YNAB You Need A Budget

[brown685]

Maryzdj, I see your story as more of a success for rules 2 and 3 rather than rule 4.

You saved for rainy day. You played whack a mole with your rainy day funds to get the expense down. Then finally you used rule three to roll with it, and will deal with the overspend by taking the money out of next months budget.

The buffer, rule 4, facilitated this, but having a buffer was not necessary to make it work. It just made it a lot easier, and worry free. And thinking about it, I see that rule 4 did it's job as well. It made the whole process stress free. You didn't have to juggle the timing of your bills to make it work.
this month

I guess I take issue when people say the money came from the buffer. The only time I see the money coming from the buffer, is when you change a pay check from available next month to available this month. Then you have robbed the buffer. Otherwise you are just making use of rule 3, while keeping your buffer intact.

James
James

[litterbug]

I guess I take issue when people say the money came from the buffer. The only time I see the money coming from the buffer, is when you change a pay check from available next month to available this month. Then you have robbed the buffer. Otherwise you are just making use of rule 3, while keeping your buffer intact.

I'm with James here. Instead of focusing on Rule 4, I'd suggest sweeping unbudgeted money into a mini e-fund (most people use $1000) and/or to build up rainy day funds in the appropriate categories so this kind of thing doesn't throw your budget off kilter enough to need to raid the emergency fund. Many have set aside a significant amount of money simply by doing that as well as zeroing out non-savings categories and sweeping those amounts into rainy day or emergency funds.

Although the "buffer for next month" line in the budget is intended to make it easier to let the buffer grow, I think that's really useful if you really have extra money at the end of the month. Until I had a running start at my rainy day funds I would budget to zero, with anything that wasn't to be spent that month budgeted to rainy days. At the end of the month I'd zero out non-savings categories and add that to the rainy day funds until I was satisfied that they were well on their way toward their targets. Eventually I moved my savings on-budget, and between that, some medical reimbursements, and selling old stuff, I leaped ahead on rainy day funds and came up with a buffer only 3 months or so after starting YNAB. If it hadn't been for those inflows, I would probably still be working on a buffer.

BTW, I used a category called "buffer," and only made that category balance into my buffer once I had the whole thing saved, rather than letting the money fall into the "buffer for next month" line. That's a matter of preference, but setting it up as a separate category made it easier for me not to spend it and to whack moles instead.

[philospher77]

I guess I am a bit confused about the phrase "people having enough funds to have a buffer" and them not using a buffer. What are they doing with the funds instead? I will admit that I may be a bit peculiar, because I do have enough funds to do the whole "this month's income gets tagged as "available next month"" thing. Which means that I do have a buffer, and on the months with 3 paychecks, it's even more than a month's normal pay. But I then go ahead and budget it out in the next month, so that I know where all of it is going and can make sure that all the important categories are funded and decide if I want overspending to come out of next month's category (which I am likely to do if the overpayment occurs at the end of the month) or play whack-a-mole instead (if I truly decided to pay money for X instead of Y), instead of waiting until the start of the month. Does that mean that I do not have a buffer, just because I have assigned the dollars jobs already?

If on the other hand, it means that I have enough money to pay next month's bills with this month's money, and instead I go and spend it all on the slots in Vegas, well, I can see that as choosing to not have a buffer, but it seems to me to be more of a case of choosing to live paycheck to paycheck, which doesn't seem to be what people mean.

So could someone clarify what we are talking about?

[brown685]

Philospher,

I can think of one situation where people have the money, but choose not to have a buffer. If someone has enough money in a savings account, but is unwilling to put it in the budget for fear of accidentally spending the money. It can be scarey when you first start YNAB, and you are asked to put all of your money into the budget and give it a job. Of course you have to come to YNAB with savings in order for this to be a problem.

James

[philospher77]

Hmm. I can kind of see that, but why not put it on budget as "Savings"? Then it is exactly the same thing, but you know it's there doing the job of "earning interest". What do people do in the situation that you describe? Just leave it off the budget entirely and ignore the fact that they have X amount of money sitting there?

I will admit that I have some off-budget accounts, but those are retirement and long-term investment accounts, so not money that I consider available for spending in the first place. So I can see having money in a similar account, but in that case I wouldn't say that I have a buffer, since it's marked as "not for spending".

[litterbug]

The buffer isn't savings; it's one month's income that's literally waiting to be spent. It could be entered into an on-budget savings account as available to budget next month, but come September 1st, you need that money in my spending accounts because I'm going to budget and spend (most of) it. But because that income is entered as available to budget next month, you can't spend it this month so long as you spend by your category balances.

Until you get comfortable with spending by category balances, it might be better to leave anything you don't budget this month off budget. It took me about 3 months to realize that the YNAB method worked and that I was able to spend by category balances and not even be tempted to touch any of my savings categories. It could take that long for others, but it will happen.

[blackdiamond]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better having a label on it so that they know exactly how much it is.

Assuming that monthly income is $5,000 and I start YNAB with exactly $5,000 in the bank I have adequate funds to allocate all income to the next month and use the YNAB buffer. There are a lot of users that are in this situation but have $3,000 of their money in a savings account that they choose to either keep off budget or in a dedicated savings category. The difference in the end, in my opinion, is more complicated budgeting with the exact same amount of money.

Think of savings as a glass full of water sitting next to another budget water dispenser. When you get paid you put water in the dispenser and when you make purchases you get a drink of water. Using the savings as the buffer would simply mean pouring the savings glass into the budget water dispenser. As long as you spend according to your categories the only difference is that the water level will be higher using the buffer and you won't know exactly how much savings you have at any one time since you are both filling and draining during the month.

It really just boils down to giving savings a label and controlling it in a category or account. I think it is really just controlling you.

[litterbug]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better having a label on it so that they know exactly how much it is.

BD, I'm stealing that phrase. Hope you don't mind!

[blackdiamond]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better hav
ing a label on it so that they know exactly how much it is.

BD, I'm stealing that phrase. Hope you don't mind!

No problem as long as you remember that it still exists and can be spent while it is floating if necessary, just like hard labeled savings.

[litterbug]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better hav
ing a label on it so that they know exactly how much it is.

BD, I'm stealing that phrase. Hope you don't mind!

No problem as long as you remember that it still exists and can be spent while it is floating if necessary, just like hard labeled savings.

Now, blackdiamond, you know my practice is not to look at it like that, and that I like to give people the idea of the YNAB budget as a yes-or-no thing. But for some reason, I just figured out why: it has an active role in how I budget every month, as opposed to savings, which are passive dollars lounging around in a ready room until I spend them on their designated jobs.

I have to enter my buffer into YNAB as my paychecks come in, and it shows up in my net worth, so there's no chance I'll forget it's there. And I know that in an emergency I can 'break' the buffer, because it's only a mild inconvenience to budget biweekly until I build it up again. But my buffer is a buffer unless it's not; it's the hammer and screwdriver I use everyday, not a specialized one I keep in the storeroom, to be used for the specialized job I gave it.

Again, look at it as a backup emergency fund if that works, but what works for me is keeping it mentally segregated from the rest of my budget.

[philospher77]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better having a label on it so that they know exactly how much it is.

Stuff snipped

It really just boils down to giving savings a label and controlling it in a category or account. I think it is really just controlling you.

Ah, I think I see where some of my confusion comes in. I don't have a separate buffer category or account. I know I have a fully funded buffer (since I am designating all my pay as "available next month"), so to me the "buffer" is "all of the money that I have assigned to budget categories for next month". I figured there was no real reason to wait until the 1st of the month to do the budget. So I know exactly how much it is, and it has labels (next month's mortgage, next month's groceries, next month's vacation fund contribution, etc.)

[blackdiamond]

The money that is used for the buffer is really floating in the background. When you receive a paycheck om the 15th of the month and don't budget it until the 1st you really don't see this money. I think that people feel better having a label on it so that they know exactly how much it is.

Stuff snipped

It really just boils down to giving savings a label and controlling it in a category or account. I think it is really just controlling you.

Ah, I think I see where some of my confusion comes in. I don't have a separate buffer category or account. I know I have a fully funded buffer (since I am designating all my pay as "available next month"), so to me the "buffer" is "all of the money that I have assigned to budget categories for next month". I figured there was no real reason to wait until the 1st of the month to do the budget. So I know exactly how much it is, and it has labels (next month's mortgage, next month's groceries, next month's vacation fund contribution, etc.)

First, I take exception to having my stuff snipped!

The money that you have allocated to the next month is your buffer, but the reason that the actual value of your buffer is difficult to pinpoint is that as the month progresses you spend which reduces the amount and you take in more income which increases the amount.

[LarryinLA]

For me, the buffer is a timing convenience only. It allows me to do my major budgeting once a month, instead of twice (when I get paid) plus some tag ends when the interest posts to my accounts as various times during the month. The buffer is not really a dollar cushion, it's a temporal cushion.

I think of the buffer as an extra month of income in my Emergency fund (big-E Emergency fund, not baby e-fund). If my income stream stopped today (phht, phht) I would have my emergency fund plus an extra month of income from the buffer available to budget towards my expenses (including rainy day ones). That's true regardless of when in the month the event would occur, since if it occurs early in the month, I've already budgeted the current whole month, and if it occurs late in the month, I will have most of the next month's buffer full with the paychecks I've already received. Either way, there's essentially one month of cusion before I need to draw emergency fund dollars and also one month to adjust expenses downward as well. So, it isn't a timing convenience, it is a real adder to the emergency fund.