Overspending is not a sign of failure. On the contrary, it’s a normal part of your financial life. What matters is how you deal with it.
Overspending is marked by a red negative number in the category balance column. We recommend correcting it right away by adjusting your budget. If you budgeted $300 for groceries, but actually spent $320, you have overspent by $20.
If you never correct it, you’re budget will always be off and you’ll be behind trying to catch up. But there's a $25 balance in spending money.
So, 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. It’s more important to stick to budgeting, than it is to stick to a set of numbers that may not make sense anymore.
What if I don't make a change to fix it?
YNAB corrects it for you.
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.
While you do 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 up to you!
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.