Understanding Transaction Types

Balance categorizes all transactions into three types: Income, Expense, and Transfer. Understanding these types is crucial for accurate budget tracking because each affects your budget differently.

The Three Transaction Types

1. Expense Transactions

Definition: Money going out for purchases, bills, and spending.

Characteristics:

• Negative dollar amounts from your account perspective
• Reduce available balance in budget categories
• Most common transaction type
• Tracked against expense categories

Examples:

• Grocery store purchases
• Restaurant meals
• Rent or mortgage payment
• Utility bills
• Gas for your car
• Entertainment subscriptions
• Clothing purchases
• Insurance payments

Impact on budget:

• Decreases “Current Balance” in the category
• Increases “Spent” amount
• Affects progress bar
• Counts toward monthly spending

Visual indicators:

• Standard color scheme (not green)
• Up arrow (↑) on transaction details
• Assigned to expense categories

2. Income Transactions

Definition: Money coming in from various sources.

Characteristics:

• Positive dollar amounts
• Increases income in budget
• Adds to available money
• Tracked against income categories

Examples:

• Salary/paycheck
• Freelance payments
• Business income
• Side hustle earnings
• Tax refunds
• Reimbursements
• Investment dividends
• Interest earned
• Gifts received
• Cash back rewards

Impact on budget:

• Increases total available money
• Adds to income categories
• Improves overall budget position
• Counts toward expected income

Visual indicators:

• Green color
• Down arrow (↓) on transaction details
• Assigned to income categories
• Positive impact on budget

3. Transfer Transactions

Definition: Money moving between your own accounts.

Characteristics:

• Neither income nor expense
• Doesn’t affect budget totals
• Internal money movement
• Not tracked against any category

Examples:

• Transfer from checking to savings
• ATM withdrawal (money leaves checking, goes to cash)
• Payment from one credit card with another
• Moving money between banks
• Transfers to investment accounts
• Payment to spouse’s account (if both are yours)

Impact on budget:

• No impact - doesn’t count as income or expense
• Excluded from budget calculations
• Doesn’t affect Current Balance
• Doesn’t consume category budgets

Visual indicators:

• Transfer toggle is ON
• Info banner: “Won’t be included in calculations”
• Cannot assign categories when marked as transfer
• Helps maintain accurate budget

How Balance Determines Transaction Type

For Bank Transactions

Balance uses your bank’s classification:

Bank says “debit” → Expense

• Purchase at store
• Bill payment
• ATM withdrawal
• Debit card transaction

Bank says “credit” → Income

• Deposit
• Direct deposit
• Transfer in
• Refund

You control → Transfer

• You toggle Transfer ON
• For movements between your accounts
• Overrides bank classification for budget

For Manual Transactions

You choose when creating:

You select Expense or Income

• Toggle at top of add transaction screen
• Default is Expense
• Switch to Income if applicable
• Toggle Transfer if moving money between accounts

Transaction Type and Categories

Category Types Match Transaction Types

Expense categories:

• Groceries
• Dining Out
• Transportation
• Entertainment
• Rent/Mortgage
• Utilities
• etc.

Income categories:

• Salary
• Business Income
• Investment Income
• Other Income
• etc.

Matching Rules

Expense transactions can only be assigned to expense categories

Income transactions can only be assigned to income categories

Transfer transactions cannot be assigned to any categories

Example:

• If you try to assign a Salary transaction (income) to Groceries (expense), the category won’t appear in the list
• The category type must match the transaction type

Visual Identification

On Transaction List

Expense:

• Standard text color
• Amount shows as regular number
• Category badge (if categorized)

Income:

• Green text/highlighting
• Amount shows as positive
• Income category badge

Transfer:

• Similar to expense visually
• Shows “Transfer” indicator
• No category badge (can’t categorize)

On Transaction Details

Expense:

• Up arrow (↑) in circle
• Secondary color (typically orange/red)
• “Transaction amount” label
• Expense categories available

Income:

• Down arrow (↓) in circle
• Primary/success color (green)
• “Transaction amount” label
• Income categories available

Transfer:

• Transfer toggle ON
• Info banner visible
• Category section disabled
• Cannot categorize

Special Cases

Refunds

Scenario: You return an item and get money back

How it appears:

• May show as positive transaction (income)
• Or as negative of original expense
• Depends on bank reporting

How to handle:

1. Option A: Leave as income transaction

   • Assign to “Other Income” or create “Refunds” income category
   • Simple and accurate

2. Option B: Adjust categories manually

   • If original purchase was categorized
   • You could create offsetting transaction
   • More complex, usually not necessary

Best practice: Treat refunds as income. Your budget will net out correctly.

Returns

Similar to refunds:

• Money coming back
• Treat as income or special refund category
• Balances out original expense over time

Reimbursements

Scenario: You paid for something, company/friend reimburses you

How to handle:

1. Original purchase → Expense (categorize normally)
2. Reimbursement → Income
3. Assign to “Reimbursements” or “Other Income”

Net result: Nets to zero over time (you spent, then got repaid)

Alternative approach:

• If reimbursement is immediate
• Could mark original as Transfer
• Then mark reimbursement as Transfer
• Neither affects budget

Cash Back Rewards

Credit card rewards, cashback apps:

How appears:

• Usually as positive transaction (income)
• Or credit on statement

How to handle:

• Assign to “Other Income”
• Or create “Cash Back” income category
• Increases income for the month

Pending Transactions

Pending status is separate from type:

Can be:

• Pending Expense
• Pending Income
• Pending Transfer

The type (Income/Expense/Transfer) is independent of pending status.

Visual: May show “Pending” badge alongside transaction type indicator.

Impact on Budget Calculations

Current Balance Formula

Current Balance = 
  Income (all income categories)
  - Expenses (all expense categories)
  - Transfers are excluded

Category Balance Formula

For Expense Categories:

Category Current = Budgeted Amount - Spent

For Income Categories:

Category Current = Expected - Received

Transfers: Don’t affect either calculation

Why This Matters

Accurate transaction types = Accurate budget

• Miscategorized income as expense → Budget looks worse than reality
• Miscategorized expense as income → Budget looks better than reality
• Missed transfers → Double-counting money movement

Best Practices

Correct Classification

✅ Do:

• Verify transaction type makes sense
• Mark transfers appropriately
• Use income categories for actual income
• Use expense categories for actual spending
• Check pending transactions when they clear

❌ Don’t:

• Leave transfers unmarked (affects budget)
• Confuse refunds/reimbursements with expenses
• Mark actual spending as transfer
• Mix up income and expense categories

Handling Edge Cases

When unsure:

1. Ask: “Is money entering or leaving my total accounts?”

   • Entering → Income
   • Leaving → Expense
   • Moving between mine → Transfer

2. Check bank’s classification as starting point

3. Override if bank got it wrong

ATM withdrawals:

• Mark as Transfer (money moving to “cash”)
• When you spend the cash, add manual transactions (expenses)
• Avoids counting withdrawal as expense AND cash spending

Account transfers:

• Always mark as Transfer
• Even if bank doesn’t automatically
• Critical for accurate budget

Working with Your Partner

Agree on:

• How to handle refunds
• When to use transfer status
• Income category conventions
• Reimbursement handling

Discuss edge cases:

• Split payments between partners
• Joint vs individual income
• Shared expense reimbursements

Troubleshooting

Income Showing as Expense

Check:

1. Is transaction actually income?
2. Look at amount - positive or negative?
3. Bank may have classified incorrectly

Solution:

• For manual transactions: Edit transaction type
• For bank transactions: Can’t change type, but categorize correctly
• Assign to appropriate income category

Expense Showing as Income

Similar check:

1. Verify it’s actually expense
2. Check amount sign
3. Bank classification

Solution:

• Manual: Edit transaction type
• Bank: Categorize correctly even if type seems wrong

Transfer Affecting Budget

Problem: Money movement counting as expense

Solution:

1. Find the transfer transaction
2. Tap it
3. Toggle Transfer ON
4. Budget immediately updates

Can’t Assign Category

If category list is empty:

1. Check if transaction is marked as Transfer (can’t categorize)
2. Toggle Transfer OFF if it’s not actually a transfer
3. Category selection should now work

If wrong categories showing:

• Income transaction shows expense categories → Something wrong
• Check transaction type
• For manual: Edit to correct type

Wrong Category Type

Problem: Created wrong type manual transaction

Solution:

1. Tap transaction
2. Tap edit icon
3. Toggle Income/Expense to correct type
4. Save
5. Categories now match type

Next Steps

Now that you understand transaction types:

• Categorizing Transactions - Assign to budget
• Editing Transactions - Fix transaction details
• Adding Manual Transactions - Create with correct type
• Budget Progress Tracking - See type impact on budget

Need help? Contact our support team - we’re here to assist!