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Budgeting

Spent once, counted twice

As soon as a credit card sits next to your bank account, your spending total stops being true. The same purchase appears on two statements, and this page says which line counts.

One month, two statements

Say January looks like this. On the bank account:

And on the card statement that payment settles:

Those five lines add up to 1240. That is no coincidence: they are the same 1240 that left your bank account. Your January spending is therefore 2840, the rent plus what went through the card. Import both files into the same sheet and you get 4080, which is 1240 too much.

As a savings rate that is not a rounding error. Out of 6500 income, the correct figure leaves 3660, or 56 per cent. The double count leaves 2420, or 37 per cent. Nineteen percentage points apart, and the wrong number is the worse one either way: you end up thinking you are thriftier or more wasteful than you are, depending on which direction you keep the books.

Which of the two lines is the expense

The one on the card. It knows what the money bought: 380 of groceries, 190 of fuel. The bank line does not. It carries a company name and a total, and that total is everything that ran through the card last month.

Paying the card bill is not spending at all. It moves money from your account to the card issuer, where it was spent long ago. Accountants call that a transfer: the location changes, the amount does not. The same thing happens when you move money from your current account to savings. Nobody would book that as an expense, and the card bill follows the same logic.

What that means for your spreadsheet

You need a category that drops out of the totals. What you call it makes no difference; "transfer" is the usual name. Every payment to the card issuer goes in there, and your sum formula leaves that category out.

Two traps come with it. First, the category has to be excluded in both directions. If you keep the card as an account of its own, it carries the matching entry on its side, and that is as little an income as the first was an expense. Second, this category must never turn up in a normal report. A transfer category with a bar in your spending chart is not half a mistake.

A refund is not income

You send back a pair of shoes for 80, and the next card statement shows a credit of 80. Booking that as income is the obvious move, and it is wrong. Your income did not go up. You spent less.

The right place for it is the category the purchase sat in. Those 455 of online purchases become 375. Book it as income instead and you raise both sides of the same calculation, and the savings rate is off again.

One side effect looks odd and is correct: a category can end a month below zero. That happens when the return lands in February and the purchase was in January. The figure is still right, it just sits in the wrong month, and over the year it evens out.

Which date counts

A card statement often carries two dates per line: the day of the purchase and the day the issuer posted it. There are a few days between them, and at the end of a month that decides which month your dinner lands in.

Take the purchase date. It answers the question you ask your budget, which is when you spent the money. The posting date answers when the card issuer did its paperwork, and that is their business.

The check

Your card bill tells you whether the numbers add up. Take a month and total every expense that ran through the card. It has to match the bill your bank paid. And that single amount must not appear a second time in your spending total. If both hold, you are counting correctly.

How Parendi handles it

Parendi is a personal finance app for the Mac, and it works exactly that way. The lines on the card statement are the expenses. The payment of the bill on your bank account goes into a transfer category that stays out of every report, in both directions. A credit on the card reduces its category instead of showing up as income. You pick the date column yourself during the import, with the purchase date suggested.

Statements come in as files you export from your own online banking. Parendi has no bank connection and never sees your credentials, and the data stays on your Mac. More about the app, or the features in detail.