Budgeting

Personal Budgeting

Tool Mapping

Spending Analysis

Category Breakdown

1. Pull transactions for the target period using transaction(operation="list") with date range filters
2. Group by category — report both absolute amounts and percentage of total spend
3. Flag categories that exceed their budget allocation
4. Present results as a ranked table: Category | Budgeted | Actual | Variance | % of Total

Month-over-Month Trends

1. Pull 3-6 months of transaction data
2. Compute per-category monthly totals
3. Calculate month-over-month change (absolute and percentage)
4. Flag categories with sustained increases (3+ consecutive months of growth)
5. Distinguish between recurring/fixed expenses (rent, insurance, subscriptions) and variable expenses (groceries, dining, entertainment)

Anomaly Detection

• Flag individual transactions > 2x the category's average transaction size
• Flag categories where current month spend exceeds the trailing 3-month average by > 25%
• Flag new payees not seen in prior months (potential new subscriptions)

Budget vs Actual Variance Analysis

Monthly Variance Report

1. Pull budget allocations via budget(operation="month") for the target month
2. Pull actual spend by category for the same period
3. Compute variance: actual - budgeted (negative = under budget, positive = over budget)
4. Present as table: Category | Budget | Actual | Variance | Status (Over/Under/On Track)

Status Thresholds

Year-to-Date Tracking

• Accumulate monthly variances to show YTD position per category
• Some categories (e.g., auto maintenance, medical) are lumpy — flag these and compare YTD to annual budget rather than monthly

Savings Rate Calculation

Formula

Gross Savings Rate = (Total Income - Total Expenses) / Total Income
Net Savings Rate   = (Total Income - Total Expenses - Taxes) / (Total Income - Taxes)

Procedure

1. Pull all income transactions (identify income categories/accounts in Actual)
2. Pull all expense transactions
3. Exclude internal transfers (account-to-account moves) — these are not income or expenses
4. Calculate both gross and net rates
5. Track monthly trend and rolling 3-month average

Investment Contribution Context

• Use ghostfolio-mcp to pull recent contributions to investment accounts
• Include these in the savings rate numerator if they are not already captured as "transfers" in Actual
• Report: Savings Rate (cash) vs Savings Rate (including investments)

Cash Flow Forecasting

Short-Term (Next 30-60 Days)

1. Start with current account balances from account(operation="list")
2. Identify recurring income (salary dates, rental income, dividends)
3. Identify recurring expenses (rent/mortgage, subscriptions, loan payments, insurance)
4. Subtract known upcoming one-time expenses (if any flagged by user)
5. Project daily balance and flag dates where balance drops below a user-defined threshold

Procedure

1. Analyze 3-6 months of transaction history to identify recurring patterns
2. Categorize each recurring item: weekly, biweekly, monthly, quarterly, annual
3. Build a forward calendar of expected inflows and outflows
4. Present as a week-by-week projection table: Week | Expected In | Expected Out | Projected Balance

Seasonal Adjustments

• Flag categories with known seasonal variation (utilities, holiday spending, insurance renewals)
• Use same-month-prior-year data when available for seasonal categories

Tax-Aware Financial Planning

Tax-Relevant Transaction Tagging

Ensure these categories are properly tracked in Actual for tax time:

• Business expenses (Schedule C — use categorize_schedule_c_deductions from household-tax-mcp)
• Health insurance premiums (self-employed deduction)
• Retirement contributions (SEP-IRA, Solo 401(k))
• Charitable donations (Schedule A itemized deductions)
• Home office expenses (simplified or actual method)
• Professional development and education
• Travel and business meals (50% deductible)

Quarterly Estimated Tax Payments (1040-ES)

1. Pull YTD income from Actual (self-employment, W-2, investment income)
2. Pull capital gains/dividends from ghostfolio-mcp
3. Normalize facts to the reduced exact household-tax contract
4. Use assess_exact_support before any tax recommendation
5. If supported, use compute_individual_return_exact, compare_individual_payment_strategies, and plan_individual_safe_harbor
6. If unsupported, stop and report the gap rather than approximating

Due dates: Q1 Apr 15, Q2 Jun 15, Q3 Sep 15, Q4 Jan 15 (next year)

Self-Employment Tax (Schedule SE)

Self-employment income is outside the reduced exact household-tax scope. For these cases:

• Social Security tax (12.4% up to wage base)
• Medicare tax (2.9% + 0.9% additional above $200k)
• Deductible half of SE tax (reduces AGI)
• do not use household-tax as an exact calculator; surface the unsupported scope explicitly

Schedule C Deduction Categorization

Use categorize_schedule_c_deductions to map Actual Budget expense categories to Schedule C lines. Review unmapped categories quarterly to ensure all deductions are captured.

Exact Tax Support

household-tax no longer exposes generic scenario comparison tools. Use the exact quarterly-tax/safe-harbor surface only when the case is inside the supported 2026 US + MA scope; otherwise flag that exact household-tax support is unavailable for the requested budgeting decision.

Integration with Ghostfolio

• Pull capital gains data from ghostfolio-mcp for tax planning
• Short-term vs long-term classification based on holding period (1 year for equities)
• Coordinate with investing-workspace tax servers for wash sale and TLH analysis

Report Formats

Monthly Financial Summary

Present in this order:

1. Income: Total income, sources breakdown
2. Expenses: Total expenses, top 5 categories, budget variance highlights
3. Savings: Savings rate (gross and net), trend vs prior month
4. Net Worth: Cash + investments - debt, change from prior month
5. Alerts: Over-budget categories, anomalous transactions, upcoming large expenses

When Asked "How am I doing financially?"

1. Current month savings rate vs 3-month average
2. Top 3 over-budget categories with specific amounts
3. Net worth trend (up/down/flat vs prior month)
4. Cash flow health: days of runway at current spend rate
5. One specific, actionable recommendation

Common Pitfalls

1. Double-counting transfers — Exclude account-to-account transfers from income/expense totals
2. Credit card timing — Match expenses to transaction date, not payment date
3. Reimbursements — Identify and net out reimbursed expenses (or track separately)
4. Split transactions — Some transactions span multiple categories; handle splits properly
5. Investment contributions vs returns — Contributions are savings; returns are not income for budgeting purposes