Author Topic: Tracking expenses - when paid or when incurred?  (Read 2786 times)

mynewchoice

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Tracking expenses - when paid or when incurred?
« on: January 03, 2018, 04:23:49 PM »
My wife and I each use one primary credit card for most of our purchases and/or automated billing, and historically I have entered the expenses into my spreadsheets on the month when they are paid as opposed to when the purchase was made.  For example, my wife's credit card bill that is due next week has charges from the middle of November through the middle of December and there is a charge for $65.00 for groceries from November 19th.  Normally, I would simply enter that as part of my January groceries because I am paying it now, rather than going back and entering it for November.

As we embark on a new year, I am wondering if I should change that and enter them in the month they are incurred.  If I take that approach, I need to either go back retroactively and update old months (i.e. as I pay January's bill now, I need to go back and update Nov/Dec costs) or I need to more actively enter transactions from the credit cards as they occur.  I know part of this problem may be due to my manual tracking with spreadsheets, as I believe moving to a service like Mint would eliminate this issue.

For those that manually track your expenses / budget, how do you handle this situation?  Do you record in the month the expenses actually occurred or when you are paying the credit card bill?  In the end it all balances out but was curious how others do it.

seattleite

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Re: Tracking expenses - when paid or when incurred?
« Reply #1 on: January 03, 2018, 04:36:39 PM »
I've thought about it a bit and honestly I really like entering it when it's occurred. It means that my spreadsheet numbers aren't always the same as my numbers as shown in my bank account but I feel like this more accurately describes my finances.

I figure my credit card is just an intermediary and I pretend as those aren't bills at all.

I believe that accountants do something similar in their double entry bookkeeping.

mynewchoice

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Re: Tracking expenses - when paid or when incurred?
« Reply #2 on: January 03, 2018, 05:23:59 PM »
I've thought about it a bit and honestly I really like entering it when it's occurred. It means that my spreadsheet numbers aren't always the same as my numbers as shown in my bank account but I feel like this more accurately describes my finances.

I figure my credit card is just an intermediary and I pretend as those aren't bills at all.

I believe that accountants do something similar in their double entry bookkeeping.

Thanks, so do you retroactively go back and update the spreadsheet numbers when you receive the credit card bill?

Lady SA

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Re: Tracking expenses - when paid or when incurred?
« Reply #3 on: January 03, 2018, 06:46:01 PM »
I do it as the expenses occur, but then I pay off my credit card weekly and I don't wait for the bill to come due.

Altons Bobs

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Re: Tracking expenses - when paid or when incurred?
« Reply #4 on: January 03, 2018, 06:49:28 PM »
It's easier if I just put in the credit card amount owed on my spreadsheet, and not have to worry about when each expense was incurred and which category. I just need to know how much we spend on average per year. That's how I track our expenses, I'm sure a lot of people don't agree with the way I do it, but it's what works for me.

Dusty Dog Ranch

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Re: Tracking expenses - when paid or when incurred?
« Reply #5 on: January 03, 2018, 07:11:52 PM »
I do it like you are currently because I use the credit card bill to figure out how much we've spent in the various categories we have in our spreadsheet. Then I pull info from the bank accounts in the same time frame as the billing cycle. It would be a pain to do it otherwise. I don't have cash flow concerns, so there's no advantage for me to do it differently.

What problem are you trying to solve by changing how you record expenses?

Llewellyn2006

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Re: Tracking expenses - when paid or when incurred?
« Reply #6 on: January 03, 2018, 07:18:20 PM »
I enter them based on the date they occur. I sit down after the end of each month and spend a couple of hours entering all bank and c/c transactions in one go rather than do it at different times during the month. I tried doing that and it got too confusing remembering what I had entered and what I hadn't.

As long as you're consistent I don't think it makes too much difference
« Last Edit: January 03, 2018, 07:21:12 PM by Llewellyn2006 »

Blackeagle

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Re: Tracking expenses - when paid or when incurred?
« Reply #7 on: January 03, 2018, 07:18:42 PM »
I track as of when the expense gets charged to the credit card.  I use YNAB and I try to enter each charge at the moment I make the purchase.  Then every week or so I look at my account online and catch any that I've missed.

mjb

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Re: Tracking expenses - when paid or when incurred?
« Reply #8 on: January 03, 2018, 07:23:21 PM »
My wife and I each use one primary credit card for most of our purchases and/or automated billing, and historically I have entered the expenses into my spreadsheets on the month when they are paid as opposed to when the purchase was made.  For example, my wife's credit card bill that is due next week has charges from the middle of November through the middle of December and there is a charge for $65.00 for groceries from November 19th.  Normally, I would simply enter that as part of my January groceries because I am paying it now, rather than going back and entering it for November.

As we embark on a new year, I am wondering if I should change that and enter them in the month they are incurred.  If I take that approach, I need to either go back retroactively and update old months (i.e. as I pay January's bill now, I need to go back and update Nov/Dec costs) or I need to more actively enter transactions from the credit cards as they occur.  I know part of this problem may be due to my manual tracking with spreadsheets, as I believe moving to a service like Mint would eliminate this issue.

For those that manually track your expenses / budget, how do you handle this situation?  Do you record in the month the expenses actually occurred or when you are paying the credit card bill?  In the end it all balances out but was curious how others do it.

The way I see it:

- the date of purchase is just that, whether made by credit card, cash, or trading goats
- the payment of the credit card is a transfer from my checking account to the credit card -- not a separate expense.

Your method makes no sense to me as you're confusing cash flow w/ expenses (I'd wonder why, say, I had a bunch of "Christmas gift" expenses in January, for instance). but hey, I don't have to wake up every day and be you! Do whatever makes sense to you.

mynewchoice

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Re: Tracking expenses - when paid or when incurred?
« Reply #9 on: January 03, 2018, 08:54:46 PM »
Thanks for the feedback everyone!  I appreciate the responses and it was interesting to see the different approaches.

--

I do it as the expenses occur, but then I pay off my credit card weekly and I don't wait for the bill to come due.

Thanks for the feedback, we pay ours off every month but we do wait for the bill.

It's easier if I just put in the credit card amount owed on my spreadsheet, and not have to worry about when each expense was incurred and which category. I just need to know how much we spend on average per year. That's how I track our expenses, I'm sure a lot of people don't agree with the way I do it, but it's what works for me.

This is similar to how I feel, as I am not overly concerned where each dollar went if we are within our overall annual budget.  But I do like having some categorization so I can see where we can tighten the belt if something is amiss or our priorities change.

I do it like you are currently because I use the credit card bill to figure out how much we've spent in the various categories we have in our spreadsheet. Then I pull info from the bank accounts in the same time frame as the billing cycle. It would be a pain to do it otherwise. I don't have cash flow concerns, so there's no advantage for me to do it differently.

What problem are you trying to solve by changing how you record expenses?

I think that is a big reason why I've done it the way I do as we don't have cash flow concerns and to do it more actively seems like it would be more work for me, versus the once a month I tend to do it all now.  Your question is a good one, and I would say there really isn't a problem that I am trying to solve but as my wife and I sat down over the weekend to review our budget and planning for 2018 it got me to thinking.  She tends to be quite hands off when it comes to managing the finances, and when I explained how I do it now it didn't make sense to her and she would enter everything as it occurred.

For now, I am going to continue doing it as I have been with my spreadsheets (and MS Money--yes I still use it as I just love that old app) but have also signed up with Mint and set everything up for more active tracking.  My wife has installed the app so she can start getting more engaged as well, and I think she will connect with that view of things better than my spreadsheets and MSMoney.

I enter them based on the date they occur. I sit down after the end of each month and spend a couple of hours entering all bank and c/c transactions in one go rather than do it at different times during the month. I tried doing that and it got too confusing remembering what I had entered and what I hadn't.

As long as you're consistent I don't think it makes too much difference

You're right that the consistency is key, and therefore I think it is best to just keep doing what I've been doing as it works for me.  I think having my wife get a little more involved as we reviewed our annual planning made me rethink things, and ultimately I want to encourage her participation and therefore was thinking what would click with her--hence why I signed up for Mint tonight.

I track as of when the expense gets charged to the credit card.  I use YNAB and I try to enter each charge at the moment I make the purchase.  Then every week or so I look at my account online and catch any that I've missed.

Thanks for the feedback, I thought of signing up with YNAB but opted for Mint instead right now as I think my wife will find it easier/better.

The way I see it:

- the date of purchase is just that, whether made by credit card, cash, or trading goats
- the payment of the credit card is a transfer from my checking account to the credit card -- not a separate expense.

Your method makes no sense to me as you're confusing cash flow w/ expenses (I'd wonder why, say, I had a bunch of "Christmas gift" expenses in January, for instance). but hey, I don't have to wake up every day and be you! Do whatever makes sense to you.

Haha, that is basically how my wife was thinking about it too.  And I really can't say it is wrong as it is the way it logically makes sense.  The way I have been doing it is largely out of a time / convenience factor and I don't mind seeing Christmas presents in January (or even February for those last minute gifts) or 4th of July groceries in August/September.  The more I talk about it the more I realize it is pretty wonky, but it does work for me so I am going to stick with it for now as we start using Mint to supplement my spreadsheets.

netskyblue

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Re: Tracking expenses - when paid or when incurred?
« Reply #10 on: January 04, 2018, 04:05:44 PM »
I track based on when the charge posts to my bank or credit card.  For example, I made a couple purchases on New Year's Eve, which posted to my bank on 1/3/18.  I count those as 1/3/18.  This makes it easier when I need to reconcile my spreadsheet with my bank account in the event I forgot a charge.  I enter credit card expenses the day they show up as posting to the credit card.  Pay off in full every month, then when it actually comes out of my bank account each month, those charges are already accounted for.


HOWEVER - while I do have a "$X/month" budget, it's a rolling thing.  I delegate dollars from each paycheck into each category, and what doesn't get spent is still there to be used the next month, etc.  So a charge from December posting in Jan doesn't "put me over" for Jan.  The money was already there (or at least it should have been, if I'm budgeting right!)

seattlecyclone

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Re: Tracking expenses - when paid or when incurred?
« Reply #11 on: January 04, 2018, 04:09:35 PM »
I use Quicken. Credit card purchases go straight against the net worth on the day they are made. Paying off the credit card is treated as a transfer between accounts that has no effect on the net worth. This seems to make sense to me.

mynewchoice

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Re: Tracking expenses - when paid or when incurred?
« Reply #12 on: January 04, 2018, 07:30:37 PM »
After giving this some more thought last night, I am going to switch up my approach and do what many of you here are doing and start recording those as and when they occurred versus when I pay off the credit card bill.  It might add a little overhead as I get used to doing it a new way, but then I just need to reconcile that when the credit card bill comes.  My rationale for changing is because that is how my wife thought of it logically, and I've wanted to get her more actively engaged in our finances for a long time--so I want to embrace what makes sense to her as to do it my way would only discourage her.

Thanks again for all of the feedback.

Zamboni

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Re: Tracking expenses - when paid or when incurred?
« Reply #13 on: January 04, 2018, 08:37:07 PM »
I think you are making the right call in changing it up. Both methods are reasonable, but getting your wife on board is important enough to invest some of your time in doing a few things her way.

Well done!

Laura33

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Re: Tracking expenses - when paid or when incurred?
« Reply #14 on: January 05, 2018, 07:13:27 AM »
I use Quicken. Credit card purchases go straight against the net worth on the day they are made. Paying off the credit card is treated as a transfer between accounts that has no effect on the net worth. This seems to make sense to me.

+1.  I always view the relevant date as "the date I incurred the obligation to pay for the thing," not the date the payment was actually made.  When I was just starting and things were tight, I literally wrote down everything I bought in a notebook and entered them at night (that was also in the Stone Ages, before you could pull up your CC or bank account balances online).  That way I knew that when the CC bill came, I'd have enough in the account to pay for it, because I had already accounted for it as an expense.  I also tracked only income and outflows and did not pay any attention to transfers between accounts.

Now we are in a very different situation, and so I tend to use Quicken to see how I did retrospectively rather than to track daily.  But since everything is online now, I can just automatically download the CC balances any time I want to check and categorize the expenses that way.  So the operative date that I "count" is still the date the charge is made (or, technically, posted; I don't worry about a day or two here or there).  But if I want to really focus on a particular category for a while (like the grocery challenge this past year), I still do that the old-fashioned way:  I write it down in the "notes" section of my phone every time I spend anything and add it all up at the end of the month.

I also commend you for being open to changing things around to make your wife more comfortable.  My DH did not do that -- he saw my simplistic approach above and laughed at it, and insisted we set up all of our different accounts in Quicken and track all of the transfers between them, too.*  As a result, I basically said "fuck it" and gave up tracking for a couple of decades there, because it was a giant PITA and way more detail than I needed or cared about.  I honestly only started paying attention again a year or two ago, because I realized the CC automatic download feature once again made things sufficiently simple and the PITA factor was reduced sufficiently.  So, yeah, if you want your wife engaged, it is in your best interest to track things in a way that makes sense to both of you and that she will/can implement easily.

*Giant eye-roll here, as at the time I was the one with assets and savings, and he was the one with toys and CC debt.  Welcome to mansplaining: the '90s version.

mynewchoice

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Re: Tracking expenses - when paid or when incurred?
« Reply #15 on: January 05, 2018, 10:25:54 AM »
I think you are making the right call in changing it up. Both methods are reasonable, but getting your wife on board is important enough to invest some of your time in doing a few things her way.

Well done!

Thanks, it took a few hours to settle in through my thick skull but I am glad that I came to that realization and am happy to do whatever I need to do to have her actively engaged in this with me.

I also commend you for being open to changing things around to make your wife more comfortable.  My DH did not do that -- he saw my simplistic approach above and laughed at it, and insisted we set up all of our different accounts in Quicken and track all of the transfers between them, too.*  As a result, I basically said "fuck it" and gave up tracking for a couple of decades there, because it was a giant PITA and way more detail than I needed or cared about.  I honestly only started paying attention again a year or two ago, because I realized the CC automatic download feature once again made things sufficiently simple and the PITA factor was reduced sufficiently.  So, yeah, if you want your wife engaged, it is in your best interest to track things in a way that makes sense to both of you and that she will/can implement easily.

Thank you, and I appreciate your feedback as I've seen your contributions on quite a few other threads here and I truly value and respect your thoughtful replies.  As you noted, where we are right now means doing my retroactive tracking has been fine but the change in approach will be good as it means my wife and I will be working collaboratively--and to me that is a huge win.  I've also setup Mint so she can access that from her phone and see things there if she prefers to have that view.

Michael in ABQ

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Re: Tracking expenses - when paid or when incurred?
« Reply #16 on: January 05, 2018, 10:48:05 AM »
We're on a cash basis (no credit cards) so expenses are entered the month they occur. We break things downs to a pretty detailed level. I believe we track about 30 individual categories, several of which we keep track of the total (insurance and utilities since each have several different categories) as well.

Frankly it was a hassle when using a credit card because it messed up my cash flow tracking. In fact I had to start tracking cash flow because we used to run almost every single purchase through credit cards. That worked fine until we weren't able to pay them off in full each month. Now that we're strictly cash if we don't have the money at the time of purchase, we don't buy it. Makes things much simpler.

In you case having both people on the same page is hugely important. My wife is still somewhat overwhelmed by my big spreadsheet but she's very comfortable with having envelopes of cash that we fill up at the beginning of each month and then add receipts to as we pull out money.