Consumerism Commentary - Latest Comments in Question From Reader: When Do You Record an Expense?

Re: Question From Reader: When Do You Record an Expense?

Sam — Thu, 10 Jul 2008 01:04:15 -0000

I like this issue a lot, because it made me recognize there really is no “right” way to track expenses. The “right” way to keep track of stuffs depends on how precise you want the data and more importantly, what you want to use the summaries for.

If you input every piece of financial data starting from January 1 of a year, you can actually track to the penny where your money is going. I can say this because that is what I do. I do this since I’m a numbers freak, so I feel happy when my company annual tax summary matches my records of taxes paid.

If you are slightly less detailed, and instead make sure to input every purchase over $1.00, then you will still really have good sense of where your money is going. You can figure out that your expensive car is taking up lots of money through maintenance, or that you may be renting a place that’s too expensive for you.

The real purpose of any expense tracker is to help you make better decisions. When you know where your money is going, you can then make decisions on how to improve your situation. When I started tracking my expenses, one of the first things I learned was that I spent way too much eating out, so I started cooking at home a lot more.

Re: Question From Reader: When Do You Record an Expense?

Jim — Wed, 09 Jul 2008 20:34:28 -0000

I think you nailed it -- This is a question of expense vs. cashflow.

I would "recognize the expense when it was incurred" (at the point of sale - when the card was swiped). But I suppose the expense may not actually be incurred, in the this case, until the gift is actually given. With a receipt, you could presumably return the gift at any time before its given.

Re: Question From Reader: When Do You Record an Expense?

Harlan Landes — Wed, 09 Jul 2008 16:00:52 -0000

I don't think it's all that complicated. I added a lot of details, but it comes down to this:

1. Recording an expense when you buy something with a credit card.
2. Recording a transfer (no effect to income/expense) when you pay the credit card.

Re: Question From Reader: When Do You Record an Expense?

Eden — Wed, 09 Jul 2008 15:56:51 -0000

Was it just me or did that sound really complicated? I guess this is for the hardcore crowd.

I use Quicken and I update my transactions every day. I enter the actual dates that transactions occur and I use the appropriate account that the transaction came from. Then I run spending reports weekly or monthly. I thought I was being a bit anal, but maybe that is the simpletons approach. :)

Re: Question From Reader: When Do You Record an Expense?

Brandon P. — Wed, 09 Jul 2008 14:24:04 -0000

Of course if you wanted to be technically correct, you would record the expense whenever you realized the expense; mainly when you swipe your card at the store. Now since you don't pay off your balance until the end of the month which is where bank reconciliations would come into play, but when dealing with personal finances there is no need to be that accurate unless you really want to. I simply record expenses when I realize them and record revenues when I receive them. I would say don't worry to much about reconciling to ensure your account balances are correct as long as you know where all the money has gone. It the end you should have accurate revenues and expenses matched up from month to month as long as you record the expense as soon as you get home. A simple excel sheet can do wonders for ones finances as well.