entering under the credit card account). I pile up all my Visa
receipts each month and enter them under the VISA account.
<<Back to Home Budget
- If you have an excess amount
of money in an expense account and want to move it to another, you can just
enter a transaction between the two expense accounts.
- You can edit a budget transaction like any other transaction to change
the amount allocated into the expense account.
- You can enter income directly into an expense account i.e. deposit into
"Bank" and record against groceries. You just loose the fact that it
was income for reporting, and it is immediately
allocated by the expense account that you deposited it into.