On May 31, 2009, at 1:30 PM, CarmineM wrote:
> Am I supposed to drag'n'drop from Salary bucket to destination buckets
> for every spending transactions recorded in the checking account, or
> am I doing something wrong?
That's exactly the type of action that defines the bucket/envelope
method.
Let's pretend to get a clear picture of why you use buckets/envelopes
at all:
Let's not use banks in this example, just cash, as though you were
using real buckets.
- You bring home your pay and place all that money in a big bucket,
labeled Salary,
- Now you have to pay all your bills & expenses from that big bucket
of money,
(Note: This is how regular accounting apps work)
- You decide that just pulling money from the Salary bucket as needed
isn't a very good way to keep track,
- You get a bunch of little buckets and label them for each bill &
expense,
- Now you start taking money from the Salary bucket and place it in
the little buckets,
NOTE:
At this point, you now have a bucket for each bill & expense you have
to pay during the month. The amount in each bucket is determined by
how much each bill & expense happens to be, or at least a good guess
at how much you think you will need for that expense for the month.
Also note that you still have the same amount of money you originally
had in the big bucket. It's still your money in your possession, just
divided into more buckets instead of just one big bucket.
Let's continue:
- As each bill needs to be paid, you take the money from the correct
bucket and pay the bill.
- At the end of the month, all your expenses were paid and all the
little buckets are empty.
- New month starts, you put your salary into the Salary bucket and
repeat the above steps.
NOTE:
Obviously, once a bucket is empty, you can't spend anymore money from
it, therefore, you cannot overspend.
The process of distributing the money in your Salary bucket into your
expense buckets is called allocating your income. MoneyWell can do
this according to a plan you set up, or you can do it manually, which
is what you were doing by drag'n'drop.
MoneyWell wants you to learn what your spending habits are so that you
can hopefully start saving money and stop overspending. One way to do
this is to determine ahead of time how much you need for each expense,
place that much money in that bucket, then don't spend any more than
that.
Now for your unexpected bucket behavior:
> The behaviour I expect is that, upon recording a transaction that
> moves $20 from the checking account to the "Fuel" bucket, this bucket
> should show a "-$20". Indeed, it does.
> I also expect that the Salary bucket goes from 1223,85 to 1203,85 as a
> "side effect" of the above mentioned transacion. Instead, it remains
> steadily anchored to its original value.
You did not put any money into your "Fuel" bucket before you did the
transaction. What happened is you spent money from the bucket that
wasn't there, so the bucket ended up with negative amount in it of -20.
The Salary didn't decline by 20 because you hadn't taken $20 from it
and put it into the Fuel bucket. You did do it after you recorded
that transaction by the drag'n'drop.
That's why you are suppose to allocate(distribute) your Salary into
your expense buckets before you pay your expenses, so that you know
before hand how much you have to spend for each expense. Then, when
you record the transaction, like your Fuel, the bucket amount will go
from $20 to zero.
If you have buckets showing negative amounts, then you've overspend
and you need to take more money from your Salary bucket, or from any
other bucket that still shows a positive amount. Remember, the money
in the buckets is money that is still in your possession, unspent,
just like in the cash example above. That's why you can move the
money around from bucket to bucket by drag'n'drop. You could even put
it back into you Salary bucket if you want. When a bucket shows a
negative amount, that's money that you don't have anymore, you spent
it, so you need to move money into it from another bucket to show how
much cash you actually still possess.
Terry
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