Financial Hack: Virtual Accounts

I saw a post over at the recently launched Hello, Dollar! website
that asked about the best way to create and use Virtual Accounts in
available financial software. I personally use Quicken and I thought it
might be helpful to outline my method below.

Rather then use
categories or classes to keep track of my spending in certain areas, I
create whole other accounts.  To do this, I simply go to File
-> New -> New Quicken Account.  I then go through the
wizard, creating a "Savings" account (Savings or Cash will work). 
I name it to whatever my budget category may be, ie Groceries, and put
it on my list.

When my pay check comes, I simply transfer the
month from WF Checking to Groceries.  This is the easy part. 
This results in the WF Checking balance being appropriate because it
reflects the $XX saved away for Groceries.

The second part is tricky.  I am going to use real numbers to help with the illustration.

As a result of Step 1, here's what we have in our accounts after receiving a $1000 paycheck and transferring $100 to groceries:

WF Checking - $900
Groceries - $100
TOTAL - $1000

 The next day, at the grocery store, I spend $35.43.  When
I enter this transaction into Quicken, I enter it into my WF Checking
account.  I then subtract $35.43 from the transfer transaction I
made to my Groceries account.  The result is this:

WF Checking -  $900.00
Groceries - $64.57
TOTAL - $964.57 ($1000-$35.43)

 A couple of notes about this technique.  First of all,
when you reconcile your accounts you have to ignore all the extra
transfers.  This isn't that hard.  Secondly, you have no way
of knowing that your $35.43 you spent at the Grocery Store came from
your grocery account.  I usually put something in the Memo field
to remind me and provide a bit of tracking.