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73 <h1 class="post-title" itemprop="name headline">Using Ledger for YNAB-like envelope budgeting</h1>
74 <p class="post-meta">
75 <time datetime="2018-06-12T21:20:00+02:00" itemprop="datePublished">
76
77 Jun 12, 2018
78 </time>
79
80 • <span itemprop="author" itemscope itemtype="http://schema.org/Person"><span itemprop="name">Nicolas Petton</span></span>
81 </p>
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85 <h1 id="bye-bye-elbank">Bye bye Elbank</h1>
86
87<p>I have to start this post with this: I will not be actively maintaining
88<a href="https://github.com/NicolasPetton/elbank">Elbank</a> anymore, simply because I
89switched back to <a href="https://www.ledger-cli.org/">Ledger</a>. If someone wants to
90take over, please contact me!</p>
91
92<p>The main reason for switching is budgeting. While Elbank was a cool experiment,
93it is not an accounting software, and inherently lacks support for powerful
94budgeting.</p>
95
96<p>When I started working on Elbank as a replacement for Ledger, I was looking for
97a reporting tool within Emacs that would fetch bank transactions automatically,
98so I wouldn’t have to enter transactions by hand (this is a seriously tedious
99task, and I grew tired of doing it after roughly two years, and finally gave up).</p>
100
101<p>Since then, I learned about ledger-autosync and boobank, which I use to sync my
102bank statements with Ledger (more about that in another post).</p>
103
104<h1 id="ynabs-way-of-budgeting">YNAB’s way of budgeting</h1>
105
106<p>I only came across <a href="https://ynab.com">YNAB</a> recently. While I won’t use their
107software (being a non-free web application, and, you know… there’s no <code class="highlighter-rouge">M-x
108ynab</code>), I think that the principles behind it are really appealing for personal
109budgeting. I encourage you to <a href="https://www.youneedabudget.com/method/">read more about
110it</a> (or grab a <a href="https://www.youneedabudget.com/book-order-now/">copy of the
111book</a>, it’s great), but here’s
112the idea.</p>
113
114<ol>
115 <li>
116 <p><strong>Budget every euro</strong>: Quite simple once you get it. Every single Euro you have
117should be in a budget envelope. You should assign a job to every Euro you
118earn (that’s called
119<a href="https://en.wikipedia.org/wiki/Zero-based_budgeting">zero-based</a>, <a href="https://en.wikipedia.org/wiki/Envelope_system">envelope
120system</a>).</p>
121 </li>
122 <li>
123 <p><strong>Embrace your true expenses</strong>: Plan for larger and less frequent expenses, so
124when a yearly bill arrives, or your car breaks down, you’ll be covered.</p>
125 </li>
126 <li>
127 <p><strong>Roll with the punches</strong>: Address overspending as it happens by taking money
128overspent from another envelope. As long as you keep budgeting, you’re
129succeeding.</p>
130 </li>
131 <li>
132 <p><strong>Age your money</strong>: Spend less than you earn, so your money stays in the bank
133account longer. As you do that, the age of your money will grow, and once
134you reach the goal of spending money that is at least one month old, you
135won’t worry about that next bill.</p>
136 </li>
137</ol>
138
139<h1 id="implementation-in-ledger">Implementation in Ledger</h1>
140
141<p>I assume that you are familiar with Ledger, but if not I recommend reading its
142great
143<a href="https://www.ledger-cli.org/3.0/doc/ledger3.html#Introduction-to-Ledger">introduction</a>
144and <a href="https://www.ledger-cli.org/3.0/doc/ledger3.html#Ledger-Tutorial">tutorial</a>.</p>
145
146<p>The implementation in Ledger uses plain double-entry accounting. I took most of
147it from
148<a href="http://sachachua.com/blog/2014/11/keeping-financial-score-ledger/">Sacha</a>, with
149some minor differences.</p>
150
151<h2 id="budgeting-new-money">Budgeting new money</h2>
152
153<p>After each income transaction, I budget the new money:</p>
154
155<div class="highlighter-rouge"><pre class="highlight"><code>2018-06-12 Employer
156 Assets:Bank:Checking 1600.00 EUR
157 Income:Salary -1600.00 EUR
158
1592018-06-12 Budget
160 [Assets:Budget:Food] 400.00 EUR
161 [Assets:Budget:Rent] 600.00 EUR
162 [Assets:Budget:Utilities] 600.00 EUR
163 [Equity:Budget] -1600.00 EUR
164</code></pre>
165</div>
166
167<p>Did you notice the square brackets around the accounts of the budget
168transaction? It’s a feature Ledger calls <a href="https://www.ledger-cli.org/3.0/doc/ledger3.html#Virtual-postings">virtual
169postings</a>. These
170postings are not considered real, and won’t be present in any report that uses
171the <code class="highlighter-rouge">--real</code> flag. This is exactly what we want, since it’s a budget allocation
172and not a “real” transaction. Therefore we’ll use the <code class="highlighter-rouge">--real</code> flag for all
173reports except for our budget report.</p>
174
175<h2 id="automatically-crediting-budget-accounts-when-spending-money">Automatically crediting budget accounts when spending money</h2>
176
177<p>Next, we need to credit the budget accounts each time we spend money. Ledger
178has another neat feature called <a href="https://www.ledger-cli.org/3.0/doc/ledger3.html#Automated-Transactions">automated
179transactions</a>
180for this:</p>
181
182<div class="highlighter-rouge"><pre class="highlight"><code>= /Expenses/
183 [Assets:Budget:Unbudgeted] -1.0
184 [Equity:Budget] 1.0
185
186= /Expenses:Food/
187 [Assets:Budget:Food] -1.0
188 [Assets:Budget:Unbudgeted] 1.0
189
190= /Expenses:Rent/
191 [Assets:Budget:Rent] -1.0
192 [Assets:Budget:Unbudgeted] 1.0
193
194= /Expenses:Utilities/
195 [Assets:Budget:Utilities] -1.0
196 [Assets:Budget:Unbudgeted] 1.0
197</code></pre>
198</div>
199
200<p>Every expense is taken out of the <code class="highlighter-rouge">Assets:Budget:Unbudgeted</code> account by default.</p>
201
202<p>This forces me to budget properly, as <code class="highlighter-rouge">Assets:Budget:Unbudgeted</code> should always
203be 0 (if it is not the case I immediately know that there is something wrong
204going on).</p>
205
206<p>All other automatic transactions take money out of the
207<code class="highlighter-rouge">Assets:Budget:Unbudgeted</code> account instead of <code class="highlighter-rouge">Equity:Budget</code> account.</p>
208
209<h2 id="a-budget-report">A Budget report</h2>
210
211<p>This is the final piece of the puzzle. Here’s the budget report command:</p>
212
213<div class="highlighter-rouge"><pre class="highlight"><code>ledger --empty -S -T -f ledger.dat bal ^assets:budget
214</code></pre>
215</div>
216
217<p>If we have the following transactions:</p>
218
219<div class="highlighter-rouge"><pre class="highlight"><code>2018/06/12 Groceries store
220 Expenses:Food 123.00 EUR
221 Assets:Bank:Checking
222
2232018/06/12 Landlord
224 Expenses:Rent 600.00 EUR
225 Assets:Bank:Checking
226
2272018/06/12 Internet provider
228 Expenses:Utilities:Internet 40.00 EUR
229 Assets:Bank:Checking
230</code></pre>
231</div>
232
233<p>Here’s what the report looks like:</p>
234
235<div class="highlighter-rouge"><pre class="highlight"><code> 837.00 EUR Assets:Budget
236 560.00 EUR Utilities
237 277.00 EUR Food
238 0 Rent
239 0 Unbudgeted
240--------------------
241 837.00 EUR
242</code></pre>
243</div>
244
245<h1 id="conclusion">Conclusion</h1>
246
247<p>Ledger is amazingly powerful, and provides a great framework for YNAB-like
248budgeting. In a future post I’ll explain how I automatically import my bank
249transactions using a mix of <code class="highlighter-rouge">ledger-autosync</code> and <code class="highlighter-rouge">weboob</code>.</p>
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