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 <chapter id="chapter15">
 <title>Budgets</title>
 <para>
 This chapter explains how to create and use budgets with GnuCash. 
  </para>
 <sect1 id="budget_concepts1">
 <title>Basic Concepts</title>

 <para>A budget is a tool for estimating expected income and expenses.
 You can use it to help you plan how you intend for your finances to
 change over a period of time, and to examine how your actual
 financial transactions for the period compare to your planned
 transactions.</para>

 <para>The budgeting concept is quite general, so GnuCash offers a
budgeting tool that is both simple and flexible.  You, the user, have
to decide how complex or simple you want to make your budget.  This
guide will help you make some of those decisions.</para>

 <sect2 id="budget_conceptsterms2">
 <title>Terminology</title> <para>There are a few helpful terms listed
  below that will be used to discuss budgeting.</para>

  <itemizedlist>
  <listitem>
    <para><emphasis>Budget</emphasis> - A financial plan describing
    the expected revenues and/or disbursements for a particular time
    period</para>
  </listitem>
  <listitem>
    <para><emphasis>Cash Budget</emphasis> - A budget planning for
    expected cash receipts and cash disbursements.  This type of
    budget tracks cash flow -- where your money comes from, where it
    goes, and, of course, how much.</para>
  </listitem>
  <listitem>

    <para><emphasis>Expense Budget</emphasis> - A budget chiefly for
    planning what you spend your money on.  This type of budget tracks
    your expenses.  It is typically not concerned with things like
    appreciation or repayment of liabilities.  However, it would
    account for interest charges.  For example, if you buy $100 worth
    of groceries with your credit card, you incur an $100 expense for
    groceries, and a $100 liability to your credit card company.  When
    you pay the credit card bill for $110, you are incurring an
    additional interest expense of $10.  An expense budget plans for
    the transaction of buying the groceries and paying the interest,
    but not the transaction of repaying the credit card
    company.</para>

  </listitem>
  <listitem>
    <para><emphasis>Capital Budget</emphasis> - A budget that
    describes a plan for paying for a large future expense, often
    through a combination of saving and borrowing money.  Note:
    Capital budgets can sometimes get quite complex because they can
    try to answer the question "Can we afford to do such-and-such?" by
    exploring various hypothetical scenarios that can involve
    hypothetical accounts.  </para>

  </listitem>
  <listitem>
    <para><emphasis>Budget Period</emphasis> - The period of time
    during which the plan is expected to take place.  The most common
    budget periods are annual and monthly.  Sometimes, you may budget
    for several consecutive periods at once, for convenience or for
    finer-grained planning.  For example, an annual budget may include
    12 monthly budget periods.</para> </listitem>

  </itemizedlist>

  </sect2>
 </sect1>

 <sect1 id="budget_creation1">
   <title>Creating a Budget</title> 
   <para>Even before you begin to make a budget, it's important to
   have given some thought to your account hierarchy.  For example, if
   you want to budget a certain amount for your electric bill and a
   certain amount for your water bill, you can't have only an
   Expenses:Utilities account.  Your accounts must be at least as
   specific as your budget.  </para>


   <sect2 id="budget_creation2">
     <title>Choose Which Accounts To Budget For</title>
     <para>The first step in creating a budget is to decide what it is
     you want to plan for.  This decision will affect which accounts
     you include in your budget.  For example, if you are only
     interested in tracking your expenses, you may create an expense
     budget by only entering amounts for expense accounts.  On the
     other hand, if you want to track all of your cash flow, you may
     create a cash flow budget by entering amounts for asset,
     liability, income and expense accounts.</para>

     <para>Before you begin to create your budget, you need to make
     two decisions: What accounts do I want to budget for?  and When
     do I want my budget to be for?  You can always change your mind
     later, after you've created a budget, but you need to start with
     something.</para>

     <tip><para>As a rule of thumb, if you mostly care about
     <emphasis>what</emphasis> you spend your money on, you may want
     to make an expense report.  If you're also concerned about having
     enough money in the right places at the right times, you may want
     to use a cash-flow budget.</para></tip>

  </sect2>
  <sect2>
    <title>Choosing a Budget Period</title>
    <para>Before creating a budget you must also decide what period of
    time you want to plan for.  The most common budget periods are
    monthly and annual.  If you want your budget to plan for changes
    in financial patterns over time, then you should include multiple
    budget periods in your budget.  For example, if you want to plan
    on having higher utility expenses in the winter than in the
    summer, then you might break your annual budget into 4 quarters or
    even 12 months, and budget a higher value for the winter periods
    than for the summer periods.</para>
  </sect2>

  <sect2>
    <title>Getting Started</title>
    <para>To create your first budget click on <guimenu>File</guimenu> ->
    <guimenu>New</guimenu> -> <guimenu>New Budget</guimenu>.  You will
    immediately see a new budget with the default settings and no entries.
    Then click on the "Options" button.  The most important options are
    the budget period and the number of periods.  For the budget period,
    choose the beginning date and the smallest period of time that you
    want to plan for.  Then, for the number of periods, choose how many
    periods you want to plan for.</para>

    <para>The budget page now shows a list of accounts with a column
    for each budget period.  The date shown in the title of each
    column is the beginning of that budget period.</para>
    
  </sect2>
  <sect2>
    <title>Entering Budget Values</title>
    <para>Now, you must enter the budget values - the amounts that you
    expect the account balances to change during the budget period.
    There are two ways to enter budget values.  The first way is to
    simply click on the cell and enter an amount.</para>

    <para>If you have past transactions recorded in GnuCash, the
    second way is to let GnuCash estimate the budget values by looking
    at those transactions.  First, select the accounts you want
    GnuCash to estimate.  Then click on the 'Estimate' toolbar button.
    In the Estimate Budget Values dialog, select the date past which
    GnuCash should look for past transactions.  GnuCash will start at
    that date and look forward for the duration of your budget.  For
    example, if you are making an annual budget, and you select
    Jan. 1, 2005, GnuCash will look at all the transactions in that
    account from Jan. 1, 2005 through Dec. 31, 2005.</para>
  </sect2>
 </sect1>
 
 <sect1 id="budget_reporting1">
   <title>Budget Reporting</title>
   <para>You've already done the hardest part - creating your budget.
   But now you want to know how your actual financial transactions
   compare to your plan.  You need to run the Budget Report.</para>
   <para>Click on <guimenu>Reports</guimenu> -> <guimenu>Income and
   Expense</guimenu> -> <guimenu>Budget Report</guimenu>.  For each
   account, the Budget Report will show the budgeted and the actual
   amounts in two adjacent columns for each period in the budget.  If
   you have created multiple budgets, you can use the Budget Report
   Options to select which budget to use in the report.
   </para>
 </sect1>
 </chapter>
