Despite what you may think, overspending is not a sign of failure. On the contrary, overspending is a normal part of your financial life. The fact that it happens isn't as important as how you deal with it.
YNAB will keep track of any overspending that happens within a category. When you overspend in a category one month, the overspending will be deducted from the money you’ve set aside for your Budget next month (or if you’re not able to set any aside, from what you earn in the next month).
For example, if you budgeted $300 for groceries, but actually spent $320, you have overspent by $20. If you never correct it (by adjusting your budget as described below), you’ll always be behind and unable to catch up.
But there's a $25 balance in spending money.
So, just roll with it. Lower spending money by $20, and add $20 to groceries.
This is a proactive move that allows you to have enough flexibility to stay in the game.
The amount of money not budgeted in May that you set aside for June was $3000. However, during May, you overspent your grocery budget by $20. That $20 is subtracted from the $3000, meaning the amount set aside is actually $2980.
What’s really important here is that, while you need to deal with this overspending, you can take the hit where ever you want. It’s up to you. Perhaps you budget less in Entertainment or Clothing. It’s your budget, you’re in control.
Rule Three keeps you on your budgeting feet so when unexpected things come up, you don’t quit. You roll with the punch and start each month with a clean slate - a huge psychological boost.