Do Your Budgeting in Your Budget

Erin (YNAB education lead) tells me she’s often asked about how to manage various accounts with specific jobs, and how those accounts factor into the budget.

Let’s get some clarity:

  • Budget accounts (checking, savings) are not budget categories (‘Electricity’, ‘Groceries’).
  • Budget categories are not budget accounts.

Your budget accounts have three jobs:

1. Store dollars. Accounts hold your dollars until you need them.

2. Log transactions. Because your dollars enter and leave your accounts (through income and expenses), they log your transactions.

3. Earn interest (maybe). Those dollars you won’t use in the near future (mid- and long-term savings) can multiply themselves.

Accounts hold the money, categories do the work.

To maximize your YNAB simplicity you’d have, say, one checking account and one credit card account (your primary transaction centers), one savings account (something to pay a little interest on those dollars assigned to mid-term goals), and an investment account where you store your retirement dollars.

Don’t misunderstand – you’re not “broken” if you have multiple checking accounts or savings accounts, but you may be adding unnecessary mental overhead – or worse.

Your desire to maintain multiple accounts, each with this or that assigned task, may mean you haven’t achieved full trust in your budget.

Have you found yourself saying you keep those dollars in that account because you’re afraid to spend them? It’s great that you’re protecting those dollars – now take it to the next level.  When a budget category carries the same weight as your dedicated savings account, you’ll know you’re fully engaged in the YNAB way.


10 Responses to “Do Your Budgeting in Your Budget”

  1. Brenna

    My hubby and I have been married for 10 years. Until now, we’ve each kept our own checking account, plus a joint account. It worked at first, but the more I use YNAB the more I’m convinced we need to go to one account. And reduce the number of credit cards.

    My biggest challenge now is that hubby is still of the ‘look at the account balance’ and spend kind of guy. So I’m trying to use that to my advantage and move everything that’s not in his allowance into the joint account.

    • Kenny

      I was in the same situation until a few months ago. Now we still have our own checking accounts and a joint account, but I put our spending money in our individual accounts and everything else is kept in the joint account. It keeps everything nice and neat.

      • Gina

        Kenny, How did you get your wife to come around that.. I’d like to for us to keep our individual account but have a joint account for all “core household expenses” that we both contribute to. But I can’t get DH to even consider that option.

  2. Buck Harrison (@jbuckh)

    My wife and I just closed our multiple bank accounts and moved everything (savings and checking) into one high interest checking account.

    It has been a lot easier to get a grasp of the money we have. Plus, it is a good feeling knowing that regardless of what category our money is in, it is all earning interest for our rainy day fund.

    Now…on to getting that investment account setup.

  3. karen renstrom

    I am in the process of getting rid of all my various accounts. I had one for long term stuff (saving for a retirement condo), one for my mortgage, one for everyday and monthly stuff and one just hanging around doing nothing. I didn’t like not seeing the whole “pot” in one place so I now will have just one. It will give me a better perspective I think on my big picture. Who was I kidding anyway, I constantly “raided” my accounts to cover stuff. Now I will be able to budget for the big stuff and really see where my money goes.

  4. Tim B

    I just made a fresh start because of exactly this confusion. Well, in part at least.

    When I first started with YNAB about 2-3 months ago, my cards were maxed out. At that time, the focus was to repay them. So they went in as categories, with an amount assigned to them each month. The problem was, if I did buy something on the card, the actual money used to pay for the goods would end up in the “credit card bill” category.

    Now they’re clear, but I’m now in a position where I want to use them for day-to-day expenses. So I don’t want them to be a category anymore.

    I made a fresh start, and set them up as normal accounts. Now, all spending on the cards gets assigned to the correct category, and paying them off each month is simply a transfer that doesn’t appear in the budget.

    One change I still make to the recommended YNAB way of doing things is that I don’t yet give every dollar (or pound in my case) a job. I tried to at first, but my socialising categories (restaurants, concerts, cinema) would end up in constant flux, because I just don’t plan a month ahead socially.

    To combat this, I have my socialising categories, and a “Weekend Cash” category. My socialising categories have a zero budget to start with. The Weekend Cash category has an allowance for that week only. Anything else stays “available to budget.” When we go to the cinema, or for a meal, or whatever, I take money out of Weekend Cash, and assign it to the appropriate category. The next week, I refill Weekend Cash with that weeks allowance.

    Maybe in a few months, I’ll know the averages well enough to plan further ahead, but for now, my approach works.

    • MendedSlinky

      In your example you’re still giving it a job. Weekend Cash is still a job that money can fulfill.

      • Tim B

        That part is, yes. However, I’m not assigning a full month to that category – I’m only assigning a week at a time, and the rest is still Available to Budget – that money does not have a job.

      • Absotively

        You could make a Future Weekend Cash category to hold the Weekend Cash for the rest of the month, and then it would be easy to see what was actually available to be budgeted vs waiting to be Weekend Cash.

        You could even make five categories, and budget to them at the start of the month – Weekend One Cash, Weekend Two Cash, etc. But that might be getting a little category-happy.

  5. Lloyd

    I realize I’m probably in the minority here, but I find that having a large number of on-budget accounts makes it easier, not harder, to make the mental separation between accounts and categories.

    In my experience the biggest danger is when you look at an account’s balance, say to yourself “I have enough money in there”, and then spend it, without looking at the budget. But with so many on-budget accounts (I have 11-12), I know that I can’t look at a single account’s balance and get any real picture of things. I *must* look at the budget itself, and use categories to allocate it. There’s no other way to get a good picture of the situation.

    If I had fewer on-budget accounts, I think I’d find it easier to look at the account balance, and be tempted to sidestep the budget and categories.

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