Converting from Quicken, accounting for 401k Contributions into Investment Account

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Andrew

01 May, 2020 12:22 PM

Based on my review of the knowledge base, other people coming to MD from Quicken have noted that MD is different in that it requires adherence to accounting conventions, whereas Quicken "hides" some of the accounting work to simplify things for users. One place where you see this is when entering Individual Retirement Account (IRA) contributions and 401k (employer-sponsored retirement plans) contributions. Quicken allows a single entry whereby, say $500 is simply added/invested to the IRA or 401k account, but there is no corresponding entry somewhere else, showing that the money was deducted from another account.

For the benefit of non-U.S. readers of this post, if you participate in a 401k plan, your employer sends your 401k contribution directly to your broker each pay period and deposits the balance of your salary payment into your checking account. In Quicken, I have simply been recording each 401k contribution in my 401k investment account. When this account was imported to Moneydance, it shows each transaction in the Register as a "BuyXfr" (Action column) and indicates "ShrsIn" in the "Check #" column.

For ease of accounting, I keep track of my 401k account by entering the amount of each deposit as a purchase of X shares of a fictitious security at a price of $1, and then I adjust the value of the fictitious security over time to match the value of the account. So, if I have a $500 401k deposit, this is recorded in Quicken as a ShrsIn transaction involving the purchase of $500 worth of FakeSecurity at $1 per share. Now, in MD, these show up with the "Shares" column correctly reflecting the amount of each contribution ($500), and the "Amount" column showing the same value ($500), resulting in a negative balance of -$1000. After the next transaction, also for $500, the negative balance increases to -$2000.

Here are my two questions about all of this:

(1) First, I have noticed that if I start with the very first deposit entry in the Register, and double-click on it as though I were going to edit the data, and then I press "Enter" without actually modifying any of the data, that particular entry will change from showing a negative balance of -$1000 to a zero balance. And I can keep going down the register, one by one and repeating this, and the balance for the entire account will go to zero. Strangely, if I should skip one of the transactions and jump down the list say, three or four entries, the ones above will not zero out and the current one that I am clicking on also will not go to zero until all the ones above it have had this treatment. So, the question is, why is this happening, and is there any reason I should not embrace this as a solution for correcting the negative balance in my 401k investment account.

(2) What is the appropriate MD procedure for entering future transactions? I would really like to not have to record a 401k deposit into my checking account so that it can be "transferred" to my 401k account whereupon it will be used to "buy" shares of the fictitious security I use as a tracker. If I understand the notion that MD, unlike Quicken, does not want money to magically appear somewhere. However, 401k contributions are not actually distributed to my checking account in the first instance, so I really do not want to add things to my checking account ledger that will not be reflected on the monthly statements from the bank. Does this mean that I have to record a "MiscInc" transaction in MD so that the funds can be used to "Buy" the fictitious security?

Thanks for any guidance.

Glad to see other Quicken ex-pats on here. I have come close to giving up a few times when encountering MD obstacles and have seen a few posts from others who gave up more quickly. The problem with paying for the next version of Quicken, as someone else pointed out, is that it appears the new version will transform your data file into a new format that cannot be exported, making it impossible to switch software later.

Andrew

  1. 1 Posted by dwg on 01 May, 2020 11:01 PM

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    I'm a fellow user.

    In terms of entering the transaction it is typical to enter it as part of your paycheck using a split transaction.

    For example in my case I started with my gross salary, then as part of the split transaction I have Tax, retirement savings etc taken out and the final amount left goes to my chequing account.

    The following older articles specifically shows entry of a paycheck and may help you.

    https://infinitekind.tenderapp.com/kb/archive-entering-transactions/archive-how-do-i-enter-my-paycheck

  2. 2 Posted by dtd on 01 May, 2020 11:36 PM

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    Given your already extensive knowledge of MD, it is obvious you are a researcher.

    Although I did not encounter your particular issue about zeroing out negative entries, I did encounter both the "magic money" issue, as well as IRA issues. I'm finished, moved to MD, and fine now, but I documented issues I encountered (like BUYXFR and SHRSIN, and so on) in the way TMI thread called "The Vicissitudes of Quicken to Moneydance".

    I wouldn't be surprised if you've already read it.

    https://infinitekind.tenderapp.com/discussions/switching-from-another-personal-finance-program/15012-the-vicissitudes-of-quicken-to-moneydance

  3. 3 Posted by Andrew on 02 May, 2020 12:03 AM

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    Hi dantdavis,

    Thanks for your reply. I actually saw your lengthy exchange about converting from Quicken and found it very encouraging. Unfortunately, I found that it was exceedingly difficult to make the transition, and after putting more than 40 hours into it, I could not justify going further.

    Glad it worked out for you!

    Andrew

  4. 4 Posted by dtd on 02 May, 2020 01:56 AM

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    Not surprised. Good luck.

    I wrote a few messages to MD and Sean saying they would lose people like you and me during this Quicken 2017 closedown transition who had significant investment account history, but I never heard anything back, which suggests we are not their potential future market.

    Again, good luck and good fortune.

  5. 5 Posted by dwg on 02 May, 2020 02:05 AM

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    I'm a fellow user.

    In some things that Quicken does it seems to take the approach of that the End justifies the means, for any software that is based on accounting this just is not going to cut it.

    Quicken has two ways of managing investment values. The first is using the universal way of having prices and shares, or in the case of funds this translates to units and unit prices. The concept is the same but shares usually are in whole numbers and units usually include decimal values.

    Quicken has a second approach which is usually reserved for funds. This allows you to use a fixed value of 1.00 for the price on buys and sales and uses ShrsIn to denote increases in value and ShrsOut for decreases in value. This I just take to be the action name being used for a different purposes and when an investment type of funds is selected Quicken understand the different usage, rather than requiring another two action types.

    Thus by understanding this Quicken can calculate the cost basis, performance percentages, returns etc.

    This second method could be used when you just want to see totals in your financial software and use the investment house site for anything more. A more significant use in my view are for those situations where the investment house provides the data required to manage the investment in any details outside of the investment house in such a way that it is too onerous or time consuming to maintain it in any program. I see that where I am where data is often provide as a CSV file with just date, description and amount columns similarly to a bank statement so you would have to some way extract what you need from the transaction description to be able to enter it.

    I have suggested to the developer that something along the lines of how Quicken does this (in this case) would be a desirable improvement. Using a function to increase and decrease the value does not break accounting rules as they are not a transaction, it is just an alternative to having a unit/share price.

    Without such capability there are a couple of approaches that can be taken, one is using pseudo prices for the investment as a total. I have done this via a spreadsheet. This really amounts to generating data so that the investment in total can be handled on the basis of having a number of units and a unit price. This method should allow most reports and the like to work as intended.

    The other method replaces ShrsIn and ShrsOut with buys and sell transactions using a number of units (shares) with no prices.

    The total value should be correct using this approach however most reporting will be rubbish.

  6. 6 Posted by Andrew on 02 May, 2020 05:43 PM

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    Thank you, guys, for taking the time to provide this helpful information. I can see that Moneydance has a large group of supporters, and I don't think the support team could keep on top of all the questions and issues without the substantial assistance that a number of users take the time to provide.

    Best,

    Andrew

  7. System closed this discussion on 01 Aug, 2020 05:50 PM.

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