How is my budget impacted when I pay a bill at the end of the month that isn't due 'til next month?


checkbookIf you’ve asked yourself that question, read on. The answer gets at the heart of budgeting versus expense tracking.

Here’s the scenario:

  • I get paid on the 22nd, and I’m still living check to check.
  • My mortgage payment is due on the 1st (8 or 9 days after I get paid).
  • I mail the check on the 25th.
  • The check clears on the 30th.

How does this play out in YNAB?

Let’s walk through each step together, following YNAB best practices:

I get paid on the 22nd…and immediately enter the income in YNAB (most likely in my checking account register). I budget the new income based on my upcoming bills, which means I budget the amount of my mortgage payment to the ‘Mortgage’ category.

My mortgage payment is due on the 1st…which is totally irrelevant, because:

I mail the check on the 25th…and immediately enter the transaction in my Checking account register in YNAB. My ‘Mortgage’ category balance decreases by the amount of the payment.

The check clears on the 30th…so I go back into my YNAB Checking account register and click the ‘C’ next to the transaction, telling YNAB the transaction is complete.

That’s it.

The takeaways:

The budget doesn’t care about the date a bill is due.

You care, because you have to make the payment on time. But the budget only needs to know when the money actually leaves (you send the check or swipe your card) and when it clears (the check gets cashed or the transaction posts to your credit card account).

If you start budgeting – instead of just expense tracking – your stress will go way, way down because you’ll have fewer (read: zero) dates and amounts due floating around in your head.

Spend more time on your YNAB budget screen.

It’s great that you’re keeping your transactions current and your accounts reconciled, but the real magic happens when your YNAB budget screen becomes your reality.