Shared expenses with shared assets

General
1

I am going insane trying to select the best approach to include in my ledger shared accounts with my partner. I began to trace my personal finances with my personal assents, liabilities, expenses and income. However, now I need to track also shared accounts with my partner. I do not want to track the personal finances of my partner, only shared accounts with me. And what I think is different from the examples of plaintextaccounting.org is that we have not only shared expenses but also shared assets: one shared bank account and some cash in a wallet.

I am considering two setups:

  • 1 unique ledger with my personal accounts and shared accounts (this is my current setup).
  • 2 independent ledgers, on for personal accounts and one for shared accounts.

1 unique ledger (current setup)

This is my personal ledger where I add also the shared assets (assets:partner:bank and assets:partner:cash). But to reflect that I own the half of shared assets I also have a liabilities account (liabilities:partner).

So these is an example of my transactions

2024-01-01 my contribution
    assets:partner:bank  100.00 EUR
    assets:bank

2024-01-01 my partner contribution
   assets:partner:bank  100.00 EUR
   liabilities:partner  

2024-01-02 pay shared bill
    assets:partner:bank  -100.00 EUR
    expenses:house  50.00 EUR
    liabilities:partner  50.00 EUR

This way I have the assets and liabilities of the shared accounts I owe added to my personal wealth. I have better understanding of the expenses. Expenses are the half of the real expense, because my contribution to this partnership is 1/2. Handicap is that transaction may be a bit more complex but I was able to automate most of them with hledger import .

2 independent ledgers

Another solution would be to have two independent ledgers. One ledger for my personal finances where my contribution to shared accounts is an expense:

2024-01-01 my contribution
     expenses:partner  100.00 EUR
     assets:bank

One additional ledger with shared income where contributions are income and then we have the shared expenses:

2024-01-01 my contribution
     assets:bank  100.00 EUR
     income:me 

2024-01-01 my partner contribution
     assets:bank  100.00 EUR
     income:partner

2024-01-02 pay shared bill
     expenses:house  100.00 EUR
     assets:bank

I like this approach because the two ledgers symbolize the wealth of two different concepts: my personal wealth and the wealth of our partnership. However, I see difficult to have an overall view of my personal expenses because the account expenses:partner of my personal ledger lacks of the details of the real expenses of the second shared ledger.

What do you think?

2

You can also think your partner as a shareholder and use Equity as corporate finance does.

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3

One of my auto impossed requirements is to use hledger import to import the CSV of the shared bank account in the assets:partner:bank because this way I can verify that there is no error. The registers and balance of the assets:partner:bank must be the same that those shown in the web page of the bank. Due to this, then I need a liability or a contra-asset account to reduce to the half value this account. So, in this case I think is not possible to use one equity account. Correct me if I am wrong.

4

I haven't (successfully) tracked shared assets like this, only shared expenses. I think I'd need a stronger separation of those accounts to avoid confusion. Eg if I really wanted both my and household transactions in one journal, I might do the following
(I've just used equity for household as @shlewislee suggested):

# me+household.journal

2024-01-01 my contribution
    me:assets:bank                              -100.00 EUR
    me:expenses:household                        100.00 EUR
    household:equity:me                         -100.00 EUR
    household:assets:bank                        100.00 EUR

2024-01-01 my partner contribution
    household:equity:partner                    -100.00 EUR
    household:assets:bank                        100.00 EUR

2024-01-02 pay shared bill
    household:assets:bank                       -100.00 EUR
    household:equity:me                           50.00 EUR
    household:equity:partner                      50.00 EUR

Or, I'd go the extra step and split the files:

# me.journal

2024-01-01 my contribution
    assets:bank                                 -100.00 EUR
    expenses:household                           100.00 EUR

# household.journal

2024-01-01 me contribution
    equity:me                                   -100.00 EUR
    assets:bank                                  100.00 EUR

2024-01-01 partner contribution
    equity:partner                              -100.00 EUR
    assets:bank                                  100.00 EUR

2024-01-02 pay shared bill
    assets:bank                                 -100.00 EUR
    equity:me                                     50.00 EUR
    equity:partner                                50.00 EUR

Or, if I needed more detailed reports from household's point of view, I could record expense categories:

# household.journal

2024-01-01 me contribution
    equity:me                       -100.00 EUR
    assets:bank                      100.00 EUR

2024-01-01 partner contribution
    equity:partner                  -100.00 EUR
    assets:bank                      100.00 EUR

2024-01-02 pay shared bill
    assets:bank                     -100.00 EUR
    expenses:foo                     100.00 EUR

#2024-01-31 retain earnings (splitting them 50-50)
#    expenses                                    ==* 0 EUR
#    equity:me                         50 EUR
#    equity:partner                    50 EUR

I haven't done it, but I think all of those could be generated with (multiple runs of) CSV rules (except retaining earnings).

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5

Great. If I summarize, I think you are proposing to follow the second proposal, in other words, to clearly separate the accounts in two different ledgers:

  • if one journal file is used, first level accounts (me and household) are used to separate the ledgers.
  • if multiple journal files are used, no need to use the first level account

Another issue that suprises me is the use of equity accounts for the household journal/ledger. From my point of view, from the point of view of the household, there are monthly incomes from contributions and monthly expenses. I do not see the point of equity accounts. Is it a preference over income?

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6

Think of your household as a company. You(and your partner) invest in a company and the company recognizes the investment as an asset(and equity). Incomes are only for things that are related to business earnings. Liabilities, are, well, liabilities. In corporate finance, it goes into capital stock on the company side and you as an investor get stocks in return. But since it's just personal finance, you mark it as an expense, not an asset, although I would personally mark expense not as me:expenses:household but as me:expenses:{shared expense name}.

I didn't think through this much(I don't live with partner yet) until I read @simonmic's way and that seems like the perfect way to address this, almost perfectly in align with corporate accounting.

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7

So household is the worst company I would never invest in! all expenses and no income :sweat_smile: :rofl:

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8

In the past I probably would have anthropomorphised Household more, imagining it as a third "person" with their own income (gifts from me and partner). That's intuitive, and there'd be nothing wrong with doing it that way. I would always start with the most intuitive arrangement. If journaling from the beginning of Household's bank account, you wouldn't need equity to account for starting balances, and you could avoid mentioning equity at all.

But now, with Household's "income" not being very important, I'd prefer the conventional use of equity, to provide starting balances and also to track ownership ongoingly. In some situations that's a pretty good feature when there's a real shared bank account with a possibly large balance.

In my household we have so far done without the shared asset (bank account) - just tracking a liability back and forth, which if one trusts the accounting (we do :tada:) simplifies things a bit. But I guess there are times when that real bank account is useful; eg it's a more certain cash reserve, as with envelope budgeting.

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9

Checking in, since this came up in hledger chat today: @zako, what did you end up doing / how is it going ?

10

My current setup is two files, personal.org for my personal accounts and transactions. And household.org for my shared accounts and family transactions.

However, in the following weeks I plan to join the two files and have different accounts prefixes (me:... and household:... ) in the same journal file to avoid errors when I transfer personal funds to household accounts. As you suggested above. Because I feel I made errors and I did not keep them consistent.

Apart from that, I feel a bit uncomfortable with the following asymmetry. When I send funds to household accounts, I track them as expenses:household in my personal ledger. However, when I receive funds in the household ledger, I track them as equity:me. I think I should use one of the following:

  • If I decide to use equity: send personal funds to equity:household (or even assets:household ?) in my personal ledger and receive funds in the household ledger in equity:me
  • If I decide to use income/expenses: send personal funds to expenses:household in the personal ledger and recive them in the income:me household ledger.

what do you think?

11

Hi. I got interested in the topic, and don't see a reply to the last question, so here's my thoughts.

If it were me, I would prefer the symmetry, as well.

The two methods you give differ in whether you want to track your part of household as a personal asset. If so, which sounds like the case, use the asset/equity method. The income/expenses method would count household as a separate entity, instead.

An asset/equity method may arguably be more natural if joining the journals. If the systems stay separate, assuming prefixes in the form [type]:[system]:[account] (some tools require type to be the first prefix) with linked accounts that should always match, your assets:me:household should match equity:household:me, including adjustments from closing household expenses.

The expense/income arrangement might be easier to journalize, as it needs fewer postings. In general, both of those methods would need a total of at least 4 postings for a synchronized change in the linked accounts. For example, a contribution in either method would need two postings for your contributed asset and your expense or asset account for household contributions. Another two would be needed for the household equity/income and received asset, which could be in a separate transaction [or maybe placed in square brackets to separate them as balanced virtual postings.] The asset/equity method should also keep in sync upon closing the household expense accounts. The income/expense method would have already counted it expended, so no further tracking is needed.

Something like your original setup would remove some of the redundancy, but I see how it could complicate reports and things, so may be best avoided.

If in doubt, try each way and see what seems most practical for your situation.

Just my 2 cents. Hope it works out well for you!

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12

Thanks @Quasic for your thoughts! I needed some discussion to know if I was on the right path.

I fully agree with your comments. The only difference is that I prefer the [system]:[type]:[account] notation and hledger allows it, so I will stick to it. In the future, if I need to use another tool, I can regex my accounts.

I think the key point to choose between the asset/equity or the expense/income models is:

Since my shared accounts for household expenses (household ledger) are accounts to spend and not to save or invest, I prefer to switch to the expense/income model. I prefer to consider this money was already spent and so (1) I do not have to close the expenses (and incomes) of my household: ledger monthly or yearly and then (2) to go to my me: ledger and depreciate the value of my household asset. I could follow this approach if my second ledger is, for example, my business and I want to track the money I invested in my business and to estimate the current value of this investment.

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13

I'm glad to have helped.

[system]:[type]:[account] is used by many others, as well. Both hledger and ledger support it. I used it, myself, then switched to the other method so I could try out more tools. A great thing about most PTA tools is they are very customizable.

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