Re: Investment account question by Dick
Dick
Sun Sep 16 16:14:39 PDT 2007
Gee, I've almost forgotten the conversation.
To do what I suggested:
Assumes pre-defined Income Category "Wages : Employer Pension Funding" and
Expense Category "Pension Contribution".
Create a new scheduled Bill as follows:
Pay to: "BigCo Pension Fund"
Pay from: [pick whatever account suits you--suggest the one where you
deposit your pay]
Next payment date: [date of your next pay deposit]
Payment method: Other
Frequency: [frequency of your paychecks]
[click on Split]
Category: Wages : Employer Pension Funding, Memo: "recognize the income",
Amount: -£100
Category: Pension Contribution, Memo: "and recognize where that money went",
Amount £100
[click on Done]
Memo: "tracking transaction to allow reporting on employer pension
contributions without tracking Gross Paycheck entries"
[click on OK]
Note this adds up to a £0 entry--why you can put it in any account--but
allows you to report on Income Category Wages : Employer Pension Funding or
Expense Category Pension Contribution or Payee BigCo Pension Fund.
Some other comments inline.
"April" <noreply@mail.com> wrote in message
news:OxAgBaI%23HHA.1168@TK2MSFTNGP02.phx.gbl...
> Sorry I took so long to reply. As this is a long conversation and I have
> got slightly confused...I have moved one of your comments to the top of
> this message and put a few comments inline. Would it be possible for you
> to given me thebasic steps as to how to setup this in Money (your comments
> below) ? I would appreciate it as I am a bit confused with the
> explanation. Thanking you very much for your patience in adavace.
>
>> Perhaps this has been confusing so let me recap what I think my
>> recommendation is here, given that you don't want to track gross
>> paychecks:
>>
>> Create a recurring bill to collect the pension contribution expense with,
>> somehow, somewhere, corresponding income transactions to offset this
>> expense in the account where the transactions are to be entered.
>> Virtually all else has been details about how to accomplish this.
>
> "Dick Watson" <littlegreengecko@mind-enufalready-spring.com> wrote in
> message news:ODAR0VR6HHA.5212@TK2MSFTNGP04.phx.gbl...
>>
>> "April" <noreply@mail.com> wrote in message
>> news:eo9RtsM6HHA.3900@TK2MSFTNGP02.phx.gbl...
>>> pse see below:
>> ...
>>> I do not wish to setup a deposit to the 'Checking' account. The reason
>>> is that my pension contribution is taken from my pay before it reach my
>>> 'Checking' account.
>>
>> Right. But now you have this money coming into a transaction that came
>> from where?
> I invoice my Company, then the pension is taken from that total amount,
> then I pay tax on the remaining amount and left with my net salary.
My point here is that the money that goes to the pension is money you've
never received as income in your Money file, so expensing it has some
problems since you are, in effect, spending money you've never deposited.
See above for my thoughts as to how I'd handle this.
>>>> Add a $100 Pension Contributions Expense into "Checking" to account for
>>>> the "before the net" deduction from your paycheck. Since you didn't
>>>> track the gross income in the original deposit, now your checking
>>>> balance is off by this $100.
>>>>
>>> I am not using the Paycheck funtion. My pension is deducted before the
>>> pay reaches my 'Checking' account.
>>
>> Right again. But you want to track this "deduction" without tracking what
>> it's deducted from. And that creates unique issues. That's all I'm trying
>> to advise you to beware of here.
> Yes, thanks for assisting, I am trying to understand but it's quite
> difficult to get it (sorry but I think I'm nearly there).
See below.
>>>> If, on the other hand, you split the net deposit of your paycheck into
>>>> a $600 Wages Net and a ($100) Pension Contributions this would make a
>>>> $500 net deposit and all would be good. Using Paycheck special category
>>>> and all of the other entries would probably be better.
> The trouble is that I am paid a Net amount for my salary. At the moment,
> I just enter a 'Deposit' when I get paid into my Cheque Account. The
> Pension was taken off before tax (so the scenario is I get paid £1000 then
> deduct £100 for the Pension. From £900, I then pay tax and I am left with
> £450.
Since you are only accounting for the £450, not all of the expenses and/or
transfers (as in your pension) that are taken out of the £1000 we are having
this discussion. Best practice for many of us id to account for every pence
between the £1000 gross and the £450 net. You are just accounting for the
net. This isn't "wrong" though it may not reflect best practices. But it
does complicate accounting for that £100 for the Pension.
>>> In your earlier response, you suggested setting up a recurring Bill with
>>> a unique Payee and also a top level Category called 'Pension
>>> Contrubtion' and a sub-category. I set this up a sub-category called
>>> "ABC Pension Company". Is it correct to setup the contribution as an
>>> income or should it be an expense?
>>
>> Let's get back to the original question: are you trying to track the
>> pension **account** or your **contributions** to this account? Note also
>> that the whole situation involves both Income and Expense and you've
>> already said you don't want to track the income (the gross pay in your
>> paycheck and all of the deductions, not just this one). The Income
>> portion is that you got paid the amount of this expense and you are not
>> accounting for that by using Deposits of net amount rather than Paychecks
>> that account for all Income and Expense (or Transfer) of that money
>> before getting to the net amount you are just depositing now.
>>
>> My recollection of the whole setup here was that you really wanted to
>> track how much you were contributing and we'd agreed that collecting this
>> as a categorized Expense that you could then report on would meet the
>> need. (Reporting all transactions of category Pension Contributions,
>> say.) See below for more...
>
> So I should setup the category as a categorised Expense.
That's what I'd recommend. See above.
>> Now, is the pension contribution an Expense or a Transfer? It could be
>> either. As noted previously, IIRC, if the plan were something like a
>> 401(k) a Transfer seems in order. To the extent it's not, just calling it
>> an Expense for your current purposes in Money seems more appropriate.
>> It's kinda like a term life insurance deduction in that regard. You pay
>> the money now in hopes of seeing something in return someday. That sure
>> sounds like an Expense in the here and now to me.
>
> I agree, this sounds like an Expense as you have described.
Yup.
>> As to a subcategory that mixes Payee with Income/Expense categorization,
>> I'd not do this. (I don't recall suggesting a subcategory for Pension
>> Contribution, but it's been a long thread.) Perhaps that's an item of
>> personal preference, but my rationale is this: say your employer changes
>> the pension plan provider ten times. Does it add any value to have to add
>> the next ten subcategories? No. It's still the exact same kind of
>> expense.
>>
>>> When setting up the recurring bill, I am unsure as to what to enter in
>>> the 'Pay from ' box? Should I enter the "ABC Pension Company" account
>>> name there? I have setup an account for the Pension.
>>
>> 1) As to account name for the account where you are entering this
>> transaction ("Pay From"), again, it depends. My recommendation, given the
>> other requirements you've identified chief among which is using a net
>> Deposit rather than Paycheck, would be to use a transaction with splits
>> that totaled to $0 but had both an Income (Wages:Pension Contrib or
>> similar, say, for $123.45 of Income, say) and an offsetting Expense
>> (Pension Contribution or similar, say, for -$123.45 of Expense) portion.
>> Put the transaction in any account that's convenient. (It's a $0
>> transaction, so it doesn't matter where you put it because it doesn't
>> change the balance of the account it's in). If you wanted to put this in
>> an account dedicated solely to these transactions, that's perfectly OK.
>> But read on:
>
> Sorry, dont' follow this... :(
See above. Hopefully this will then make more sense.
>> 2) Beyond a collection place for the $0 tracking purposes only
>> transactions, I wouldn't use an account for the Pension since it doesn't
>> have a current cash value to you and is not relevant to your net
>> worth--or at least not in any way directly relatable to the amounts you
>> are trying to deposit there. Say you contribute $20,000 to the plan this
>> year. Does having this account in Money with a $20,000 balance make your
>> financial picture depicted by Money more or less clear? I'd argue the
>> latter by a long shot.
>
> Yes, I don't want this account to reflected in my net worth.
Yup.
>> Perhaps this has been confusing so let me recap what I think my
>> recommendation is here, given that you don't want to track gross
>> paychecks:
>>
>> Create a recurring bill to collect the pension contribution expense with,
>> somehow, somewhere, corresponding income transactions to offset this
>> expense in the account where the transactions are to be entered.
>> Virtually all else has been details about how to accomplish this.
>
> Would it be possible for you to given me some basic steps as to how to
> setup this in Money? I would appreciate it as I am a bit confused with
> the explanation.
See above.