Rollover budget

What It Means

A rollover budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more lets money you don't spend in a category stay with that category, so it's added to next month's amount instead of disappearing when the month ends. In apps such as Quicken and Monarch Money, rollover is a setting you turn on one category at a time. A category that ends below zero can carry the shortfall forward too, which leaves less to spend the following month. Quicken's help suggests it for spending that swings from month to month, such as clothing and entertainment.

How It Sounds at Home

• "I've got $60 rolled over in clothes, so the boots are covered."
• "Whatever we don't spend on eating out rolls into next month."
• "I blew the gas budget, so next month's gas money is already short."

The Breakdown

An example family. The Nguyens budget $100 a month for clothes and switch on rollover. All the numbers are made up.

Back-to-school shopping in August cost $240, and the category could cover it because two quiet months had built it up.

Where it goes wrong. In October a $200 winter coat comes out of a category holding $150. The $50 shortfall rolls forward, so November starts with $50 instead of $100, and one more big month keeps the category in the red into the new year. Another common slip is treating a big rolled-over balance as spare money and spending it on something from another category, which leaves nothing when the coat or the school shoes are actually needed.

What to watch for

• A category that grows month after month may be set too high. Lower it and give the difference to savings or another category.
• A balance that stays negative for several months means the monthly amount doesn't match what you really spend.
• A rolled-over amount is a number in your budget. Unless you've moved the money somewhere separate, it sits in checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more with everything else.

Good to Know

Quicken's and Monarch Money's help pages both describe rollover as something you turn on one category at a time, and a negative balance can carry forward as well as a positive one unless the setting ignores negatives. Check how your app handles it before you trust a rolled-over number. Rollover suits costs that come and go. For bills that arrive once, twice or four times a year, the Consumer Financial Protection Bureau's Your Money, Your Goals toolkit has an annual planner for mapping them across the year, and its cash flowCash flowThe money coming in and going out over a period; positive cash flow means more came in than went out, and negative means the reverse. See more budget suggests splitting a large periodic bill into smaller, more frequent payments, which can make it easier to pay.

Related Terms and Categories

• Sinking fund

  Money set aside in small, regular amounts for a known future cost, so the bill doesn't land on a single paycheck.

• Envelope budgeting

  A budgeting method that gives each spending category its own envelope of money, and spending in a category stops when its envelope is empty.

• Budget category

  A group of similar costs, such as housing, groceries or transportation, that a budget plans and tracks together with its own amount.

• Budget variance

  The gap between what a budget planned and what actually happened, in dollars and as a percent of the plan, marked favorable or unfavorable.

• Zero-based budget

  A budget that assigns every dollar of income to spending, saving or debt, so income minus everything assigned equals zero.

Household money and budgeting