Categorize Paycheck and Deductions in Excel Checkbook Software

Applies to Excel templates: "Georges Budget for Excel"

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How to enter and categorize your W2 paycheck from your job as an employee into the checkbook software spreadsheet, Georges Budget for Excel. You can either categorized just the net amount of your paycheck or using split transactions, categorize the gross payment less tax withholding and deductions to get the net check amount that is deposited into your checking or savings account. The 2 options are: (in both examples 3000.00 is the amount of the paycheck that is deposited into the checking account)

 

Categorized just the net paycheck amount and do not categorize any deductions and withholdings.

 

 

 

 

This is a simple way to record your income from your employer. Just enter and categorize the net amount of your paycheck which is the amount of money that is deposited into your bank account whether by direct deposit or paper check.

1) Net Salary: 3000.00 (Income Category)

This makes budgeting and managing cash flow easier. Just set a budget for your net amount of the paycheck sometimes called your take home pay. You do not have to set budget for the payroll deductions such as tax withholding, insurance, retirement plan contributions and other voluntary contributions. You could still track your retirement account balances by creating a retirement asset account in one of the registers or you may decide track your retirement account balances outside of the budget spreadsheet. From a personal budgeting view, since these payroll deductions from the paycheck are already allocated to a specific purpose (whether voluntarily or involuntarily), the net paycheck amount of 3000.00 is what is available cash flow to be budgeted.

 

 

Categorize the gross paycheck amount, payroll deductions and tax withholdings.

 

 

Tracking the gross paycheck and related deductions is another option in personal budgeting software. However it creates more work and some choose not to use this method in part because you really don't have access from a cash flow perspective to the gross paycheck amount so it's not money that you can spend anyways because the money has already been spent on taxes, insurances or transferred to retirement accounts.

Below is an example of how to enter a gross paycheck and deductions into the budget spreadsheet. There may be other deductions but this just goes over some common ones.

The budget spreadsheet has a great split transaction feature in the Excel template that lets you split a transaction into multiple categories. Using a split transaction in the checkbook register, split the net paycheck amount of 3000.00 into the following categories. The budget spreadsheet app allows you to customize the category names so you can edit the names to suit your financial situation. The net amount deposited into the bank account is 3000.00 which is also the running balance in the register.

1) Gross Salary: 4000.00  (Income Category)
2) Paycheck Deduction: Federal Income Tax Withholding: -300.00 (Expense Category)
3) Paycheck Deduction: Social Security Tax: -248.00 (Expense Category)
4) Paycheck Deduction: Medicare Tax: -58.00 (Expense Category)
5) Paycheck Deduction: Health Insurance: -144.00 (Expense Category)
6) Transfer to Roth IRA  Account Contribution: -250.00 (Transfer Category: does not impact Income or Expenses)

In addition to recording the details of the gross paycheck and all the deductions, you also have to set budgets for each of the income and expense categories. That can difficult because the pay periods may not always align with the budget periods. Also, you may want to consider the impact of whether they are pre-tax vs. post-tax deductions and contributions by tagging the transactions.

 

Summary

These are two methods to record your paycheck into checkbook registers of the budget spreadsheet. Recording only the net paycheck amount is easier from a budgeting and cash flow perspective and saves time. Recording the gross paycheck amount along with the related deductions takes more time to enter the transactions and set up all the related budget accounts used in creating the transaction. One benefit of recording the gross paycheck and deductions, is that you are tracking the total gross amount of your salary or hourly pay rate and where that money went. Whatever method you choose, it is important to track your income earned from work, whether you are an employee or self employed and also track your expenses in a good personal finance spreadsheet to help you save money and time.

 

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