YNAB You Need A Budget

[rdeleo]

Thank you both for such a quick answer to my question. I've been so impressed with the amount of knowledge on these forums.

I'm excited to get going with YNAB. I've used Microsoft Money for years but have always been disappointed with the lack of an intuitive way to roll over budget categories from month to month. I'm a big fan of the 'envelope' method and it seems YNAB is going to better help me budget and save toward my goals. I look forward to diving into more YNAB features as soon as I can. Thanks again for the help -

Ryan

[carrieant]

Yet another philosophical question. I'm trying to sort these out before I make the BIG LEAP...which I'm quite excited about, but the way.

I am a squirreler. I hide away little amounts of money to keep myself and others from putting their paws on it. I do this because once I stick it in that savings account, in my mind it's "off limits". Doing this has allowed me to build up what I consider a decent emergency fund, but the problem is once it's saved I HATE to touch it...thus defeating the purpose. I guess what I really hate is not the not touching it, but not having a mechanism in place to put it back. That's why I've come here, to try and make my spending and savings much more regular and predictable so I don't drive myself, and my family, crazy.

Enough about my insanity, here's my question. Should I let my savings and emergency savings take the hit and fully fund my buffer right off? It seems like the right thing to do, but it freaks me out a little. I figure with the buffer fully funded, I can then make my money work at paying off the little bit of debt we have and then regulary pay my savings back. Like I said, it may be a philosophical question, but it helps me to hear from others...maybe get a little moral support to make the leap a little less scary.

Thanks!

[Mudie]

I am a squirreler. I hide away little amounts of money to keep myself and others from putting their paws on it.

I guess what I really hate is not the not touching it, but not having a mechanism in place to put it back. That's why I've come here, to try and make my spending and savings much more regular and predictable so I don't drive myself, and my family, crazy.

Based on what you've said, YNAB is the perfect vehicle for your habit's as it addresses the need of squirrels very well with it's ability to handle rainy day funds as it does.

Should I let my savings and emergency savings take the hit and fully fund my buffer right off? It seems like the right thing to do, but it freaks me out a little.

In a word, YES!

Operating YNAB with a full buffer is bliss and it will give you so much focus you'll be amazed. If you find you don't like it that way you can always just shovel the money back to savings and struggle along like before.

Steve

[Bertha]

What Mudie said! Living a month ahead is great, and reduces a lot of stress. Look at it this way--the amount you have in the savings and emergency fund will be less critical once you're living on last month's paycheck, because if disaster strikes and you have no income, you'll still have a month's worth of money to pay the bills. That's probably what you kept the savings for anyway, right?

And one of your budget items will be your emergency fund, so every month you'll still be squirrelling away some money. That's how you'll put it all back.

[Sairey724Gamp]

And if you need more encouragement, read Why You Should Use Your Savings to Fund Your Buffer.

Sairey

[carrieant]

That was just the encouragement I was looking for. Thanks so much!!!

Now, as i inch closer to my goal of living by The Rules, I have one more cloud hanging over my head. We are about to close on a new home-one of the big kicks in the behind that got me here in the first place. It's a fixer upper and we have a lot of projects ahead of us. Any reasons why I should wait until the closing is finished vs. starting in the next few days? It seems like such a big undertaking - plus, we'll be getting cash back at the closing and I'm not sure how I would handle that.

I realize it's not really buffer related but since you were all so supportive on the last question I took a chance.

[Mudie]

Any reasons why I should wait until the closing is finished vs. starting in the next few days?

No reason at all to wait. Start now then when you get the windfall you can simply enter it as Supplemental Income and budget it away to various rainy day categories and/or debt.

Steve

[carrieant]

All right. So I thought I had it figured out, but it looks like I need more help. First, a clarification please. Say I determine my buffer is 3000. When wanting to start with a "fully funded buffer" do I make sure that I have 3000 in my checking account to cover or do I need 6000? I may be over thinking this, wouldn't be the first time.

ANd then if I'm starting brand new in the middle of the month, how do I make that number show up as available for everything I need to pay in July? Do I just make the entry on June 30 and reverse budget it for July? Then I can allocate all of those funds for the bills I still need to pay this month, enter subsequent paychecks as primary and move forward towards my happy place?

[Mudie]

All right. So I thought I had it figured out, but it looks like I need more help. First, a clarification please. Say I determine my buffer is 3000. When wanting to start with a "fully funded buffer" do I make sure that I have 3000 in my checking account to cover or do I need 6000? I may be over thinking this, wouldn't be the first time.

Since all a buffer starts out as is one full month worth of expenses - in your case $3000 - then that is all you would need (on July 1st for example) in checking since that is where most people spend from. As the month goes by and you spend that pile of cash away, the checking account will be propped back up by your new paychecks as they arrive waiting to go to work on August 1st.

And then if I'm starting brand new in the middle of the month, how do I make that number show up as available for everything I need to pay in July? Do I just make the entry on June 30 and reverse budget it for July? Then I can allocate all of those funds for the bills I still need to pay this month, enter subsequent paychecks as primary and move forward towards my happy place?

You can simply start out by entering it as Supplemental income (for use this month) then budget it away as normal. I would expect that what little outflows you've had thus far won't be enough to topple the plan.

Then yes, enter new ones as Primary and go from there.

Steve

[girlyheart]

I finally, I think, understand the buffer concept. I'm a new user, never posted on a message board before so if I get an answer, wish me luck in finding it! I've spent the last 6 hours trying to get up and going.. my brain may be fried. But... here's my question. I put a dollar amount in the budget at the top, under 'available' that I have in my account. I did this on todays date and before I had the lightbulb moment re: the buffer. I'm driven and wanted to get something started!!
After reading the buffer confusion post, I need to change the amount and predate the amount so I can use YNAB this month. I re-entered the more correct amounts in the register as supplemental income, changed the date to June 30. However the available amount at the top of my budget will not change. The amount there does not make sense to me and is in parentheses. I had already formulated my budget and entered all the desired amounts. Do I have to start over?? Surely there's an easier way. I feel like the member who said, "Pretend I'm ten years old.... "

I want to like this, but right now I am soooo frustrated. I understand the concept of zero budgeting. have read The YNAB Way, and referred to the tutorials. Previously I was a Quicken user. I purchased YNAB Pro today. And I really don't understand usergroups, being allowed, not being allowed....

[Patzer]

After reading the buffer confusion post, I need to change the amount and predate the amount so I can use YNAB this month. I re-entered the more correct amounts in the register as supplemental income, changed the date to June 30. However the available amount at the top of my budget will not change. The amount there does not make sense to me and is in parentheses. I had already formulated my budget and entered all the desired amounts.

The Available amount is in parentheses because it is negative. If you hover your mouse over it, you should see a box that tells you how it's computed. That box will probably tell you something like, $0.00 Primary Income from June + $0.00 Supplemental Income from July - $0.00 Overspending from June - $x,xxx.xx budgeted in July = ($x,xxx.xx).

What you need to do to get a positive number in the Available is tell YNAB you have some income. In the initial setup, this "income" is the account balance you started with. To make it show up in July's Available, you need to either change the date on your supplemental income in the register from June 30 to July 1, or change the category on the June 30 entry from Supplemental Income to Primary Income. Either way will put that amount into your Available for July.

Once you do this, the bold Available number at the top should be a relatively small positive or negative number, because you have already budgeted for July. If the number is positive, it represents dollars you need to find jobs for. If the number is negative, that means you budgeted more money than you have and you need to trim your budget somewhere.

Patzer

[WairereRose]

Subject: Buffer confusion? Try Here.

I finally, I think, understand the buffer concept. I'm a new user, never posted on a message board before so if I get an answer, wish me luck in finding it!

Hi there and welcome. I'm hoping your settings will allow you to find your private message even if you can't find where you posted in the board (there is a way, but I'm not sure I could explain it to make sense - click your name, and in your profile it will show where you've posted, so you can get back to that thread)

I've spent the last 6 hours trying to get up and going.. my brain may be fried.

I have been there, done that before today...

But... here's my question. I put a dollar amount in the budget at the top, under 'available' that I have in my account. I did this on todays date and before I had the lightbulb moment re: the buffer. I'm driven and wanted to get something started!!

How did you do that? Are you using YNAB Pro, or YNAB excel? I only know Pro, so if you have excel, then stop reading and post again in the excel thread for some of the excel users to help you. It isn't possible to enter a number to the Available box directly. That can only be influenced by what you enter through the register part of the program.

After reading the buffer confusion post, I need to change the amount and predate the amount so I can use YNAB this month. I re-entered the more correct amounts in the register as supplemental income, changed the date to June 30.

Here it sounds like you are using the register to make your entries, so maybe it's ok.

However the available amount at the top of my budget will not change. The amount there does not make sense to me and is in parentheses.

As Patzer said in his reply, the parentheses means that you have budgeted more than you had available. I am picking more and more that you are using the excel version?

I had already formulated my budget and entered all the desired amounts. Do I have to start over?? Surely there's an easier way. I feel like the member who said, "Pretend I'm ten years old.... "

You can probably do this without starting over, but you may have to re-work the desired amounts to numbers that will fit your available figure. Because this is on excel, I'm not really familiar with how it works, and there may be other 'tweaks' you need to make to get things going. One that springs to mind is to check the date in the overview page and make sure it is showing 2008 - but I can't tell you how to get to the overview page, or how to change it when you get there if it isn't.

I want to like this, but right now I am soooo frustrated. I understand the concept of zero budgeting. have read The YNAB Way, and referred to the tutorials. Previously I was a Quicken user. I purchased YNAB Pro today. And I really don't understand usergroups, being allowed, not being allowed....

I am also a Quicken user I assume the usergroups is a reference to something on the forum board? (I don't know about them either). And here you say it's Pro you have, so in that case, ignore my comments about the overview page because that's an excel thing only. I'll post this to the thread also, for others to add to. Hopefully you can track it down to see Patzer's reply and any others from the info I gave above about finding your post.

[wassupdoc]

Since all a buffer starts out as is one full month worth of expenses - in your case $3000 - then that is all you would need (on July 1st for example) in checking since that is where most people spend from. As the month goes by and you spend that pile of cash away, the checking account will be propped back up by your new paychecks as they arrive waiting to go to work on August 1st.

Wow, I think I am looking at Rule #1 a little differently then. For example if I get paid July 1st I would expect to have $3000 in my account on June 30th. Then On july 1st when i get paid that money($3000) goes on reserve for the next month. Steve, based on what you describe above, I am still living paycheck to paycheck since I let the current months income dwindle to 0 and then wait for the next paycheck to start spending again.

[Patzer]

Wow, I think I am looking at Rule #1 a little differently then. For example if I get paid July 1st I would expect to have $3000 in my account on June 30th. Then On july 1st when i get paid that money($3000) goes on reserve for the next month. Steve, based on what you describe above, I am still living paycheck to paycheck since I let the current months income dwindle to 0 and then wait for the next paycheck to start spending again.

The use of a month is arbitrary. You could, in theory, set up Rule 1 on the basis of a pay period that could be a week for some people, two weeks for some, half a month for some, and a month for some. Because it would be hard to support (let alone sell) software with that many variable time frames, we use months. Besides the fact that this works easily for people who are paid monthly or semi-monthly, most people have some major monthly expenses like utilities and rent or mortgage payments.

Having made the decision to organize the budget and the budget software on the basis of months, when someone is paid makes the cash flow look different. Suppose we have two people who are paid once a month: Al is paid on the 1st, and Zeke is paid on the last day of the month. If each of them is paid $3000 per month and neither of them has any Rule 3 rainy day funds, what does Rule 1 look like?

Al gets $3000 on July 1, but bases his July budget on the $3000 he got paid on June 1. So on July 1 Al's checking account has $6000, and by July 31 it is down to $3000. Al can handle having a checking account with a minimum balance very easily.

Zeke budgets $3000 in July, but it's the $3000 he received on June 30. On July 1, Zeke's checking account has $3000, and it's down close to zero on July 30 just before he gets paid another $3000 on July 31. Zeke can't afford to have a checking account with a minimum balance.

Al and Zeke are extremes. Consider Melvin, who gets paid every Friday. Melvin will budget July based on his four or five paychecks in June, and his checking account on July 1 will have that amount in it. As he spends down his July budget, his July paychecks hit his account every Friday and he comes closer to the average of having exactly one month's pay in the account in the middle of the month than either Al or Zeke do.

The point of the buffer isn't to have a month's worth of expenses in your checking account at all times; the point is to have a month's worth of expenses in your account on the 1st of the month so you can budget money you already have instead of money you expect to receive in the future. Depending on your pay schedule, this may or may not result in having a lot of money hanging around in your checking account.

It's actually Rule 3 that's intended to get you to have a lot of money hanging around in your bank accounts. When you think about budgeting for car insurance that's paid every six months, homeowner's insurance that's paid annually, property t@xes that I pay in February and September, and lumpy expenses such as car repairs, clothing, and medical costs, I can have quite a pile of dollars sitting around waiting patiently for their assigned jobs to start.

Patzer

[Mudie]

The point of the buffer isn't to have a month's worth of expenses in your checking account at all times; the point is to have a month's worth of expenses in your account on the 1st of the month so you can budget money you already have instead of money you expect to receive in the future. Depending on your pay schedule, this may or may not result in having a lot of money hanging around in your checking account.

Well said Patzer, very good indeed.

It's actually Rule 3 that's intended to get you to have a lot of money hanging around in your bank accounts. When you think about budgeting for car insurance that's paid every six months, homeowner's insurance that's paid annually, property t@xes that I pay in February and September, and lumpy expenses such as car repairs, clothing, and medical costs, I can have quite a pile of dollars sitting around waiting patiently for their assigned jobs to start.

Exactly, overall Rule 3 provides the big cushion to allow Rule 4 to operate. The only way the cushion might be reduced is if a person were to transfer the rainy day funds off to ING or someplace like it to earn money while they are "sitting around waiting patiently for their assigned jobs to start."

Thanks Patzer, as always, you're response is spot on.

Steve