Transactions involving money from the budget and money from elsewhere
Went to Target today (famous last words). So in my family, the vast majority of our spending is handled from accounts that are in our YNAB budget, and tracked accordingly. But every once in awhile one of us gets a cash gift from somewhere and stores it in a drawer —and sometimes, especially around the holidays, that cash comes into play to help offset big expenses. Accounting for this is sort of interesting.
For example, let’s say that on today’s Target run we bought $100 worth of Halloween decorations. At the register, we paid $40 in off-budget cash, and then the remaining $60 on our budget-linked debit card.
There are a few ways to notate this in YNAB, and the effects of each are subtly different.
Option 1: Only log the part of the transaction that came from the debit card. That is, log a -$60 transaction, -$60 of which is categorized as “Halloween.”
Option 2: Log a -$60 transaction in the debit card account register, but set it up as a split. Both splits are categorized “Halloween;” one is -$100 to account for what we actually spent, and the other is +$40 to account for the cash offset.
Option 3: Same as Option 2, but categorize the +$40 cash offset split as “Ready to Assign.” In theory this should result in a $40 increase in the budget’s RTA number, which I can then move into “Halloween.”
All three options (if Option 3 works as I’ve described, which it sometimes doesn’t) produce the same overall result in the budget: -$60 on the debit card, and -$60 in the Halloween category. The differences come into play in reporting.
Under Option 1, it looks like we only spent $60 when we actually spent $100 —this is fine if the extra $40 is really truly something we would never have done if we hadn’t had the extra cash available. But if it’s reasonable to expect we would have spent it either way, then it’s not great to have the actual amount misrepresented.
Under Options 2 and 3, the spending report accurately reflects the full $100 spent in that category, but the cash offset is represented differently. Option 2 treats it as a category-level offset, whereas Option 3 treats it as income.
Of course, that’s assuming that Option 3 works as expected. In some cases (today, for example), I’ve found that marking the cash offset as “Ready to Assign” does not actually result in an increase to the budget’s RTA value. I’m not really sure what happens to it —the net result seems to be the same as Option 1, which I don’t think is correct.
I was hoping for some feedback on all of this —best practices in general, but especially if anyone knows why I’m getting unexpected results for Option 3. From a reporting perspective I can see both 2 and 3 having valid use cases in different circumstances, but only if they both work as expected.
Thanks for any help you can offer!
I'd make a gift card account, inflow the gift card (and any others) there as RTA. This is separate from the purchase.
Then, split from the payment (checking/CC) account as follows:
Line 1-negative $60 as it hit your account
Line 2- negative $100 from category
Line 3- positive $40 transfer from GC account
I like this because I can see how much I actually spent in Halloween stuff, regardless of payment method.
If, however, you don't want to have a GC account, go with your #3. The fact that your RTA didn't increase means you have other funky stuff going on elsewhere in your budget (SFTF, likely).
Forest Green Viper said:
Of course, that’s assuming that Option 3 works as expected. In some cases (today, for example), I’ve found that marking the cash offset as “Ready to Assign” does not actually result in an increase to the budget’s RTA value.
Are you budgeted in a future month? Do you have unresolved cash overspending in this month? It could be the perennial SFTF issue.
For me this decision would come down to how often and how much $ this involves. If this is a few hundred $ a year in a couple of categories, I'm going with option 1. If this is a regular, ongoing way I'm managing my money, I'm setting up a cash account and tracking it accurately. ETA, I don't see as scenario where I'm trying to jump through the hoops of option 2 or 3.
I have an on budget cash account where any cash inflow is recorded. Usually for things like used stuff I sold etc. For birthday money, that is not entered until I use it for something. So in your situation I would actually have handled it like this.
Take the physical cash (currently stuffed in a drawer) and put it in my wallet where I have on budget money (my wallet has 2 sections - one for budget cash and one for my cash). Record that as inflow to the cash account. I would probably categorize directly to the birthday gift category and then WAM to Halloween. That way the fact that I contributed my birthday money to something is not lost in the big picture (I want that in there for the record 😉). Buy the item 100% using the debit card. Record that in YNAB as normal.