doubts on lack of a running balance
JC
via web
Although there is a Knowledgebase Entry on "why is there no running balance", I have doubts about the reasoning therein. It seems that Money Well is appropriately used for two somewhat different tasks, banking and cash flow tracking. The Money Well team certainly has the right idea with buckets and money flows and such, i.e., cash flow tracking. However, the program is almost useless for banking when it comes to monitoring how much money is actually in the accounts now and in the coming weeks. After entering in numerous scheduled transactions that will occur in the future, there is no clean and efficient way to figure out if I actually have enough money in that particular account to fulfill these scheduled transactions (say, I might need to transfer money from a different account); note, this is a different "layer" than the buckets, i.e., virtual, layer. I disagree that selecting the transactions and looking at the bottom of the screen is a good way of doing this because it is (1) tedious and (2) does not tell me on exactly what date I may overdraw the account. Furthermore, the fact that Money Well adds a year or more worth of "never ending" scheduled transactions into the register when I am doing banking (rather than just the upcoming month's worth) is messy and makes the process of balancing the register more confusing. When actually banking, the traditional register seems most appropriate.
Any clarity would be appreciated. JC
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Support Staff 2 Posted by Kevin Hoctor on 18 Jun, 2009 08:36 PM
Part of the problem with using running balances to predict the future is that most people cannot predict all their upcoming expenses. This means that the running balance is incomplete and could make you feel like you have more money available than you really do.
The goal with an envelope budgeting system is to keep you on track with the current available cash and help you to set aside funds for future emergencies. Some of your buckets can be used to set aside money for future expenses as well.
Although it may seem convenient and comfortable to see a running balance, it rarely is a good projection of future cash flow.
3 Posted by Terry Norton on 18 Jun, 2009 09:27 PM
To uses MoneyWell's main feature - buckets, means you need to pull yourself away form that old paradigm you're so used to using all the other non-envelope style accounting apps.
Looking at the balance in your checking account, whether in MoneyWell or online with your bank, will tell you only how much money is sitting in your account at that moment. It doesn't tell you how many checks haven't cleared yet. You then end up having to manually figure out what checks are still outstanding for the running balance to really mean anything, at that moment.
MoneyWell's buckets are what you need to actually be looking at now. What's goes on at the bank is just financial data history. Using buckets is forward looking - do your buckets have money in them to cover upcoming bills and expenses?
Your buckets tell you how much money you really have right now, today. That you have enough money in your buckets to cover upcoming bills, and also if you have any extra money in your income bucket that doesn't need to go toward an expense.
4 Posted by Jason J. Corso on 19 Jun, 2009 01:31 PM
Thanks for the replies.
What I'm hearing is that I just need to make the paradigm shift...(Can I
charge you when I overdraw?! just kidding).
Note, in a proper check register, you've already listed checks that have not
yet been cashed. So, even though the bank daily balance may be wrong, the
register balance you are keeping is accurate. Furthermore, if you do this
in a spreadsheet and add all scheduled/future transactions, then the balance
you're keeping is pretty accurate and is a fair measure of the future. Of
course, this does not include unexpected expenses, etc; hence the move to
buckets...
Support Staff 5 Posted by Kevin Hoctor on 19 Jun, 2009 02:06 PM
Jason,
I guess your world is a bit more structured than mine. I have a ton of variable charges that I could never put into a check register (proper or not) and properly predict my household spending. We always seem to spend more in the past than we planned because our spending was more than just our bills.
It is a paradigm shift to allocate available income first and only spend what you've allocated but it really does work better than trying to predict future bank balances.