Categorizing Venmo Transactions in Monarch Money: A Comprehensive Guide

In this tutorial, we will explore how to use Venmo in Monarch Money and how to categorize Venmo transactions correctly to ensure accurate budgeting. Whether you're a frequent or occasional Venmo user, understanding how to categorize your transactions is crucial for effective financial management.

Connecting Venmo to Monarch Money

If you use Venmo frequently (multiple transactions per week), it's recommended to connect your Venmo account to Monarch Money. This will enable you to track your transactions seamlessly and categorize them accurately. However, if you only use Venmo occasionally (1-2 transactions per month), it might not be necessary to connect your account.

Understanding Venmo Transactions in Monarch Money

In the Venmo transactions tab, you will typically see two types of transactions: transfers (from your Venmo balance to your bank account or vice versa) and transfers to/from other people (reimbursements or payments). These transactions can be confusing, especially if you're not familiar with how Venmo works. To ensure accurate budgeting, it's essential to categorize Venmo transactions correctly.

Categorizing Venmo Transactions

In Monarch Money, you can categorize Venmo transactions by creating a new category for Venmo transactions (e.g., "Venmo Payments" or "Reimbursements") and linking your Venmo account to Monarch Money. This will enable you to track your transactions and categorize them accurately.

Common Issues with Venmo Transactions

One common issue with Venmo transactions is seeing duplicate transactions in your Venmo account, such as a transfer from your Venmo balance and the same amount being deposited into your bank account. Another issue is incorrect categorization, which can lead to inaccurate budgeting.

Connected Venmo Account vs. Unconnected Venmo Account

If you don't have your Venmo account connected to Monarch, your transactions will not be labeled as transfers. You need to categorize these transactions manually. When categorizing, make sure to put the reimbursement in the same category as the original charge, and preferably categorize it as an expense, not as income. Set up a rule in Monarch to alert you when a Venmo transaction needs to be reviewed.

If you have your Venmo account connected to Monarch, most Venmo transactions in your checking account will be labeled as transfers. However, this is not always the case, and sometimes the label may be incorrect. You can differentiate these transactions by looking at the notes or comments left by the person who sent the funds. When categorizing, make sure to put the reimbursement in the same category as the original charge, and not as income.

Additional Tips

• Set up a rule in Monarch to automatically categorize Venmo transactions when they come in.
• When reviewing your transactions, make sure to check the label and categorize it correctly.
• Keep in mind that sometimes the label may be incorrect, and you may need to manually correct it.

Transfers in Venmo

When tracking expenses in Venmo, transfers are labeled as transfers because they are just moving money from your checking account into your Venmo account. The rule of thumb is: if it says "Venmo", it's a transfer. If it says "person", it's an expense.

Categorizing Expenses

For expenses, you need to categorize what the money was spent on. If you're being reimbursed for something, put the category as whatever the original charge was. Clicking on the carrot icon will show you where the transaction came from (e.g., your Venmo account).

Transfers vs. Expenses in Venmo

If a transaction says "Venmo", it's a transfer. If a transaction says "transfer", it's a transfer. Transfers are when money is moving in or out of your Venmo account. Expenses are when you're sending money to someone else.

Accurate Categorization

Accurate categorization is important to recognize income and expenses in your budget. If you don't have your Venmo account connected, make sure to type in "Venmo" and categorize all transactions that come in and out of your Venmo account. If you have your Venmo account connected, everything related to Venmo will be listed as a transfer.

Exceptions to the Rule

Sometimes, transactions may be labeled as "Venmo" without a person's name. The reason for this is unknown. It's best to double-check and categorize the transaction correctly.

Understanding Transfers in Monarch Money Budget

• Rule of Thumb 1: If an account says "Venmo" and the money is transferred directly to your checking account, it's a transfer.
• Rule of Thumb 2: If an account says "Venmo" and the money comes from your Venmo account, it may need to be categorized separately.
• Categorization: Ask yourself if the money moved to your bank account. If yes, it's a transfer. If not, it needs to be categorized.
• Transfers vs. Categorization: Transfers do not show up on your cash flow report and do not affect your income or expenses. You need to categorize transactions that come from outside your bank account or control.
• PayPal and Zelle: Transactions from PayPal and Zelle may automatically be labeled as transfers. You need to set up a rule to categorize these transactions as uncategorized.
• Checks: Transactions from checks may also automatically be labeled as transfers. You need to verify that these transactions are correctly categorized.
• Double-Checking: Regularly review your transactions in the "Transfers" and "Credit Card Payments" categories to ensure that everything is correctly categorized.
• Connecting Venmo: If you only have a few transactions per month, you may not need to connect your Venmo account. However, if you have multiple transactions per week, it's recommended to connect your Venmo account and follow the rules of thumb for categorization.
• Monitoring Transactions: Regularly review your Venmo transactions to ensure that they are correctly categorized and to monitor your cash flow.

By following these guidelines and tips, you can ensure accurate categorization of your Venmo transactions in Monarch Money, leading to better financial management and budgeting.