how to record credit card payments when budgeting

Herbyme

I'm trying (again) to be more disciplined about recording spends.

I'm self employed so my money comes in in variable dribs and drabs. (This is a budgeting problem in itself, but I've given up trying to find a solution, I just have to deal with what comes in). This means I never have a 'pay day' when there's a lot of money in my current account, but there's enough to cover the month's spends.

I use a credit card to buy bigger items eg plane tickets, so I never go overdrawn, and pay it off bit by bit as my money comes in, always paid off in full each month.

My question: when I record (eg) Sept spends, is it best to record the credit card spends for Sept, or the money paid from my current account to my credit card in Sept? Or does it not make any difference?

TYIA

Curls2208

It surely depends on when you pay your credit card bill and if you pay it off in full etc? Likelihood is that if you buy something in Sept, you may not have to pay it off until your nov bill (depends on your direct debit date, check that).

So if I were budgeting in that way I'd say that it' a big debt on my november spending and not my september.

tempus_fugit

I use YNAB and their philosophy is that you should consider the money gone (even though it hasn't) as soon as you spend on the credit card. The idea is that all spends should be budgeted and an equivalent amount should be earmarked for paying off the amount you have just spent, that way it doesn't get spent on something else meantime. But it's a philosophy rather than a rule and you should just do what works best for you.

Zero_Sum

Download MS money

It depends how you want to moniter your money. Either on an inc&exp basis (which is what I do) or as it sounds for you just cashflow

Herbyme

tempus_fugit wrote: »

I use YNAB and their philosophy is that you should consider the money gone (even though it hasn't) as soon as you spend on the credit card. The idea is that all spends should be budgeted and an equivalent amount should be earmarked for paying off the amount you have just spent, that way it doesn't get spent on something else meantime. But it's a philosophy rather than a rule and you should just do what works best for you.

Tempus, thanks for this, so if I do it this way, do I ignore the money going out of my current account to pay off the credit card? Otherwise would I be counting it twice?

I pay chunks off my credit card as and when I have spare cash in my bank account so it's a bit messy, but I prefer to get the credit card down whenever I can.

I love being self employed but this is one of the few down sides for me, it makes budget planning much harder. maybe I should just rearrange my Direct Debits (which are over several current accounts) and start afresh with a work account and a personal account (both ordinary current A/cs but used for those purposes)

Takmon

carolinerunner wrote: »

I'm trying (again) to be more disciplined about recording spends.

I'm self employed so my money comes in in variable dribs and drabs. (This is a budgeting problem in itself, but I've given up trying to find a solution, I just have to deal with what comes in). This means I never have a 'pay day' when there's a lot of money in my current account, but there's enough to cover the month's spends.

I use a credit card to buy bigger items eg plane tickets, so I never go overdrawn, and pay it off bit by bit as my money comes in, always paid off in full each month.

My question: when I record (eg) Sept spends, is it best to record the credit card spends for Sept, or the money paid from my current account to my credit card in Sept? Or does it not make any difference?

TYIA

So your effectively spending money on the credit card which you don't have yet?. This means your always a month behind in your finances and could lead to trouble if the expected income was delayed or not paid at all.

You should start saving up an emergency fund to use as a buffer with atleast 1 months income. You can then have separate accounts for income, spending and bills. If you setup direct debits to go into your bills account and spending account as per your budget it will all run automatically and the one months buffer will smooth out the dribs and drabs your income is paid in.

Herbyme

Takmon, Yes I am spending money on the assumption invoices will be paid (which they always are), but actually I have more than a months money in a separate savings account, I just don’t like taking it out! I know how easy that is, and how much harder it is to build it back up again.

But you’re right I think, I should just sort my accounts out and create a ‘salary’ which is separate from the fluctuations of the irregular payments that come in. That one needs a bit of thought. I’ve also got 3/4 current accounts, 3 savings accounts and 2 credit cards ( no debt) so maybe I should rationalise them a bit!

Thanks all, good food for thought!

Willing2Learn

I assign all credit card transactions to their applicable budget category spend as soon as the transaction has been made...This makes sure all transactions are correctly recorded to the correct monthly budget.

I use YNAB Classic for Windows and the YNAB Classic Android App

polymaff

https://www.investopedia.com/ask/answers/09/accrual-accounting.asp


As regards your business, use a cash basis or an accruals basis - but don't use one for income and the other for outgoings

RG2015

carolinerunner wrote: »

My question: when I record (eg) Sept spends, is it best to record the credit card spends for Sept, or the money paid from my current account to my credit card in Sept? Or does it not make any difference?

As polymaff says it is a conflict between accrual accounting and cash accounting.

As an accountant in a previous life I am conditioned to use the accrual method and would always advocate this for business including for self employed. However cashflow cannot be ignored else it may well end in tears.

If you pay off your credit card in full every month then there is no real problem in recording this when you pay full balance. I have started doing this now all I manage is my personal finances.

Rich1976

A lot of our joint spends, food, petrol, joint fun money and bits for the house go on our credit card which we share.

This is paid off in full by direct debit on the due date.

As regards budgeting I enter the figures on my spreadsheet( under food, petrol and joint fun ) in the appropriate month that the dd comes out.

So for example everything we put on on the card between the 8th October and 8th November are on the statement produced on the 9th November and because the direct debit is due in the next few days I have entered it onto Decembers budgeting spreadsheet as the salary we received end of November has to pay for it.