My "budget" runs from the 15th to the 15th of the following month. Best practices?

mrpiano

Hi there! New user of Simplifi and have a question that I hope you can answer!  I get paid on the 15th and the 30th of the month.  So, when I put 2 checks in as "income," realistically, the second check has to get me through the first 2 weeks of the following month.  Put another way, my "budget month" really runs from the 15th of the month until the 15th of the following month, not the 1st day of the month through the end of the month, which would make things neat and tidy.  The issue this is causing is that my 2 paychecks are adding up to an amount that's falsely telling me I have a huge amount of money left over, because the software thinks I'm getting both of those paychecks as usable cash for that particular month, which is not the case.  My mid-month paycheck gets me to the end of the month, and my end of the month paycheck gets me to the middle of the following month.  What's the best approach for handling this?  I'm not really able to budget accurately when it looks like I have all this money laying around that isn't really "there."  I do see the ability to create a custom amount for my income.  Should I just override my bank amounts to account for the off-cycle payroll? 

One strategy I am trying is to change my payroll frequency: One check on the 15th, and then the other, instead of being on the 30th of the month, I have moved it to the 1st of the following month even though that's not exactly what's truly happening. Is the approach I am taking here "reliable" so that if I stick to the budget I have created I will truly have the amount leftover that Simplfi is telling me I will have (so long as nothing changes such as unplanned expenses, etc). I realize math is math, but I'm a little excited about the possibility of going into the next month with a positive balance and just want to make sure I'm not jumping the gun. Thank you!

DannyB

@mrpiano

I don't want the "release available for spending" to carry over to the next month. I want to pretend it's not there, basically and just start the budget fresh month over month

Every month starts from scratch so to speak. Nothing rolls over from the previous month unless you have set up one of your Planned Spending categories as a rollover.

You won't see any of the "left at end of month" in the next month's plan.

DannyB

Hi @mrpiano

Welcome to Quicken Simplif!

Others have raised this "issue", and there is a feature request to that end that you can add you support for by upvoting it and adding your comment on how this feature would benefit you.

https://community.simplifimoney.com/discussion/2207/customize-budget-cycle-as-opposed-to-month-to-month-3-merged-votes

I have always planned/budgeted by the calendar month without regard to my pay cycle. I have had both an every-two-week pay cycle and a twice a month cycle (for me it was the 1st and 15th, which I suppose psychologically would be a better fit for monthly planning). Currently my income is received on or about the 1st and on the 2nd Tuesday of each month.

Cashflow, however, is not always the same as budgeting or planning, so I get it. The Spending Plan is a tool to help you plan out your monthly spending, of course, but it's not necessarily a cashflow tool. The cashflow tools are incorporated into your individual account views at the top of each account page and in the "Bills & Income" page on the "Cashflow" tab.

For what it's worth I would leave your payday dates as they are. Instead, I would work on "aging" my money. What I mean by that is that I would work toward having the funds needed to cover any given month's expenses (however you define "month") in the bank one month before needed. If you can do this, your pay cycle won't have a significant impact on your monthly spending plan.

For you for now, I would work toward shifting when I need the funds from each paycheck to the two week period prior to when the paycheck lands in your account. If you can do this, you won't need the paycheck funds that arrive on the 30th until the 15th of the next month and the funds from your 15th paycheck won't be needed until the 1st of the next month.

So your cashflow is such that you have the funds in place for the upcoming two (or four, or three, or four, etc.) weeks expected/planned expenses, but your planning is on a month-to-month basis. Of course, this is all in a sense arbitrary so perhaps making the Spending Plan dates customizable is still a good idea.

mrpiano

Hey Danny, all good advice. I realize the budget is kind of a "fiction" in that Simplfi isn't moving actual money around, so I guess I can set this up a few different ways. I'll continue to refine this until I get to a place that I feel I can "rely" on. The biggest thing I am curious about is if I actually have the money leftover in my bank account that Simplfi is forecasting. Given that, I want a "clean" month where my paycheck hits in Simplifi on the 1st and 15th, and every single bill I have will need to get paid during that month alongside my planned spending and savings goals. I'm even considering "sequestering" any money that is in my checking account and moving it out of my checking account so I can start with only the income I will be receiving in the month of March with no "head-start" of any kind. Basically starting with a zero balance when the paycheck hits on March 1st. Appreciate your advice!

DryHeat

@mrpiano "The biggest thing I am curious about is if I actually have the money leftover in my bank account that Simplfi is forecasting."

If the forecast you are talking about is the one in the Spending Plan, then it probably won't work out like that. Spending Plan tracks whether you are taking in more money in the month than you are "spending." But — crucially — "spending" doesn't mean "paying out."

Some of spending is actual money you pay out, but it excludes some payouts (like, by default, credit card payments). And it includes some things you aren't currently paying out, like things you buy on a credit card (and essentially agree to pay for next month). It's more or less designed to tell you if you are living beyond your means in a way that will eventually catch up with you. It's not cash on hand.

If the forecast you are talking about is the Projected Cash Flow in the Accounts view, well, that is closer to a "cash on hand" accounting. But how accurate it is at forecasting depends on how accurately you have put in your upcoming transactions. For me, there are always things being paid out of my bank account that aren't part of a predicted transaction.

Comparing the two views is tricky because they measure different things. The Spending Plan may show you that you "underspent" your income by $1,000 this month. But that doesn't mean your bank balance in Projected Cash Flow will be up by $1,000 at the end of the month. Suppose, for example, you had to pay an $8,000 credit card bill this month that covered last month's fling in Tahiti. That $8,000 shows up as a hit to your Cash flow this month, but it doesn't figure in your Spending Plan.

mrpiano

Hey DryHeat, thanks for the response. I see the spending plan as "virtual envelopes." If I have 9 things in my spending plan and went and took out cash and distributed it across the 9 envelopes under the pretense that the amount in the envelope is all that's available for the entire month, and then put my savings goals in 2 other envelopes…in theory all I'd have left is the money needed to pay my actual bills and whatever is left over that didn't end up in an envelope. Except for going to the ATM and pulling out a bunch of cash and sticking it in a bunch of envelopes, I'm treating the budget as if I was managing it in this way. If my current budget says that at the end of March I'll have "x" dollars with no spending or "envelopes" attached to it, I want to validate how close I am to that number on April 1. i'm going to pretend I spent every dollar in every category I have allocated.

Regarding "Projected Cash Flow…". That view not really telling the whole story. It doesn't consider flexible spending (and I understand why). It shows you how much cash you have left based on reminders that are attached to recurring bills. What it does not do, however, is consider the $1500 I'm spending flexibly in my Spending Plan, because it of course doesn't know when you're going to spend it. It's been unusable for me given that. I'll always have less than it tells me I have because Projected Cash Flow doesn't "see" that I just put $300 in gas in 4 cars….anyway, great tips and feedback all around!

DryHeat

@mrpiano "I want to validate how close I am to that number on April 1"

I understand your objective. Where will you look for that validation?

mrpiano

Well, given the hypothesis under which I'm operating, I suspect there should be money left in my checking account before my next paycheck hits that hasn't been utilized (given I know how much I'll make, what the bills are and what the worst-case-scenario should be assuming I max out all my flexible spending and saving categories). If my paychecks for the month come out to 10k and I have, all-in, 8k worth of "stuff" allocated and none of that changes, I suspect there would be 2k left that didn't find a home for that particular month. By all means let me know where the "gotcha's" are in that logic that I may not be seeing. I realize I may be thinking about this too simply. The goal in the scenario decribed above would be to roll into the next month with 2k positive cash balance before the next paycheck hits. Ideally, rinse-and-repeat?

DryHeat

The gotcha is that $2000 left over in the spending plan does not indicate $2000 left over in your bank account.

Because the set of transactions that impact your spending plan are not the same ones that impact your checking account.

(Unless you do not use credit cards or savings goals, in which case it will be close if you adjust for your starting balance and unplanned spending.)

mrpiano

Credit cards are not part of the equation at all, actually. Everything that's happening is coming directly out of checking, and all the money from that checking account gets deployed solely against the budget. There's no invisible spending going on that competes for the same dollars. If it's not in Simplfi, no money will be spent on it. So, in my case, I think the transactions that impact my spending plan can ultimately be mapped directly to what's happening in my checking account reliably (hypothesis in question!)

As an experiment to test this, I want to move any money that's in my checking account out of it to some random other account so that the only money I start out with on March 1st is the paycheck I receive on March 1st. I am basically looking to zero-out my checking so that my checking account income matches exactly what I've told Simplifi to expect, with no seed-money of any kind in there.

DryHeat

I think I see now. Your spending plan doesn't include your credit card accounts (or maybe you don't have any) and you aren't paying any such accounts or transferring money out of your account. Strictly current cash payments.

That's unusual, but in that case the spending plan result could more closely mirror the bank account (with the adjustments I mentioned above).

mrpiano

Yeah I actually don't have any credit cards (I do for my businesses, but those aren't included in my primary budget since they're more "sidehustles." It's all cash payments to bills that are part of our household each month, a couple of savings goals, and the flexible categories. After all that's paid, whatever is left is what didn't have a particular "job." When I tried this in YNAB, it wanted me to zero out the money, which kinda freaked me out LOL!

DannyB

In theory…. If your checking account exactly matches your Spending Plan, then it seems that your balance in the real-world checking account should mirror what the Spending Plan left at end of month gives you. As for the "available" as the month progresses, that won't since the balance in your real-world checking account will include any unspent Planned Spending amounts in addition to any undesignated funds.

I look forward to hearing the results.

Can I make one suggestion? I referred to it above as "aging your money." (Another popular pfa uses this term, and I find it very helpful.) You can still "zero out" your income and spending, but instead of starting with zero, start with enough cash in your zero out checking account to cover, if not the whole first month, at least a margin equal to one paycheck. I suggest this for cashflow purposes.

Just for fun, and this has nothing to do with the general conversation above, but here is something else I like about the QS Spending Plan - the way it sorts out my spending between fixed and flexible expenses (you allude to this in your comments): Income after bills and savings = fixed and Planned Spending = flexible. If desired, I can go a step further and sort discretionary and non-discretionary using the "Bills" (non-discretionary) and "Subscriptions" (discretionary) sub-divisions.

mrpiano

Hey Danny, not quite there yet on your first suggestion (close), but absolutely planning to get there next month. I do have a number of subscriptions that are in the dedicated "subscriptions" category, but really, those are monthly "bills" that always hit at the same time, same day, for the same amount. I'm too lazy to move them at this point but they are serving a similar purpose to the "bills" section. Appreciate all the great ideas here, and thank you for your feedback and advice (and to DryHeat for the same)!

DryHeat

@mrpiano "It's all cash payments to bills that are part of our household each month, a couple of savings goals, and the flexible categories."

I'm getting a better picture now. Here's a couple of more things about matching the Spending Plan to the bank account.

If you have Savings Goals, your spending plan will not match your actual bank account unless you transfer the contributions to those goals to some other account. (Many have asked for a way to link Savings Goal contributions to transactions, but it's not possible yet.)

I think by "flexible categories" you are referring to Planned Spending expenses. (Because you are talking about predicting and Other Spending isn't really predicted in the Spending Plan, it just happens.) If that's the case, check out the way "Release available for spending" works with Planned Spending. Basically, it's a way of telling the Spending Plan that you didn't actually spend all you planned and that the excess is available. That should get you closer to your month-end checking balance.

mrpiano

Hey DryHeat, yes I do in fact move money into bank accounts that are specific to the savings goals (Goal "A" moves to "Goal A Bank Account."

And yes, "flexible categories" are planned spending categories. Since we are getting close to the end of of the month, I've actually alread "released available for spending" in some of the categories that I know I've closed out for the month. What I haven't seen yet, because I've only been using the software for 2 weeks, is what happens in March. I don't want the "release available for spending" to carry over to the next month. I want to pretend it's not there, basically and just start the budget fresh month over month, rolling over the excess at the end into some other account, or something similar. Appreciate the insight for sure!

DryHeat

The end of the month is right around the corner. You'll have to update us after that to let us know how your method works out.

A pretty substantial number of folks here use some form of "multiple dedicated bank account" system, but I'm too lazy for that.

I think I can get similar benefits by using the software in its default setup (because I do use credit cards), using a single checking account, and close paying attention to the amounts "saved so far" in the Savings Goals and the "Available Balance" on that account.

But it would really help if the bank account Projected Cash Flow would show a second graph line based on Available Balance instead of just the actual balance. That's one bit of info that shows up more clearly in your system, I think.

SRC54

@mrpiano and others. An interesting discussion that I am getting around to reading. My experience:

We get paid on the last day of the month and we've always been paid as teachers that way because employers don't pay you for work until you've done it. (In fact when new young teachers start, they often start in August and get their first paycheck on September 30!). So the money we get paid is going to see us through the following month. It is really hard to get around this reality. I could manipulate it so the deposit appears to be on the first day of the month, but that won't work because then we get two paychecks in December. I have to keep it in the same tax year for the tax report.

In fact, for several years for accounting purposes I could never fathom the school where we both worked changed the paycheck from the last day of the month to the first day of the next month, but they had to pay out in December so we ended up with 4 paychecks in December! I had to manually roll back the paychecks to the last day of the previous month, which was the real pay period in order to make my budget in Microsoft Money (that I used at the time) work.

So the reality is that we each got paid 12x per year. Now we are retired and the retirement check is the last day of the month (actually last business day of the month). My social security check is the 4th Wednesday of each month. I assume my wife's SS will be the 2nd Wednesday when she starts drawing it. But pay is always after starting work. And even SS when you choose to "begin" in June won't start payments until July.

The Spending Plan actually works pretty well for this since these recurring paychecks are included in the monthly plan so you can see how much you have left from income minus expenses for the month. The calendar is a construct too. Even if I could set up a spending plan from say the second Wednesday to the next second Wednesday, I would run into a spending plan that overlaps Dec-Jan, which just really doesn't work. It was the same problem I had when I ended up with two paychecks in December.

So as you've all said (one way or another) we have two realities. 1) How much money we actually have on hand in our spending accounts and 2) how much we actually receive and spend during an artificial time frame that was determined centuries ago called months and years.

I like sticking to reality and it's one the reasons I prefer the Spending Plan to an old time budget. The Budget is an unreal as it gets because it never works out. At least it never did for me. Fortunately I am in the place in my life where I don't have to worry if I spend a little more in one category and a little more in another each month as I just adjust them at the end of the month to what they actually ended up being. I have a plan but if it doesn't work out, I don't sweat it (unless it is really off, but even then it was probably necessary).

Oh and yes I agree with you about actually putting the money into a savings account, which is why I don't bother with savings goals. Whatever is left is savings, and I move it every couple of months to a savings account too. I actually have a rewards checking account that I just treat as a savings account. I watch the Savings grow and as long as I end up with more every 12 months, I feel like we won.

DannyB

@mrpiano you can scroll forward through the next 12 months of your monthly Spending Plans. You can see now what your March Spending Plan looks like. You can even make adjustments for individual future months.

In the header next to the MM/YYYY are two arrows that will move you forward or backward (I seldom look back but often look forward).