YNAB You Need A Budget

[Michelle]

We have received our tax return as a electronic deposit into our checking account. We would like to use the money in alot of different ways (ex, buffer, car repair, glasses, etc). The money will be used over a period of time based on when I can get things finished. Should I move the money into the saving? If so, how? Transfer like I do cc payments or another way.

What is the best way to do all of this? I would like the money in the tax return to be budgeted so I don't spend more then the amount of the return.

Thanks.

Michelle

In month 2 as a YNAB user, and still loving it.

[Mudie]

Hi Michelle, welcome to YNAB and the forums.

I recommend that you leave it right in the checking account. At least do so until you figure out where you intend to use the money. If it's going to become your buffer then the bulk of it should stay there as the buffer will ebb and flow like the tide and keeping you from hitting bottom is one it's main jobs.

If however you have enough that you can fund a full buffer as well as set aside a bunch for long term rainy day type accounts then you can transfer those amounts off to a high interest savings to earn a little money while they wait around to go to work.

Either way though, sit down for a complete budgeting session and decide where you need to budget it all to - all the way to zero.

[Trakeveth]

If you are just starting with YNAB (like me) I would also recommend that you leave the money in your checking account and then just allocate it to whatever categories you need to in your budget. You won't accidentally spend it if you are paying attention to your budget.

One of the things that I used to do to drive myself crazy (pre-YNAB) was to continually transfer money back and forth between my checking and savings account. I view my savings account as my emergency fund. If I had an extra few hundred dollars in my checking account at the end of a month I would transfer it to savings, even though I knew that I would eventually need to use that money to pay an upcoming bill.

Seeing the balance go up in my savings account made me feel better, but when the bill came and I had to transfer that money back to checking, I felt awful seeing the balance in savings go down. It is needless psychological mind games, in my opinion.

If the money is intended for future expenses, it should stay in the checking account.

Only TRUE additions to my emergency fund will go into savings from now on.

That way, I will end the emotional roller-coaster over money.

[Mudie]

Oh, and there's one other reason to keep it in checking and that is to open up a high interest account at a credit union. Not all of them offer it but mine pays 4.01% with no minimums or fees etc.

If this interests you then check out https://www.checkingfinder.com/ for one near you. It may seem like a scam but it's not and the website is trustworthy.

[rollercoaster]

I actually created a Master Category named "Tax Refund Allocation" in the budget. The sub categories are all the places I needed the tax refund to go. Once the money is all spent and the category balance is back to zero, I will just hide the category...or not, as I've got it sitting way down at the bottom of the budget right now.

I forgot to add that I just left the money in the checking account to avoid extra steps of transferring money around when it came time to spend it.

[Michelle]

Thanks everyone! That helped a whole lot!

Michelle

[dawnw5]

I actually created a Master Category named "Tax Refund Allocation" in the budget. The sub categories are all the places I needed the !@#$ refund to go. Once the money is all spent and the category balance is back to zero, I will just hide the category...or not, as I've got it sitting way down at the bottom of the budget right now.

I forgot to add that I just left the money in the checking account to avoid extra steps of transferring money around when it came time to spend it.

I LOVE this idea! I think that's what I'm going to do, also. However, I have a question about the subcategories. For example: Part of our tax refund will go to paying our 2009 personal property taxes. I know that after they are paid, I will divide it up into the number of months left until December and just budget a monthly amount (for the rest of this year) but for now, would I put Personal Property Taxes under this Master Category of Tax Refund Allocation or just budget the amount into my regular Personal Property Taxes category under my Transportation Master Category?

I hope I'm being clear enough.

[rollercoaster]

I LOVE this idea! I think that's what I'm going to do, also. However, I have a question about the subcategories. For example: Part of our !@#$ refund will go to paying our 2009 personal property !@#$. I know that after they are paid, I will divide it up into the number of months left until December and just budget a monthly amount (for the rest of this year) but for now, would I put Personal Property Taxes under this Master Category of Tax Refund Allocation or just budget the amount into my regular Personal Property Taxes category under my Transportation Master Category?

I hope I'm being clear enough.

You could do it however you wanted. I wanted to keep a fairly accurate record of where the money went, because big money like that has a tendency to 'leak away' on little things in our bank account ~ pre YNAB, of course!

What I would probably do is budget the money under the Tax Refund category for this month, then negative budget it out of there in the month I needed it to pay the taxes and budget it to the regular property tax budget line. This is just to keep a record or 'money trail' for myself that this is where the money went.

Another way it could be done is with a split transaction when entering your refund to your account register. Split X amount to the property tax category directly as an "inflow" and the rest to your Tax Refund category or various other categories, wherever you need it to go.

[dawnw5]

Thanks! I'll need to think on it some more of how I want the inflow and outflow to be recorded. I really, really HATE to see red numbers in my budget, so I'm still not sure how I'm going to do it. I have a while to wait, too. We had to snail mail our return because we had one too many forms to efile and the IRS website shows that they haven't even "received" it yet. Bummer!

[Michelle]

So, I love the idea of the tax allocation catagory. I made the master catagory in the budget. I have entered a few smaller catagories under the master. How can you tell when this specific catagory gets down to zero.

Sorry, I'm sure I'm missing somehthing.

Michelle

[rollercoaster]

Zero, as in budgeting each dollar? I just made sure the Master category balance total equaled the total of our tax refund at the very top.

There should be three totals for each line in the budget page: Budgeted, Outflows, Category Balance

The first line is the total of our tax refund, the second is what I've already spent, and the third is what is remaining.

[Patzer]

I had several bad things happen in 2009. Some of the bad things resulted in more deductible expenses, and some of the bad things resulted in less income. Most of the "less income" things didn't result in less taxes withheld. As a result, I'm getting a ridiculously large refund. Yes, I know about interest free loans to the government; but I didn't execute very well on the plan to come close to breaking even.

Anyway, I thought about 2% being the best savings rate I could find, and decided to put part of my far too large tax refund into savings bonds. I'll regard the bonds as being part of my e-fund, and I built an account named "US Bonds" in YNAB to hold them. Then I transferred the amount I put into bonds from an e-fund savings account to a Rule 3 savings account, for the net budgeting result of having that ridiculously large refund to budget to *somewhere*.

My employer had an off year in 2009, and I expect that the bonus will be smaller this year. So I budgeted the tax refund to where the bonus would normally go--my 2011 Roth IRA contribution. I hope that the bonus will be enough to max out the 2011 Roth Contribution, and any excess will get budgeted to Car Replacement and Home Improvement. In an environment where my monthly budget doesn't throw enough dollars at Roth Contribution, Car Replacement, or Home Improvement to fund the rather large lumps that I hope to spend from those categories, it's important to use large lumpy inflows to make up the difference.

Patzer