The credit card transaction looks like this:
expense: Amount
Card: Amount
budget: Amount
budgeded cash: Amount

Later when I pay the card, that is just a transfer of money and no budget account is used:
card: Amount
bank account Amount

We always keep the budget tied to actual things we buy and then later when we are paying cards off or transferring money between accounts, those transactions don’t affect the budget.

When I buy food, I pay for it with a credit card (get cash back, provides more security over real money, etc…). What would this type of transaction look like? Without a budget, I would have a payment to my expense food account and a charge to the credit account. Later when I pay my credit card bill, I would have a payment to the credit account and a charge to the checking account.

I’m unsure how to work in the budget transactions. I still have the money in my checking account after I make the food purchase through the credit card, but I want to remove the amount from the food budget.

Can you help me? I’m not great when it comes to understanding finances.

Another huge benefit of this system (that can’t be replicated with any other system that I’m aware of) – your budget accounts don’t have to mirror your expense accounts. Take a $1000 house payment, for example. From an expense perspective, I want to track the $100 principal (txfr to the Liabilities:Loans:Mortgage acct) and the $900 interest (txfr to the Expenses:Interest:Mortgage Interest acct). From a budget perspective, however, I only care about the $1000 total that will be spent this month (txfr to the Budget:Housing budget account).

This makes it possible to track my expenses at a different level of detail than my budget – something I’ve been wanting to do for years.

Another benefit if you’re doing zero-based budgeting (where “every dollar has a name”) – you can very easily compare your Budget:Budgeted Cash total to your Assets:Current Accounts (bank accounts + cash on hand) total – they should always match if you’re doing it right.

I tried tracking my finances with GnuCash about a year ago and at the time it would barf on the .ofx/.qfx files that I got from my investment accounts but it did ok with checking/savings accounts.

Between the investment account problems and having to import transactions manually I eventually gave up.

I have played with the new version (2.3.7) and the problems with the investment accounts seem to be resolved, so I’m ready to give it another whirl, this time with an emphasis on budgeting rather than just tracking what’s going on.

But if there’s a way to make it easier to get the transactions into GnuCash in the first place that would make me more likely to stick with it this time.

Thanks for the great write up

My budget is working now
The key was to use liability-accounts for ALL Budget-accounts.
Now I just have to convince “mrs peswe” about the benefits of using “quad entry” instead oh double entry accounting. I can definitely see the benefits…

Thanks again for sharing your ideas
/ Peter

/Peter

Budget: (0)
->Budget1 50
->Budget2 25
->Budgeted Cash -75

Of course, you can stick the accounts wherever you want, but like you said, it can effect reporting depending on where you put them. This is the way that I think I like it best.

i.e., where we put the money isn’t important, where we spend money is.

Aftr registering the income to checking, I’d do many transfers from Checking to each sub-account as per budget.
Then, I would register each expense against the corresponding subaccount(s).
This wouldn’t change the balance either (as the budget accounts are checking’s sub-accounts) and I think every item of your requirements would be fulfilled.
What do you think?

I revamped my accounts configuration according to your post and I’m loving it!

Just a short question, what “Report” features do you find useful for this budgeting method? What do you do to answer the following questions:
1. How much did I spend for this month?
2. Did I go over the budget this month?
3. How much did I spend on food and transportation this month?
4. How much was my net-income for the last quarter?
5. Which area can I spend less and save more?

Since you’ve been using this tool and method for quite a long time, you probably asked these questions as well

*this can be a topic for another blog post *

I’ve been doing this for about 4 months now, and I’ve still loving it. Most of the work of the split transactions can be avoided by using scheduled transactions. The rest of the time, I don’t find it too much more work to enter which budget the money came from. Having an always up-to-date budget is working out very well for us.