If you read my last post on using Mint like a champ, you should now have a good idea of how to use Mint to track your expenses and income, cash or otherwise. Remember, that is what Mint is for: tracking income and expenses within budgets. I will now show in a series of posts how to manipulate Mint’s categories for more powerful budgeting and income/expense tracking.
First, some basics. Think of Mint’s categories like accounts on a double-entry ledger. Before you hit “back” because eek, accounting!, you only need to know this: each account can be credited (adding money) or debited (removing money) to result in a positive, negative, or zero balance. A $100 shopping expense would be a $100 debit against “Clothing”, leaving a -$100 balance in “Clothing.” A $1000 paycheck would be a credit toward “Income,” leaving a $1000 balance in “Income.” Separately, your various Expense and Income categories can be viewed as their own ledgers. Putting them together, expenses are applied as debits against “Income,” and the net balance is your net income. So a $1000 balance in Income with a $100 Clothing debit against it leaves a net income of $900.
Now let’s say that you processed these example transactions. And let’s say your Clothing budget were $50/month, so you decide to return $50-worth of clothing like a good little budgeter. If you used a card, Mint would automatically categorizes the return as an Income. If you got cash back, you may be tempted to categorize the return as an income when you manually enter it. At first glance of your overview page, you may think all is good and dandy because your assets would increase by $50, which is true and correct.
But look closer. And stop looking at your Overview page.
First, check your income:
Your income has increased to $1050/month. (But didn’t you only take home $1000?)
Now check your budget:
You’ve still blown your Clothing budget even after the return. You’ve apparently earned $1050 and spent $100, or 9.5% of your income, on clothing. In reality, you made $1000 and consumed $50-worth of clothing, or 5%.
This all happened because you or Mint treated the return as a credit toward income, increasing the positive balance. Now get this in your head and do what you can to never forget it: besides interest, money owed or given back to you is not a credit toward income—it is a credit toward expenses.
Why? Because you didn’t earn $50 twice. You earned it once, spent it somehow, and are un-spending it, thus bringing your expenses up from a negative balance and closer to $0 ($0 being the balance of your Expense accounts before you spent any money).
So from now on, treat money owned or given back to you as a credit towards expenses.
All we need to do to tell Mint to treat the return as a credit is to recategorize the return from “Income” to “Clothing,” or whatever the category the original expense is.
Now, the $50 return will be a credit toward “Clothing,” resulting in a -$50 clothing balance instead of -$100.
…your income, what you actually earned, that month would then remain at $1000 because the $50 is no longer applied towards it as a credit:
…and your Net Income and Budget would be true and accurate:
Consider this post a basic primer on using Mint’s categories like double-entry accounts. The next few posts will be on how to use this system for more complicated budgeting, like splitting bills and getting money you lent paid back.