Age of Money

Rule Four teaches us to "age our money". This is, for me, the most powerful concept YNAB has taught me over the years. Achieving an age greater than fourteen-ish days was something I never saw before using YNAB.

Now, after using and learning the method for the past three years we have achieved something wonderful. This past October we reached an age of money of 181 days! After much shopping, activities, and illness during November it has dropped slightly, but we're climbing once again. Talk about peace if mind. Wow!

What's your age of money right now?

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  • I have a couple of accounts that I keep larger-ish sums of money as a long-term savings.  Does that falsely inflate my Age of Money?  My money is 258 days old.  How do I pull those two accounts out of the equation?

    Reply Like
      • Ben
      • Toolkit for YNAB Designer & Developer
      • furiousfalcon
      • 1 yr ago
      • 7
      • Reported - view

      Gold Harp (13ad987ff2d8) - The AoM equation looks at all money available in the budget, so yes, that does have the potential to effect your AoM number. The only way to make sure that the savings accounts aren't counted would be to move the accounts off budget (but realize how this might affect your budget categories).

      Ultimately, I've chosen to keep my savings on budget, despite how it affects my AoM, because that money is split up between multiple categories and I've found having more specific savings categories is more motivating. Realistically, I've found AoM more useful when I was first starting and the number was low, and less useful over time as my savings has grown.

      Reply Like 7
    • Mark
    • Orange_Hammerhead_6227a
    • 1 yr ago
    • 3
    • Reported - view

    Well done, that's a brilliant achievement. Here's to the next 181 days!

    Reply Like 3
  • I've restarted my budget a few times which skews the AOM, but at the moment it is at 98 days. I think I was up to 150 days before the last time I did a budget reset.

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  • My oldest AoM was 336 days; that was right before I bought my own apartment. Since then I'm a little bit struggling (as at the same time I'm about to get married next year), but I've been keeping my AoM at 30+ days. It's now at 34 days.

    Reply Like 2
  • The concept itself is a natural progression of budgeting according to the first 3 rules, but I'm not a fan of the Age of Money metric. To me the number is nothing more than a curiosity. Since it is based on your budget income and spending, and people do things differently, the numbers aren't universally comparable. As a result they do not have a universal meaning.

    The number is affected by too many variables, including:

    Spending using credit cards

    Frequency of income events

    Frequency of spending events

    Lumpy irregular spending and its magnitude

    Reply Like 9
      • Michael
      • I desire to inspire.
      • thepawnwithaplan
      • 1 yr ago
      • Reported - view

      nolesrule I understand where you're coming from. Instead of an AoM metric, what would you rather measure? Besides the obvious net worth, income/outgo trends, etc... Could there be something else that we could plot on a graph that would be insightful? (I'm just thinking on paper at this point....)

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 3
      • Reported - view

      Michael We had a lengthy discussion on the topic (29 pages last I checked) on the old YNAB forum starting in January 2016. I don't think we ever  came to a consensus other than AOM isn't very useful.

      The Toolkit has an "Age of Buffering" which is a projected burn-down rate of your existing funds, based on average spending over select-able look-back period.

      But what we determined is that just about any simple metric that doesn't require user input has what we call a Rule 2 problem, the lumpy spending. And the larger the expenditure, the bigger the impact. But anything that uses spending as part of the equation is backward-looking rather than forward.

      Just as an example, in September 2015 I bought a car in cash. My AOM dropped by 76 from the previous month and took a year to recover. I could just as easily have taken out a car loan (and would have if the numbers would have made it the better deal) and not had a drop in AOM at all. My AOM would almost certainly be higher than the 297 it's at now, maybe even close to a full year, but I'd still be about half-way through the loan.

      In the end, the best indicator of your forward-looking success is the money in your categories that is essentially earmarked for getting ahead rather than keeping even (money budgeted in the future and categories that wouldn't get spent under normal circumstances), relative to your current nominal income.

      But even that has its limits to usefulness when you are sending some of that money off-budget. Around the time nYNAB came out, I started a taxable investment account, and it has almost as much in it now as my Income Replacement category in my budget. And we have 3/5 of our 2018 IRA contributions already saved up and just waiting on earned income after January 1st to get sent off.

       

      tl;dr There isn't a good one-size-fits-all metric that can be calculated from the data in YNAB that doesn't require user input, and user input can be flawed as well, which is its own issue.

      Reply Like 3
      • negrcian
      • negrcian
      • 1 yr ago
      • 1
      • Reported - view

      nolesrule I'd still like to see the AOM as a candlestick graph, but still think it needs a way of being able to exclude categories from the base number (which would mean that it would retain value by introducing perceived scarcity) , but we had these ideas two years ago, so i'm not sure it's worth wasting any energy rehashing something that no-one @ ynab is going to listen to.

      Interesting sidepoint is that the ToolKit extension exists in part because we had the discussion re AOM

      Reply Like 1
    • Jen
    • Budget Expert
    • Jen_c
    • 1 yr ago
    • 1
    • Reported - view

    Congratulations! That sounds like quite an accomplishment -- that's 6 months! 🏆

    I also wanted to add that we really want to hear feedback about the Age of Money! We take each email and push that specific feedback through to a system that compiles them with similar feedback and tracks the frequency. We don't gather that from the forums, though, so if you have suggestions, please email us at help@ynab.com !

    Reply Like 1
      • June
      • Gold_Cobra_7e139812ab28
      • 1 yr ago
      • Reported - view

      Jen my age of money has disappeared from my budget.. what gives?

      Reply Like
      • Jen
      • Budget Expert
      • Jen_c
      • 1 yr ago
      • Reported - view

      June how strange! We'd like to troubleshoot that for you personally -- please email us at help@ynab.com and we'll work on it!

      Reply Like
  • Michael Wow, congratulations! 💥

    Some of the side discussion reminded me of this blog post that I thought you or others may be interested in. Age of Money is, more than anything else, a visualization. (Which is why I am so excited about the graph in the mobile apps). It can go up, go down, and level off.

    Like anything else, it isn't "useful" in a vacuum. But in as much as it shows money sitting in your accounts, when perhaps it used to fly out faster than you could count it, it sure is.

    In the end, as others point out because everyone is different, your total budget is anyone's best metric. The money actually sitting in your categories can tell you, are you prepared? Are your paychecks sitting around longer? Are you able to pursue what you love? Are you meeting goals?

    So glad you're finding success and peace of mind, Michael !

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 5
      • Reported - view

      Todd 

       

      This tooltip is not accurate, and yet it declares an absolute.

      It's not that it just isn't useful in a vacuum, but it doesn't have any consistent meaning. At least in your blog post, you mention the credit card effect, but it's not in the tooltip... which could easily be fixed by checking the budget for credit card activity when rendering the tooltip.

      The other problem is that your published material keeps using 30 (or 60 with credit card use) as the target, and that's just not helpful. The tooltip says "Keep [it] above 30". Well, how high does it have to go so that in the course of my normal spending I can keep it above 30 (ignoring for a moment the fact that I'm currently at 297 days). Following Rule 2 means you are going to have a whole bunch of money saved up over time above your regular monthly spending amounts. Maybe you'll spend it next month, or in 3 months or in 6 months. Or maybe a year, 2 years, 5 years, 10 years. But it's going to be spent. And when it does, your AOM is going to drop. The longer the delay before spending (and usually with correlation the bigger the amount), the larger the drop.


      Also, I can keep it my AOM higher in lots of ways that aren't necessarily the proper choice. Financing over time instead of paying in cash. Using credit cards... and not paying in full after using them (another type of financing). Just not paying off bills or debt.

      So tell me, what would my AOM be if I spent all my Rule 2 funds down to zero? Because that would be a truly useful AOM number that would let me know if, under normal circumstances I would always have an AOM above 30 (or 60 with CCs).

      Reply Like 5
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 6
      • Reported - view

      Todd Of course, after that rant, the truth is that what really irks me is that you guys decided to toss the #1 piece of functionality that the folks at YNAB ever invented and set you guys  apart from every single other money management/budgeting system.... "Income for <Next Month>". The old Rule 4 was a concrete. It was actionable. It was a SMART goal.  The new Rule 4 is passive and vague, and the implementation of removing walled months has introduced my other frustration... "Stealing from the Future". As I said in the other forum, the fact you guys actually allow a stealthy stealing from the future is spitting in the face of Rule 1.

      Reply Like 6
      • ToddYNAB Team
      • YNAB's CPO | Four Rules since 2009
      • Todd
      • 1 yr ago
      • Reported - view

      nolesrule I have absolutely no disagreement that the Rule 2 scenario you describe is accurate. Save up to buy a car with cash, AOM goes up. Buy the car, AOM goes down. One hundred percent accurate. It's happened in my budget.

      I think the reason I posted, though, is this: I find it useful when that happens. It tells me a story about my budget and my use of my money. I think there's probably a wide range among YNABers—and I especially didn't want the original poster to feel like he shouldn't feel good about what probably represents a real accomplishment in how he's managing his money.

      We have active design discussions continually about feedback we get from long-time and new users alike, Rule 4 implementation included. I don't want to re-create a 29 page thread, but that doesn't mean we don't and won't continue that process. That may not be super-comforting since nothing has happened with this particular issue that I know a lot of people care about, but it's real.

      Reply Like
      • elsewhere
      • elsewhere
      • 1 yr ago
      • Reported - view

      Todd 

      I'd prefer it if you didn't go quiet as there are a lot of things that only someone holding your position in the YNAB Company can explain.

      How do I tell Michael that I'm happy that I don't have an Age of Money score and that I won't have one for comparison purposes anytime soon?

      In January 2016, on the old forum, right after nYNAB's launch, I said:

      As for the Age of Money metric, does it now correctly calculate an Age of Money score for those nYNAB users who perform 99% of all of their spending using a credit card? Or are those nYNAB users destined to see an Age of Money score of “???” for anywhere up to the next 10 months or so? If the metric can’t handle this scenario, then remove it from the main Budget user interface. It’s not ready for prime time and don’t pretend that it is.

      YNAB Management had plenty of advance notice regarding the potential impact of this issue, yet they didn't deploy a fix for this issue until 1 June 2017 (Release Notes):

      For new users, we won’t show your Age of Money number before it’s ready. If you miss the question marks we used to show as a teaser, please copy and save these question marks for later use: ???

      So how should I respond to Michael ? Should I say to him that Rule 4 is actually redundant for those YNAB users who know how to manage a credit card properly?

      Please advise.

      Thanks

      Reply Like
      • Ben
      • Toolkit for YNAB Designer & Developer
      • furiousfalcon
      • 1 yr ago
      • 3
      • Reported - view

      elsewhere I don't really see that being a big issue.

      You explain that the AoM has limitations, one of them being that it only looks at money leaving and entering the budget. Since credit card transactions are spent using credit, the only credit card related transactions that affect the AoM are credit card payments. Yes, there are specific situations where the AoM figure isn't as accurate or may not work as well as it ideally could.

      AoM is simply one metric that may or may not be useful. It's not a perfect number, and it isn't the only thing you should look at when trying to determine how healthy your finances are. It's useful for some people (especially those just starting out, who find trying to increase that number motivating while they are breaking the paycheck to paycheck cycle) and not for others like you.

      I would argue that while the AoM number itself may not be useful to you directly, the overall concept -- don't spend more than you earn, and build savings over time -- is still applicable.

      I should also point out that while the rule may be redundant for you, it may not be for him, even if he does use credit cards a lot. People get motivation from all sorts of silly things, and seeing a number increase over time is one of them. If he finds that number motivating, and it encourages him to keep going and continue improving his financial position, isn't that a good thing? Maybe we can celebrate the things that YNAB users are excited about, even if that number doesn't mean much to you personally?

      EDIT: I do want to add that I don't mean these comments as a criticism of you personally. Based on the current state of how the AoM is calculated, it has limitations. People do need to be aware of the limitations, but at the same time, I'm not sure it's great to somewhat put down someone's achievements because of those limitations.

      Reply Like 3
  • Todd said:
    I have absolutely no disagreement that the Rule 2 scenario you describe is accurate. Save up to buy a car with cash, AOM goes up. Buy the car, AOM goes down. One hundred percent accurate. It's happened in my budget.
    I think the reason I posted, though, is this: I find it useful when that happens. It tells me a story about my budget and my use of my money.

     I think it's useful too, but I don't think that most of the documentation regarding the Age of Money number does a good job in explaining it. And certainly not the concise, yet inaccurate, tooltip.

    It's certainly a solid graph that should be part of the charts, graphs and reports. I just disagree that we should be using it as a measuring stick for one of the rules. The rule is actionable, but the measuring stick is passive. The old Rule 4 was actionable and so was the measuring stick.

    As for the OP, 180+ days is certainly a heck of an accomplishment, assuming he did it through savings and not by deferring the impact of cash-based spending. 👍

    Reply Like 1
      • ToddYNAB Team
      • YNAB's CPO | Four Rules since 2009
      • Todd
      • 1 yr ago
      • 2
      • Reported - view

      nolesrule Those additonal points are helpful, thanks. Now I'm going to go quiet so I won't keep talking over Michael and his original question. 🙊

      Reply Like 2
  • Congratulations!  Useful as a specific metric or not, it means you're far from in the hole! 

    Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      Mayfly Without context, you cannot make that inference. It's also possible that there have been very few cash-based transactions and the OP is living on credit and not making payments.

      Reply Like
      • Mayfly
      • Forest_Green_Crab_27286
      • 1 yr ago
      • 1
      • Reported - view

      nolesrule That's certainly possible.  I tend to want to give the OP the benefit of the doubt, though, and assume that he/she would not be on this particular forum raving about this accomplishment were he/she sorely neglecting the YNAB fundamentals.  I also feel comfortable inferring this from the statement about having some bumps in the road lately that had to be covered, so being a little less far along than previously.

       

      I could be awfully, terribly wrong, but I feel pretty good about where I've landed.  😋

       

      Also, to respond to the initial question:  My AoM right now is only 30 days.  Down a good bit from where I used to be due to taking less care over the past few months than I normally would, but just about right given my personal assessment of my financial situation.

      Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      Mayfly I'm sure you're right. Just pointing out the theoretical possibilities that often get overlooked.

      Reply Like
  • 369 days

    Age of Money,

     

    mile stone just past the year.

    Reply Like
  • I wonder what my AOM would be if I didn't do the following:

    1. Churn 401k contributions as wash transactions (That's 4-5 income and "spending" transactions per month). - increases frequency of spending
    2. Churn HSA contributions as wash transactions (That's 2-3 income and "spending" transactions per month. - increases frequency of spending
    3. Pay for medical expenses via credit credit card with HSA reimbursement instead of using the HSA debit card - increases frequency of spending transactions
    4. Got a loan for my car instead of paying in cash - takes a big up-front hit rather than a smaller
    5. Use a credit card to make most purchases - pushes off the spending transaction to a single credit card payment... this is the only one that actually increases AOM.
    6. Make extra principle payments on monthly mortgage payments - increases amount of spending transaction
    7. Send money off to 2 Roth IRAs (4-6 transactions) - increases number of spending transactions and money leaving budget
    8. Send money off to a brokerage account monthly - increases number of spending transactions and money leaving budget
    9. Consider (some) gift card purchases spent at time of purchase rather than as a transfer that remains on budget - increases number of spending transactions and money leaving budget
    Reply Like 2
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 yr ago
      • 5
      • Reported - view

      nolesrule Who cares? AOM is meaningless after a certain point. For me if my AOM is over 150 days, then I probably have too much in cash. Time to move some to my investment accounts. Maybe after I retire, I'll keep a year or two of cash in online savings and CDs. But until then, I don't want it getting too high.

      Reply Like 5
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 1
      • Reported - view

      Superbone At what point does AOM go from meaningful to meaningless in a universally applicable manner? Assuming it's ever meaningful. 😉

      We've had that too much cash discussion before, and the problem I keep coming back to is my "too much cash" mentality is at odds with my "give every dollar a job" mentality. I just have trouble reconciling those two thoughts.

      43% of the money in my budget is essentially zero-day. 6-months expenses as income replacement, and additional reserves for home and car repair.

      My job as an ecommerce architect is obviously tied to the strength of the economy, and I've been laid off twice in the last 4 years just because the companies I worked for got complacent in getting new business while the economy has been booming, so I'm not comfortable putting that income replacement money at risk. The only category in my budget besides those that isn't intended to be spent in under 5 years is the meager beginnings of my next Car Replacement, which will happen sometime in the next 8 to 13 years.

      Reply Like 1
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 yr ago
      • Reported - view

      nolesrule I agree that is a diffent issue. It's also a matter of one's risk tolerance. I also didn't mean to imply that AOM is meaningful before that point but I can see where it might help at the beginning of one's budgeting journey where they see it change for the better over time. Still, it's not really actionable like the old Rule 4 in previous YNABs.

      As far as "too much cash" versus give every dollar a job, I don't think they're at odds. Once every category is maxed, the job of extra cash for me is to invest it. So, that's its job. It is then no longer a concern of my budget.

      Also, I personally have had the same job for 17 years (knock on wood) and I am less concerned about having all of my emergency funds liquid so I personally have half of mine invested in the stock market.

      Reply Like
    • Superbone DING DING DING....congrats to the original poster, but after AOM is over a certain point (depends on your specific situation) start investing some of that cash.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      We do invest the extra cash. In VTSAX and VTIAX.  But not money in the budget intended for savings .Savings in the budget isn't extra.

      But it just feels like too much cash.

      I was laid off in 2013 and 2015. And I expect the fate of my current employment is dependent on the company I work for continuing to maintain a specific client. So I cannot fathom investing my income replacement (Schroedinger's Category).

      The other issue is I run the budget and the household finances and it's easier to manage should something happen to me.

      But even I suffer from fear of missing out. Our investments have done well the last couple of years and it can be hard to ignore.

      Reply Like
    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 1 yr ago
    • 2
    • Reported - view

    We started in over draft, so we're still at zero.  What happens with that is every month I start in the red for TBB because I overspent the month before.  The good news is, our over spent from previous month is clicking down and will be gone in 2-3 months I think.

    Reply Like 2
  • Superbone said:
    As far as "too much cash" versus give every dollar a job, I don't think they're at odds. Once every category is maxed, the job of extra cash for me is to invest it. So, that's its job. It is then no longer a concern of my budget.

    Every category is funded at the exact same amount every month (except kids allowances which vary based on Sundays in the month). Even income replacement gets a small amount every month to account for inflation and minor lifestyle creep, and interest from our bank accounts more than covers that monthly amount. We go on vacations, appliances need to be replaced, cars get replaced, the kids have bat mitzvahs in less than 5 years.

    And the dollars that really don't have a job are sent off to Vanguard.

    It's just that over time, the total in the budget just keeps growing and growing. The money in the budget is now at approximately 5.5 months base salary or roughly 85% of one year take home pay (excluding bonuses). This year alone it's grown by more than 20%.

    Even though every dollar still in the budget has a job, it just seems excessive in that regard.

    Reply Like
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 1 yr ago
      • 2
      • Reported - view

      nolesrule Superbone Interesting discussion on "how much is too much," wish I'd seen it earlier.  I wrestled with this in transition to retirement, and now there's a lot less money in my budget than there was when I was working.  The major cause is that I eliminated my e-fund category, which was conceptually an income replacement fund for the possibility of layoff.  The part that didn't get used to fund income for the transition to ongoing retirement income flow got transferred to investments.

      I agree that Age of Money is worthless in determining how much can be taken out of cash and put into investments.  Sending every dollar over and above fully funding all the budget jobs is a better answer, but begs the question of how you determine what budget jobs are necessary and what level constitutes fully funded. 

      People who talk about investing also talk about how much should be in cash.  Various theories say to hole 3 years or 5 years expenses in cash.  I have my own take on that, but it probably belongs in my journal on the old forum.  Not immediately; I have another budget philosophy post percolating to the top before I get to that one.

      Oh, and for what it's worth - Age of Money is currently 228 days in my budget.  That tells me that I have at least 228 days of history in the nYNAB budget, and that's about all it tells me.

      Reply Like 2
  • 6 days

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  • My age of money was high due to keeping savings and true expenses on budget, however I did a fresh start this year and it is back down again but ticking up daily and the money amount has not changed much.  I guess in 6 months I will be back up around 180 days.  I assume AOM is based on past spending and since I did a fresh start there is nothing in the history to base the calculation on to make it 180 from the start.

    Reply Like
    • ynaber2613 I did the same thing and was dismayed when my AoM went down.  Its working its way back up now, and truthfully it doesn't matter when I know I have the money there :)

      Reply Like
  • Panzer, retiring at age of 60, two of us at work,  both 60 at approx same time ( 18 months)  and both wanting to retire, question he keeps asking is when do you stop saving and start spending, only way is, you need to know your departure date . Or go by the saying " Thrifty to Sixty, Spend to END"

    I don't get too worked up about AOM as Current Account is best interest, just max out on these, two single accounts and a joint account, once these are full move to shares, cash ISA, Bonds. Sad day when the current account is best for instant access

    Reply Like
    • Michael
    • I desire to inspire.
    • thepawnwithaplan
    • 1 yr ago
    • Reported - view

    I've really enjoyed reading all the responses to this post. I seem to have stirred up quite a discussion! 😝

     

    I've decided that, while I do enjoy the visual element of AoM, what I'd truly enjoy having built into YNAB is perhaps a "Goals Met" counter. Something that intelligently shows me how often I meet my goals and how many goals I've met. Haven't given it much thought but I'd enjoy the feature, I think.

     

    Update: AoM is down to 76 days. 👍

    Reply Like
  • Michael  Congratulations on your progress. Bet it feels good to have changed your relationship with money.

    Reply Like
  • Is there any way to see the velocity of inflow vs outflow?  This is part of what I imagine AOM shows.

    I am brand new to YNAB so don't have the history of usage that many others here have.  I am also starting with a 45 day gap in inflows.  Now that I am at the end of March (2 weeks using YNAB) my AOM is 3 days.  To be expected.  I still have several double payments to fit into the budget over the next 3 months to get everything caught up.  My inflow rate is sufficient to do this but my AOM should not change too much.  Once caught up, I expect my AOM to rise as I am able to rebuild E-Funds, Vacation funds, other saving goals as well as my quarterly/yearly expense funds.

    As a software architect/developer, I've written systems in the past that looked at both acceleration and velocity of X vs Y.  My situation right now, I have a large positive acceleration in bill spending that will hit ZERO in a few months then go into a negative acceleration until everything is balanced out.  My velocity of spending will come down over the next several months until I am steady at just paying my usual monthly amounts.

    With the YNAB system, I see velocity being best likened to a cruise control on the car.  Acceleration is the change in velocity to get to cruising speed and once at cruising speed the acceleration should be very close to zero.  However, in a financial system, acceleration would also be calculated by comparing goals and spending.  Right now, my goals are set for the "normal" month yet I am spending twice my goals in several categories: a high acceleration.

    Hopefully, I am making sense.

    I think another way to put it is, acceleration is the cange in velocity in a short (30 days?) period of time while velocity would be the average speed over a longer period of time (6-12 months?)

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