YNAB You Need A Budget

[Joel]

It sounds like the further responses have you squared away...

You can continue to pay the statement balance in full if your checking account allows (since you are paying for current expenses with the credit card)

Current expenses will be budgeted for within the budget... And you want to make sure you budget something to the Pre-YNAB Debt category every month (If not as much as possible to eventually get that balance down to 0).

I would actually recommend entering your savings account as on-budget, and budgeted the money towards an emergency fund category. Keep in mind, it will stay in that category until it is spent, or budgeted out of the category. You can leave it in the category for now, and if worse comes to worse, you could budget it out if needed. I highly recommend doing this because YNAB is most beneficial when all your dollars have a job. That $1000 job is emergency fund, but many people in their heads count it as $1000 that could go towards this, or that, or the other thing they want. As you use YNAB, and see that Pre-YNAB debt balance decreasing... you can decide, maybe you do want to clear out that emergency fund balance in the budget and to lower the overage of the pre-ynab debt. You may find that you are quickly able to plug holes and cover up that pre-ynab debt very quickly.

Anyways, good luck... and you will have it figured out in no time!

[litterbug]

To add just a wee bit more, my concern is that if you put all unspent dollars toward the credit card, you could be knocked sideways by a Murphy visit (car repair, unplanned-for expense, whatever) and not have anywhere to go but the credit card. That $1000 could cover that purpose, as Joel said, and go for this and that. But if you choose, you could reserve that $1000 for whatever you consider to be a big enough emergency to warrant it. Either way, cutting back whatever expenses you can to pay down the credit card would be your priority.

That being said, I'd caution you to budget a small amount (maybe $20-$30) of 'fun' or discretionary money for each of you to spend on little stuff without being accountable for it. It serves as a release valve. Also, if it'll take more than a month or two to pay down the credit card, you should consider not cutting expenses so far that you'll come to resent your budget enough to abandon it. After all, we're only human!

[mistyp11]

To transition slowly from using the float to truly paid-in-full, this is what I would do:

(This is actually a detailed step-by-step method of doing what Joel said earlier)

1. Set up all accounts in YNAB with current balances, categorizing all CC balances as pre-YNAB debt. If you have debt other than the PIF card make sure the PIF card is in its own category and click on the red arrow to turn it down, not to the right like the other pre-YNAB debt.

2. Budget the amount of the current balance on the card you intend to pay off at the statement date to the PIF credit card debt. This will leave you with either a small or negative amount available to budget. If it's negative, do nothing until you enter your next paycheck, then proceed to step three.

3. Categorize whatever amount you have "available to budget," starting with any bills/categories that you can't or don't normally put on the credit card (including at least minimum payments on all other Pre-YNAB debt) then to the categories that you do put on the credit card.

4. As you purchase things with your card, categorize them to their appropriate categories. At some point their category balances will go red. That marks the point that you are starting to live off CC float. Ignore it for now -- you aren't doing anything differently than you have in previous months, except that now you're seeing the truth that you're living in the red.

5. Pay the card off in full as usual. You can then hide its Pre-YNAB debt category, since all further purchases are going into their appropriate categories.

6. When you get another paycheck, enter it as income available this month. Then budget the "available to budget" number to zero, starting with bills/categories that you can't/don't put on the card, then categories that are in the red, then everything else.

7. Be as frugal and thrifty as you reasonably can, and the date when the category balances go red will move later and later in each pay period. At some point they will stay in the black for the whole time -- then you are living on current income. Rejoice! And then start saving toward a buffer so you can live on the previous months income.

OK, I thought I was getting closer to clarity but these suggestions have me TOTALLY lost, and they seem to be a different route to take than other suggestions. For this suggestion, I would take my PIF card out of Pre YNAB debt and put it in a category by itself? Why do I turn the arrow down rather than turn it to the right? Maybe I have not watched enough of the videos to understand this, but I have no idea what you mean here. So would the PIF CC be Pre YNAB debt, or not? Concerning step 3, I already have my budget for June totally completed, and it includes everything- household bills, "cash" categories like food, gas, etc., sinking funds for auto, clothing, gifts, annual life insurance, everything. We had a very very detailed budget before, so I just put it into YNAB. And since I plan to keep using the credit card for daily purchases, and then paying it off at the end of the month- how will the individual categories go in the red? For example, I have $200 per month budgeted towards gas. As I spend that, I will enter the gas transactions and that $200 will start approaching zero as I spend out of the category. As long as I don't overspend per my budget in any category, why would it go into the red? The only thing that I would think would be red would be the credit card that I use for everything and pay in full every month.

So outside of my budgeted expenses in any given month, I have about $1200 that is not accounted for that should be going to debt repayment. I am thinking I will now budget that $1200 towards the PIF credit card, which is Pre YNAB debt, and by doing that I will see the balance of the credit card decrease until we are paying forward with that card instead of backward. And really what the money is doing to staying in my checking account as a sort of buffer.

That is where I am with understanding things. I am am feeling less optimistic about this working for me, just because as soon as I think I understand it, I realize I must not understand it. I have already spent hours and hours on this, and I am wondering if this was something I just won't be able to grasp or make work for me.

[Joel]

What dana is suggesting is dealing with the preynab debt now. And then letting the overspending accumulate in the various categories. That is virtually the same thing as keeping the overspending all in one category.

I think you will find a month or two in that either way it wont really matter.

[mistyp11]

So you mean for this month I would not budget anything towards food, or gas, or whatever category, and then that is how the categories would end up in the red?

[Joel]

So you mean for this month I would not budget anything towards food, or gas, or whatever category, and then that is how the categories would end up in the red?

Yea that is her suggestion... I personally would stick with having the overspending consolidated in one category (pre-ynab debt).

Let's say you have $1200 to budget this month.. Basically, what you would be doing is instead of budgeting $1000 to your normal spending this month, and only budgeting $200 to your pre-ynab debt... You would instead be budeting the entire $1200 to your pre-ynab debt and nothing to your normal spending.

Now let's assume your Pre-ynab debt had a -1200 negative balance. That would eliminate that -1200 balance, but let's assume your normal spending actually was $1000... and therefore if you add up all the categories with negative balances, it results in -1000 total negative balance.

That is the same exact thing if you budget $1000 to your normal spending categories, and only budget $200 to your pre-ynab debt.

Does that make sense? The end result is the same thing...

[litterbug]

I'm sorry, but this is getting really convoluted. I can't see why seeing red in all categories except pre-YNAB debt does anyone any good, especially when they're new to the software and the method. In fact, I think it's a very negative emotional thing to put someone through. I see nothing in Misty's situation that justifies going so far off the beaten path.

Here's the 29 minute video that's all about setting up pre-YNAB debt:

http://www.youneedabudget.com/support/v ... ds-in-ynab

Somewhere in there is a much better explanation of using a credit card with existing debt on it than I could ever provide. There are other video tutorials, as well as some very well-written material in the software's Help.

I hope that makes sense. Sometimes I get cranky and go on a rant, so I apologize in advance if that's what I've done here.

[mistyp11]

This is actually ending up causing me too much anxiety and I have contacted YNAB to see if I can get a refund. I was overly confident and was so sure that this was going to be a great solution for me, but I am totally lost. I have spent ten hours setting up my budget, watching videos, reading the forum. I am still not really getting what I am supposed to do and I feel like I am getting a different answer from everyone. I really appreciate everyone attempting to explain what to do, sorry I couldn't get it figured out for my situation. Thanks again- Misty

[litterbug]

I'm sorry, Misty, and I hope we didn't scare you off too much. Sometimes we can't help but get creative, and that can be confusing. I'm sure you'll get a refund, although support might offer to spend some time to see what's hanging you up when you try to set up your budget. Don't feel pressure. I'm certain YNAB would work for you, but it can be really hard to get.

By the way, don't feel bad about not understanding how pre-YNAB debt works. It's still one of the Great Mysteries of Life for me!

[Joel]

This is actually ending up causing me too much anxiety and I have contacted YNAB to see if I can get a refund. I was overly confident and was so sure that this was going to be a great solution for me, but I am totally lost. I have spent ten hours setting up my budget, watching videos, reading the forum. I am still not really getting what I am supposed to do and I feel like I am getting a different answer from everyone. I really appreciate everyone attempting to explain what to do, sorry I couldn't get it figured out for my situation. Thanks again- Misty

I recommend using the software for a few weeks before you do that. Wait until you receive a paycheck and see what happens.

[Dana_S]

I think my post was responsible for a great deal of your anxiety, and I'm sorry. It was an alternate suggestion that would involve continuing to pay the credit card in full, but seeing your true financial picture. But you don't HAVE to do it that way, if it doesn't make sense to you. That's why I said it was what I would do, not ( necessarily) what you should do.

You can keep all the Pre-YNAB debt together and budget current funds to current expenses, if that way works for you. For me, that would be disconnecting the budget from reality, since the reality is that you are continuing to spend money that you don't have as long as you are using the CC for float and I would want the red numbers so that was reflected. If you'd rather not have them, then ignore my suggestion! But keep trying to find a way that works for you -- don't give up on a really great tool just because there are multiple ways to use it.

[mistyp11]

I posted something on Twitter about the issues I am having, and Jesse Mecham (YNAB founder) offered to set me up with a free hour of coaching. So I will try that. And even though all of the suggestions may have added to my anxiety, I know that everyone was only trying to help. I am sure everyone has figured out a system that works for them after using the program for a while and is just trying to explain their process. This particular issue isn't actually addressed anywhere in the videos or lessons that I have watched (unless I am missing something). I would have to think that this situation is so common though, that I am surprised it isn't more directly addressed with an official or recommended process.

[Turf_Hacker]

Not sure if you watched our recorded class on credit cards, I believe that it would help you get set up.

ETA: As I understand your situation (using the float on your credit card such that you don't have enough money to both pay off the card and budget for your needs), I would have recommended using the Pre-YNAB Debt category then budgeting for this a bit at a time as you go.

In any event, you'll likely get Todd as your coach for the one-on-one session and he's really good at it. I'm sure he'll help you get all set up and feeling confident about getting started.

Best wishes!

[bookman413]

The method to deal with this IS addressed, and has been addressed at various times by different forum members, but I suspect it isn't emphasized on an ongoing basis because it can be viewed as "tricky" and a slippery slope. What you want to do is to adjust your budget page to make it so your credit card spending for the month doesn't flag you with an overall overspend for the month and big red numbers, which ar alarming and actually aren't helpful to you at all in your situation.

Here's my suggestion of how to do that:

1)Decide how much of your current card you are using as a float for the month. Easiest thing to do is make it be what your monthly credit card bill is (the total required to pay off without incurring interest charges).

2)Make up a fake account called "credit card float loan to budget page"

3) Make the balance the amount of the loan (if the most you use is $900 of your $7000 worth of credit, make the balance $900).


THERE. Done.

This is basically phantom income, put in place to shore up the visuals on the budget page. Its whole purpose is to make your budget page not look like you are going over budget, as long as you are within the $900 that you "floated" to yourself in accounting terms, which simply represents the truth of your monthly finances...In other words, i think this is much more accurate to your situation than some other commonly suggested methods that have been mentioned in this thread.

Once you have enough money to get rid of the float, if you desire, say in several months, or a year (or never, if you see no point is getting rid of the float) just delete the float account or zero it out as a "miscellaneous" expense, with a note on it explaining what it is (if you care about such things).

Following this method you can stay within budget and avoid the red numbers on your budget page. Since your issue is not overspending, this will not be a problem for you and will enhance the clarity of your monthly budget view.