YNAB You Need A Budget

[RoboLobo]

Hello everyone! RoboLobo here. Just ugraded to YNAB3, what an elegant program. So here is my newbie question, which no doubt has been asked and answered a zillion times before I started up YNAB at the end of Februrary, and my starting buffer was what was in my checking account. For March I have pretty much treated YNAB as a checking account register, and have dutifully recorded all financial transactions. This is turn has recorded said expenses (and income) in the budget section, but as I have been unsure where some of my money goes (down the drain with too many vanilla lattes), I have not budgeted any specific amounts for March except for known, "definite" expenses (e.g., the electric bill is $30.24, so I have budgeted $30.24 for March and am budgeting that same amount for April). Similalry, if I wind up spending $37.23 on Starbucks by the end of the month, I am going to record that same $37.23 for my March budget number, and then be tough on myself in April and only budget $20 on Starbucks. Am I on the right track? I am thinking that a) anything miraculously left over in my checking account at the end of the month will be my carryover buffer for April, and that b) I can look at my actual expenses in March and use them as a guideline for my April budget numbers.

Thanks for any and all advice!

[lautzu]

Welcome...

On your two questions:

1. Yes, anything left over does roll over to the next month as part of your starting buffer. The object of Rule 1 is to do this enough times that the quantity becomes enough to cover 1 month's expenses.
2. And yes, you can certainly use YNAB to help you track your expenses this way to help collect data on your spending patterns.

Good luck!

[Maggie Magpie]

Welcome!

YNAB will certainly help you with understanding your spending habits. You're right, if you spend $37.23 on Starbucks and decided to cut that back to $20.00, YNAB's conscious spending system will definitely help you with that. You will have "definite" fixed monthly categories, "variable" monthly categories and fixed and variable sporadic, semi-annual, annual and long term categories. For example, your auto insurance category will be a fixed semi-annual or annual category. I have a "braces for my daughter in 3 years" category....the more you use YNAB, you'll start to evolve and expand your categories, moving them around until you are comfortable with them. YNAB becomes really helpful when you set some goals for yourself: for example, you could set a goal of maximizing your annual IRA contributions, or you may need to set a debt pay off goal. I strongly recommend the following debt snowball website where you can enter all your debts (including your mortgage if you have one) and see how much faster a few extra dollars will pay off all your debt: http://www.whatsthecost.com/snowball.aspx?country=us . Once you see your debt payoff goal, you can go back to YNAB and adjust your category limits to help free up discretionary income towards the extra debt categories. These are just examples.

These forums are full of stories about all the changes we've all made due to the new consciousness YNAB has introduced into our lives. And as said, anything you don't spend in a category will roll over to the next month and continue to accumulate until you spend from that category. You are already on the right track and I can tell you will love this system!

[RoboLobo]

Thank you Lautzu and Maggie for your replies! If you don't mind (and to anyone else), I have a follow-up question. When tracking my expenditures in YNAB as opposed to a simple checking account register, I have had to decide how to deal with cash purchases. For example, if I go to the bank and make a $20 ATM withdrawal, that's all that shows up in my traditional checking account register: "$20 ATM withdrawal." But of course I need to track exactly how that $20 is spent if I want to have any idea at all as to where my money is going (i.e., disappearing). What I did, and I am interested in what other people are doing, is to set up a Payee called "CASH", and then see what my cash purchases are via the Category column. Of course, this entails me carrying around a tiny little Moleskine notebook with me everywhere and RELIABLY recording all my cash purchases. Am I on the right track with this? I really can't think of much else except not using cash, and using my debit card for (almost) all purchases. Ideas anyone? Thanks!

[sarahspangles]

There are two ways I know to deal with Cash - the first is to use splits to categorise how you spend the cash withdrawn. Problem is that if you withdraw the cash and don't spend it by the end of the month it shows up as spent in the wrong month's budget. The other issue is that there is usually some loose change when you draw some more cash and you end up splitting items between two cash withdrawal entries.

The alternative is to use a transfer to an account called Cash, it shows up as a positive balance and then you categorise it as you spend it. So if you have some left at the month end it becomes part of your buffer for the next month. This is a more accurate way but may be OTT for some!

[dorothyc]

There are basically two ways to handle cash. The first would be to just have a payee something like ATM, then categorize the withdrawal towards what you intend to spend it on - Dining, Fun money, Parking or whatever. That will give you a more general idea of where the money is going without sweating the small stuff. That is the way I handle it.
The other approach is to set up a new account in YNAB called Cash or Wallet or whatever, of account type Cash, and when you make an ATM withdrawal, enter the payee as Transfer:Cash and leave the category blank. Then as you make cash purchases you go into your Cash account register and list the outflow there, categorizing at that point. I think that would cover what you are using the moleskine notebook for. Of course, you would still need a notebook to write down cash expenses that you don't get a receipt for, but that would be in order to enter them in YNAB. That is the approach that people who prefer to know exactly where every cent spent in cash is going, but it requires more work in tracking the small expenses. Then again, it can discourage you from making said small purchases, so that can be an advantage.
Sometimes, it might happen that you find you have less cash left on you than YNAB thinks, so you'd have to make an adjusting entry, categorized to something like Personal:Miscellaneous.

Hope this helps
Dorothy

[dorothyc]

As sarahspangles said, you could also do split categories as you withdraw money. I occasionally go back and recategorize a cash withdrawal as a split if I ended up using a large portion of it as something very different from the original intention, but since I don't withdraw nearly as much cash as I used to before finding YNAB it's not usually a problem. Before YNAB, I used to feel naked if I didn't have at least $140 dollars on me. Heaven knows where it all used to go

[Maggie Magpie]

I agree with Dorothyc and Sarahspangles: You would need to set up a "cash" account. I only use cash for my "fun money" which I've assigned to anything I want, and in my case, I do not track what I spend it on because it's "fun money". Others may still want to track their fun money, so they would need a cash account and would then "transfer" (do not categorize) the ATM with drawl from their operating account into the cash account, then track their expenditures through the categories from there. I use a rewards credit card for everything and every other day or so I go through my credit card postings and categorize everything. I then "transfer" the payment from my operating account when it's time to pay the credit card. I pay it in full every month (or multiple times throughout the month). I then take full advantage of the rewards dollars.

HOWEVER, I will say this.....I do feel that using a credit card still leaves more room for "conscious spending". In other words, I feel that if I set up a "cash/wallet" account instead of a credit card account, I'd probably then put all applicable cash items into physical envelopes in my handbag (or locked away in a drawer waiting), and would probably spend even less then I do using a credit card. I also feel that the savings would exceed any rewards dollars I acquire through using the rewards credit card. So I continue to deliberate over this. My conflict is with my time. I'm a working mom and I'm very busy. But I have a mortgage and really REALLY want rid of it. This might be a way to find extra dollars, in my case, to throw at the mortgage principal.

[malisab]

I didn't get from the original post if it's just you or if there are more people involved in your budget/family.

About your cash question, I do both of the two ways that Sarah and Dorothy explained. When DH gets cash, it usually gets charged to his lunch money because it's most likely used on cokes and croissants. He plays poker about once a month, that cash gets charged to entertainment (he's even come home with some a couple times, but I figure I just budget what he started with to entertainment and not worry about it).

And then for me, I have "Malisa's Wallet" set up. When I get cash, it goes into that account and I categorize transactions just as I would from any other account (except I round to the nearest dollar). I try to deal with cash as little as possible. If I get something at a place that takes a debit card and they don't have a minimum, I use a card. I also try to encourage DH to use a card as much as possible.

I've lost cash once that I couldn't account for. It got charged to entertainment. I can not WAIT for the iphone app!

Welcome.

[lautzu]

There's a good explanation of ways to track cash in the built-in Help feature of YNAB.

Myself, I transfer cash to a cash account that is on-budget (Remember - NO category when transferring to another on-budget account!) and then categorize it as I spend it from there.

[bookman413]

I'll go out on a ledge and say that you are right: your unaccounted for money is largely going for food at restaurants and cafes. People get hungry and get in the habit of just buying food when they are out instead of planning for this daily occurrence and bringing the day's food with them. It can be an expensive habit (not packing and bringing your own food, that is).

As for the receipts/cash spending tracking issue:

A suggestion: Put a jar or box by your computer for cash receipts.

When you are out and you spend some cash, get a receipt or write it down. Then when you come home empty the receipts into the box or jar by the computer. Enter them all when you feel like it.

That's how I handle all of my receipts, actually, not just the cash ones.

If you are out somewhere and buy something and no receipt is available, just grab a piece of paper and write the date, the amount, and what it was for and stuff it in your pocket. (A self-made receipt)

Also, echoing others, treat all ATM withdrawals as a transfer to your cash account in YNAB , which of course you have to create first. Then enter your cash receipts into the cash account's ledger.

[MALMomma]

Welcome!!! You'll find this community to be wonderfully supportive.

As for the cash question, if I read the replies correctly, I do it a hair bit different. Just another option for you to think about.

When I withdraw from the ATM and spend it all in one transaction, I do NOT categorize it as cash. Example, I took out $20 for fresh produce at the farmer's market and spend it all. My ING account online shows a $20 ATM withdrawal, BUT my YNAB checking register shows the category as Food: Groceries and $20 outflow.

If I withdraw and only use SOME of the money (whether on a few transactions or one), I will do a split transaction in my checking register. I will categorize the spending I did and then with the leftover cash, it will be a Transfer-->Cash with the balance and no category indicated. A perfect example of this was Saturday. My DD7 had a cheer competition. I knew I needed cash for parking & the tickets to watch. I also knew we weren't supposed to bring outside food in. I took out $100 at the atm. Ended up spending $12 on parking, $15 on tickets, and *gulp* $19 on a couple snacks (crazy expensive there!!). I lumped it all as one line on my split transaction (dear hubby so graciously said it could come out of his fun money.) On the way home, we picked up pizza. I paid cash for that and indicated that on another line in the split under Food: Restaurants. After the day was over, I had $21.76 in cash. That was a third line in the split, where I transferred it to our Cash account (and now when I use it, I'll enter the transaction in the Cash account.)

Hope I've helped and not confused!