Budget is a way to set what you expect of income and expenses during a month. In the service you may easily set a budget by navigating to "Budget" either from the menu or from your dashboard. Start by clicking "Create budget post" and fill in either account group or account, and a desired monthly amount.
Figure 1: Screenshot of budget post form.
It can seem difficult to choose a monthly amount for a budget post. Just remember that you can look at it two ways; either as a goal ("I will not spend more than this amount") or as an estimate of what you expect to spend. To get a more accurate picture of what the estimate should be, it is important to have historic data.
Add transactions from a few months prior (e.g., the last three full calender months). Thereafter, navigate to "Expenses" and select an account or account group you wish to create a budget post for. Finally, you can look at the balance for each of the months you have transactions for and use an average of these as a monthly amount in your budget post.
An important part of budgeting is to actually follow it. In your dashboard, you may easily see what you have spent during the current calendar month per budget post. We calculate amount spent differently across the different account types:
The reason for the calculation being different, is that transaction types depend on the account type of each post within a transaction.
Figure 2: Screenshot of budget spending in dashboard.
When you create a budget post on an account of type "Asset", it is interpreted as a savings goal. You are budgeting that the specific asset will increase in value corresponding to the monthly amount. The difference between incoming and outgoing is the increase in value (may be negative if outgoing is higher than incoming).
When you create a budget post for debt, you are budgeting that the debt will decrease – i.e., you repay the debt during the period. Note that expenses related to the debt, such as interests and fees will not be included in the budget as this is money that will generally go out of the debt account or another account.
When you receive income, such as salary, the income account has an outgoing amount and one of your assets has an incoming amount. To find out how much is received (spent by the income account) according to the budget, we need to look at the total outgoing amount during a period. However, we also need to take into consideration the fact that sometimes it is necessary to correct the income, e.g., if you have received too much in salary and you need to pay back to your employer. Therefore, we subtract the incoming amount to an income account.
When you purchase goods or services, the money goes out from one account and goes into an expense account. There are some exceptions for money going out of the expense account. This can occur for instance when you return something you purchased or that you receive a refund for some other reason. Therefore, we subtract the incoming amount to an expense account.