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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ajmers on January 08, 2013, 08:02:21 AM

Title: Accounting for 'make-up' payments
Post by: ajmers on January 08, 2013, 08:02:21 AM
Hi Mustachians!!

I've been trying to go Mustachian for a few months coinciding with a move, lower rent and a raise. My nifty (if I do say so!) Excel spreadsheet for tracking everything you can think of has been a big help. I have a quick question - I'm looking for suggestions of how to account for the additional payments I'm making on my car each month.

Each month I deposit a certain amount automatically into my Roth IRA, 401k, and savings account. Then, at the end of the month, I've been taking anything that's left over after all my expenses and using it to make an additional car payment to pay down the principal. I'm paying this out of my 'daily operating budget' (I have a "Funding Source" column) but technically it's not daily expenses. I could just add another column but I was wondering if anyone has a more elegant way of classifying things like this? (My pivot table filters are getting too complicated!)

Thanks for your help!
Title: Re: Accounting for 'make-up' payments
Post by: ShavenLlama on January 08, 2013, 10:14:03 AM
I'm not sure if this answers your question exactly, but has an amortization calculator that will help you see how much closer your getting with each extra payment. This particular ones says it's for a mortgage, but same difference with a car loan. Just punch in length of loan, amount owed, rate, and how much extra you're putting. (
Title: Re: Accounting for 'make-up' payments
Post by: ajmers on January 11, 2013, 12:15:08 PM
Thanks for your reply! That calculator is SO helpful!

I guess I didn't phrase my question very well though. I basically divide my expenses into:

- 'Daily', expected things like food and all my bills, rent, car payment, birthday gifts, etc, which is paid by my salary (anything that I don't use goes into savings) and I graph this monthly to see how I'm doing on the 'normal' stuff;
- 'Other', which is any big purchase that I have to plan for such as a vacation, new snowboard, unexpected car repairs that put me over my monthly salary, etc, and this gets paid for out of other income such as bonuses or monetary gifts.

I guess I have two things I'm trying to track - 1) that my income from each funding source is bigger than my expenses from that source, but also 2) what kind of trend my 'living' (daily) expenses are following. I've been using all my leftover salary each month to make principal payments on my car, and if I count this as 'daily', it (obviously) shows my monthly spending as being always equal to my income, even though I could've done really well that month and made a big extra payment, which is really a form of savings in my mind. I am (like everyone here) very Excel-savvy but I'm just trying to 'theoretically' decide which attribute of these payments (funding source? or define some new attribute?) I should change so that I can most efficiently track those two things.  :)

Also, do you think it's a bad idea to consider 'big purchases' separate from monthly spending?
Title: Re: Accounting for 'make-up' payments
Post by: new2this on January 11, 2013, 12:45:10 PM
I would love to see your spreadsheet, I hate when I make large annual purchases and it looks like I've way overspent that month even though I'd been saving for it throughout the year. As far as the principal you are applying toward the car, I am still in debt repay mode as well and I like to classify the payments as savings rather than expenses. Maybe not the right way, but I figure its increasing my net worth so I like to put it there.
Title: Re: Accounting for 'make-up' payments
Post by: ShavenLlama on January 11, 2013, 03:01:25 PM
I wouldn't necessarily classify extra car payments as "savings" because you are throwing cash at a depreciating asset. Certainly you are saving in interest, but you would have been better off altogether to have not borrowed the money to start with.

Yes, get rid of the car payment ASAP, but picture it more as you're filling in the red hole. You won't have some big lump sum awaiting you at the end, just a vehicle worth less than what you just finished paying for. :(
Title: Re: Accounting for 'make-up' payments
Post by: Fuyu on January 11, 2013, 08:42:10 PM
Maybe you can treat the extra car payments as a prepaid asset?

Could you elaborate how you set up your excel sheet? I don't see why it would be necessary to have multiple columns separating the expenses and funding sources or multiple filters on your pivot table.
Title: Re: Accounting for 'make-up' payments
Post by: smalllife on January 12, 2013, 09:27:09 AM
I wouldn't necessarily classify extra car payments as "savings" because you are throwing cash at a depreciating asset.

I think it depends on the meaning of "savings". If one looks at is as reducing liabilities, then yes, I would categorize payments to principal as savings in so far as is moves the net worth ticker upwards.  They are throwing cash at a debt, the fact that it is on a depreciating asset has nothing to do with the money owed (same principle applies for mortgages or credit card debt).
Title: Re: Accounting for 'make-up' payments
Post by: ajmers on January 12, 2013, 01:16:47 PM
Here are a couple of screen shots, because all the columns wouldn't fit in one :) All the grey columns are formulas based on what I enter:
-Post date for debit/credit entries (stopped using this because it was a pain and not useful)
-Name of entry/merchant
-detailed description if necessary
-Item (category, I have about 15 or 20)
-Method of payment (Debit, credit, cash, check, etc)
-Funding source (how much of my bonus have I used?)
-Expense (is this a reimbursable work expense? I travel a lot)
----Envelope - if it's a work expense, for what trip/envelope (this is what Expensable calls an expense report)?
-Recurring bill? Yes/No (rent, car insurance, car payment, utilities, to check if I've paid/entered all the recurring expenses I expect
-Reimbursed date (if a work expense)
-Visa Paid date (if paid by credit)

All the grey columns are helpful for pivot table filters. The shot with the graph shows income vs spending by month, filtered on "Daily Operating Costs". The make-up payments are currently under this funding source so they show up as an expense here, whereas Christmas gifts and vacations don't.

Hope that's helpful :)
Title: Re: Accounting for 'make-up' payments
Post by: Fuyu on January 12, 2013, 03:32:07 PM
Opps, sorry. I had a completely different idea of how you were setting up your excel sheet. I thought you had a separate column for each funding source. Your excel sheet is amazingly detailed! I only keep track of the expenses, not their related cash flow.
Title: Re: Accounting for 'make-up' payments
Post by: ajmers on January 13, 2013, 12:05:55 PM
Well, I figured with minimal extra effort I could get a lot of information out of it if I included EVERY transaction, whether it's income, transfer, or expense. The funny part is I developed it all before I found out about, so I basically created my own Mint, just with a few other useful graphs like "outstanding credit vs. checking account balance".