Characterizing Gift Cards: Income? Or coupon?

[Meezer_Mom]

Received a few gift cards this past week and have been thinking through how to characterize them on my budget spreadsheets.

Option 1: treat as income* and allocate accordingly even though it may be for a particular business. If I frequent that business, I'm still paying for whatever service or product from that particular spending category; I'm simply first using up a gift card as form of payment.

Option 2: treat gift card as coupon, no allocation on spreadsheets, pretend it never existed. Only record any final out-of-pocket expenditures.

I'm favoring Option 1 to stay self-honest - and I kind of like the idea of saving something even from gifts and windfalls - but there may be good reasons for Option 2... or, even, another option.

*only for personal spreadsheets; not for tax purposes

[Chicken lady]

It's a gift. How do you allocate other useful gifts?

If someone gave you a sweater, would you subtract it from your clothing budget?

[Aqua Blue]

I seldom get gifts anymore, let alone gift cards, but when I did they were "mad" money. I suppose they do cut down on some expense, but I really don't care. I use my credit card rebate the same way. I am not a big spender, but once in a while there is something I want, but don't' really want spend the money on it. This last time it was an instapot. I love it but probably wouldn't have bought it except my out of pocket cost was around $20. I've saved that much using it I am sure. I guess of your choices I go with 2. I did record the $20 it cost me.

It works for me. I just totaled 2015 expenses and income. My spending was within $100 of last year. The year before it was a little more, as I moved.

[iris lilies]

Thus is the problem of spreadsheets and rigid categories.

I would count it as income.

I don't see the conflict in"honest" vs dishonest. Remember OP, these are categories
YOU set up.

[pony mom]

I'd count it as #2. It's a gift you wouldn't have otherwise, and it doesn't cost you anything.

[Meezer_Mom]

While we wouldn't track a sweater, certainly, doesn't it make sense to still track "free" money? Even if that amount were 100% allocated to a category of choice?

[iris lilies]

While we wouldn't track a sweater, certainly, doesn't it make sense to still track "free" money? Even if that amount were 100% allocated to a category of choice?
sweetie, count it how ever you like, you are the arbiter of these categories.

But it is income. If you are rigid in your thinking and you consider that you get income from only one source--your job--ok.

I think that's limiting.

[Meezer_Mom]

iris_lilies, I studied tax law (inter alia) so, no, I don't just define "income" as monies from a job.

There is a wide range of budgeting strategies and I've been trying to find the sweet spot for my own. But, you know, sometimes what is obvious to one isn't necessarily obvious to another.

Hence, my question and this thought-provoking discussion. :)

I am kinda working out an analogy with cake, if imperfect.

If I have a cake to share among myself and 7 other people and someone gifts me with another cake, does it make sense to hide the extra cake and eat it (and the calories that come with it) all by myself? Or share the extra cake with the others so every one gets a little more? (And likely building good will along the way.)

[Kestra]

Sometimes I treat them as a reverse gift, so it just reduces my budget line for gifts. But I hardly ever get gift cards or give gifts so it doesn't come up much. When I put credit card points towards free groceries I don't bother counting it as income. My spending on groceries is reduced, so my savings are increased by the same amount.

[Meezer_Mom]

I'd see points towards free groceries as a coupon, too, Kestra.

[ToomuchStuff]

I am going to be tracking again soon, as I had some large known expenses last year, that I didn't want to keep looking at. In my categories, I had a gift category, for when I bought a gift for someone (dual entry bookkeeping, has to come or go to some category), and gifts I received also went there.

[iris lilies]

iris_lilies, I studied tax law (inter alia) so, no, I don't just define "income" as monies from a job.

There is a wide range of budgeting strategies and I've been trying to find the sweet spot for my own. But, you know, sometimes what is obvious to one isn't necessarily obvious to another.

Hence, my question and this thought-provoking discussion. :)

I am kinda working out an analogy with cake, if imperfect.

If I have a cake to share among myself and 7 other people and someone gifts me with another cake, does it make sense to hide the extra cake and eat it (and the calories that come with it) all by myself? Or share the extra cake with the others so every one gets a little more? (And likely building good will along the way.)

The cake analogy is funny, and it may help me understand a little what you are trying to accomplish with categories that track incoming money, but only a little.

I would say that if you intend to review at the end of the year how much you spent and saved of that which was available to you, then you have to record the gift money. If that's not a calculation that's important to you, then you don't have to,record it.

[catherine]

In my opinion, I'm closer to Meezer_Mom. I don't count gift cards as "income." I count them as gifts, but they don't factor into my budget.

[Williamsmith]

If you want a true description of your financial activity for future analysis, shouldn't gifts in any form be accounted for both as income and expenses?

[rodeosweetheart]

I try to save 10% of any cash gift, just to be in habit of continuing to save, like reflex.

Gift cards, I do not account for in any way, I just enjoy them.

[Meezer_Mom]

Thank you, Williamsmith, for the phrase: "true financial activity".

Yes, that IS what I'm striving for. Another reason to be self-honest. If gifts and windfalls are used to pay for certain things then including them clarifies the figure I must reach to have the same quality of life the following month or year.

rodeosweetheart, I am trying to develop that same reflex. :)

[catherine]

If you want a true description of your financial activity for future analysis, shouldn't gifts in any form be accounted for both as income and expenses?

I guess it depends on the gift. If a relative gave me $200 cash, I would enter that as income, especially if I were using it for specific budgetary purposes. But a $50 gift card to Amazon--I'm sure it's my own dysfunctional way of looking at money, but I would rather not "taint" a gift by accounting for it in my budget. My rationale is, if they had given me a book instead of a gift card, I wouldn't put the value of the book in my budget, so I would treat the gift card the same way.

[Williamsmith]

I guess it depends on the gift. If a relative gave me $200 cash, I would enter that as income, especially if I were using it for specific budgetary purposes. But a $50 gift card to Amazon--I'm sure it's my own dysfunctional way of looking at money, but I would rather not "taint" a gift by accounting for it in my budget. My rationale is, if they had given me a book instead of a gift card, I wouldn't put the value of the book in my budget, so I would treat the gift card the same way.

Yes but isn't the difference your ability to utilize the gift card in multifaceted ways whereas the book is.........well a book on a specific subject with no room for personalizing the gift. Why I love gift cards over any other gifting.

[iris lilies]

If you want a true description of your financial activity for future analysis, shouldn't gifts in any form be accounted for both as income and expenses?
Not gifts in any form. It seems reasonable to record all financial transactions because it's a financial tracking system.

If someone gives you stuff in physical form like a sweater, it's mixing concepts to enter the sweater into the financial transactions file. That should go into the "sweater" or "clothing" inventory. If you sell the sweater, you would enter the money you got from its sale into the financial sheet.

Real property vs. financial property. Keep em separate, that's what I say. I'm in the middle of listing our assets for our attorney, and this is what I'm doing.

[iris lilies]

I guess it depends on the gift. If a relative gave me $200 cash, I would enter that as income, especially if I were using it for specific budgetary purposes. But a $50 gift card to Amazon--I'm sure it's my own dysfunctional way of looking at money, but I would rather not "taint" a gift by accounting for it in my budget. My rationale is, if they had given me a book instead of a gift card, I wouldn't put the value of the book in my budget, so I would treat the gift card the same way.
You're right, I can't relate to this thinking. Taint? catherine, that's funny-interesting.

But a lot of trouble I'm having here is because I don't budget. I also do not track money in or out at that level of detail.

our main financial accounting is to compile a snapshot, once a year, of our assets. All assets, including sweaters ( but not cake because foodstuffs are too temporal to include.)

[iris lilies]

Ok, I am really into this topic and that's why I'm posting so much.

Heres another thought that might cause me to NOT include a gift card in financial transactions: how fungible is it? Can it EASILY be spent?

for us, a gift card to Target (which are the only cards we get) is easy to spend. But a gift card to, for instance, a restaurant on the other side of town for cuisine we don't much like would be a PITA to spend. Same for bookstore cards, I don't buy books. So for these latter cards I,would likely ignore them for the financial,details,because it's possible I might not ever use them.

[Meezer_Mom]

Yes, fungibility is key. I would sell a gift card for a business I don't frequent, ergo converting it to cash.

My spreadsheets, btw, aren't that detailed. I know myself too well: if it takes too much time to enter, I start putting it off because I have other things to do. So, I enter what I spend daily in the same notebook as I do my calorie counting and to-do list, then tally by category once a month on discretionary spending. It takes about an hour to calculate. Categories are general according to my lifestyle: groceries, drug store, cat food & supplies, etc. I try to keep my discretionary spending between $7-12/day. The notebook helps to rein me in on the fly.

I have spreadsheets for the other categories - rent, debt, healthcare, utilities, transportation, savings and donations - with percentages of net income allocated for each as earned. I've been doing this for the past couple years. I've been keeping the more detailed discretionary spreadsheet for about 3 months. It's been illuminating.