Reserves and lumpy bills

Some bills do not arrive on the same rhythm as your pay. This page explains why that breaks an ordinary
budget, and how Swish's reserves fix it.

Read this before setting your targets in Setting up your budget — it is
the idea the rest of the budget is built on.

"Lumpy bill" is our phrase for it, not a label in Swish. You will not find a button with that name.
What you will find on screen are reserves — and this page is about what they are for.

What a lumpy bill is

A lumpy bill is a cost that belongs to your budget every cycle, but does not turn up as a payment every
cycle.

It comes in two shapes:

Paid on a different rhythm from your budget. Power billed monthly while you budget weekly. Rent due
fortnightly while you budget monthly. The cost is constant; the payments are not.

Paid rarely, in one hit. Car insurance, house and contents insurance, rates, car registration, a
warrant of fitness, school costs, a big car service, the vet, Christmas, an annual subscription.

Either way the money is genuinely owed. It just is not owed this week.

Why they break an ordinary budget

Say you budget weekly. Your power bill is $300 a month, so you set a target of $75 per cycle.

Throughout this page, Funding/cycle means the per-cycle target you set in
My Budgets. On screen the column is named after your own cycle —
Funding/Weekly, Funding/Fortnightly, Funding/Monthly.

In an ordinary budget, here is your month:

Three weeks of false comfort, then a week that looks like a blowout.

But nothing went wrong. You set aside $75 a week and the bill cost exactly what you expected. The budget
is fine — the measurement is broken, because it is comparing a monthly bill against a weekly target.

Left alone, this teaches you to distrust your own budget. Worse, it hides the categories that are
genuinely off, because every fourth week is red anyway.

Two different questions

The fix starts with noticing that "how did I do this cycle?" is really two questions:

• Cash spend — what actually left your bank account during this cycle?
• Budget progress — has enough money been set aside to cover this category?

For the power bill, week 4's answers differ completely. Cash spend was $300. Budget progress was perfect:
you had put away $225 over the previous three weeks and added $75 more, so the bill was fully covered the
moment it arrived.

An ordinary budget only tracks the first and reports it as the second. Swish tracks both.

How reserves answer both

A reserve is money set aside in a category that carries forward instead of vanishing at the end of the
cycle.

Each cycle, your Funding/cycle goes into the category's reserve. When a bill lands, it comes out of
that reserve. The same month now reads:

Week 4 still shows the $300 leaving your account — that is real and you should see it. But the category is
on track, because the reserve covered it. The reserve is back to zero and starts building again.

Targets are build-up rates, not spending limits

This is the mental shift, and it is worth stating plainly.

Your Funding/cycle is not a ceiling on what you may spend this cycle. It is the rate at which you are
setting money aside for that category.

So a category is healthy when its accumulated reserve covers the bill — not when each individual cycle
stays under the target. Spending $300 against a $75 target is fine if $300 was reserved. Spending $80
against a $75 target with an empty reserve is not.

Setting a target for a lumpy bill

Take the yearly cost and divide it by the number of cycles in your year:

Some worked examples:

Round up rather than down. A reserve that runs slightly ahead costs you nothing — surplus can be freed up
or pointed at a goal. A reserve that runs short means finding the shortfall the week the bill arrives,
which is the problem you were trying to avoid.

If you do not know the yearly cost, check last year's payments in
Transactions and use what you actually paid.

Set the figure in the funding column — it is named after your cycle, so it reads Funding/Weekly,
Funding/Fortnightly or Funding/Monthly. See
Setting up your budget.

Stopping a reserve from hoarding

A reserve for a yearly bill will keep growing all year. That is the point — but only up to what the bill
actually costs.

Set the Bucket Balance cap at roughly the largest single amount you would realistically need: about a year's
worth for an annual bill. Once the reserve hits that cap, further contributions show as Freed up and go
somewhere more useful instead of sitting idle.

Full detail in Setting up your budget.

Watching it work

Spend Overview is where you check that a lumpy bill is being handled properly.
Select the status dot on a category row to open its breakdown, which reads:

Opening reserve  +  Added  −  Spent  =  Closing reserve

What to look for:

A new lumpy-bill category will go negative the first time the bill arrives if it has not had a full cycle
of build-up yet. That is expected. It corrects itself over the following cycles.

Common lumpy bills

Worth a category and a reserve each:

Common questions

Do I need a separate category for each one? No, but the more specific the category, the more useful the
reserve. "Car" covering insurance, registration and servicing works. "Everything else" does not.

What if I spend the reserve on something else? The reserve is money in a category, not a locked
account. If your car reserve pays for a repair, it is not there for the insurance bill. The reserve
balance in Spend Overview will show you.

Where does the money physically sit? In whichever account backs the category — its Funding bucket.
Account Allocation checks that your accounts actually hold
what your reserves and goals have claimed.

What if I start mid-year and the bill is next month? Set a target that covers the shortfall in the
cycles you have left, then drop it to the normal rate afterwards.

Is this the same as a sinking fund? Yes, in spirit. Swish does the arithmetic and the tracking for you,
per category, automatically each cycle.

Next: Setting up your budget.