New to YNAB - different bank accounts

Hello,

Some financial plans I know of require you to have different bank accounts for budgeting purposes eg, one for bills, one for day to day spending etc.

Do we need to to the same for YNAB? Id rather just keep a single account (credit line) as the more i have in there the less interest I pay. Plus one account is just easier.

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  • No. The categories in YNAB tell you the purpose of your money.

    However you'll find that you have to jump through hoops to use a Line of Credit the way you want, because it's an account with a negative balance and YNAB treats those as not having any money.

     

    On a side note, what's with the obsession with the Line of Credits these days? This is like the third thread in 2 days. Didn't people learn from the last go-around with LOCs? They are callable, can be closed or have the limits reduced at any time at the whim of the financial institution, putting your money at a huge liquidity risk. And if you're doing it in lieu of a mortgage, you're probably paying a higher rate, which means you need a significantly lower balance, just to break even vs. the mortgage.

    Reply Like 1
  • Hi lolsausages !

    Having different accounts to handle different things is the opposite of the YNAB approach. We believe in simplifying - check out our Simplify Guide - because having fewer moving parts is easier to manage. :)

    That being said, having at least one cash account in your budget will make things easier to handle. YNAB uses the amount of cash you have on hand to create your budget - if all of your cash is tied up in a line of credit, it's a bit harder to get a true view of what you have to work with in your budget.

    Reply Like 1
  • Faness said:
    That being said, having at least one cash account in your budget will make things easier to handle.

     It would perhaps be clearer to say cash-based account - i.e. checking/current and/or savings account, not necessarily an actual cash account referring to physical paper/coin money (though I do have 2 actual cash accounts as on budget accounts, one for my wallet and one for the emergency cash I keep at home).

    Reply Like 3
      • jenmas
      • jenmas
      • 1 mth ago
      • 3
      • Reported - view

      Superbone The offset mortgage accounts in Australia just seem different though - i.e. they are a specific mortgage product and stashing your cash in them is exactly how they were meant to be used, whereas these recent threads seem to be about American-style LOCs and a " super secret trick" to using them to reduce the amount of interest you pay on your mortgage

      Reply Like 3
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
      • Reported - view

      jenmas From what I've read of the American-style LOC "super secret trick" (LOL), they also want you to stash your cash (paycheck) in them as well but I guess the American-style LOCs don't make that as easy to do?

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 mth ago
      • Reported - view

      Superbone American-style LOCs weren't designed to act as offset accounts. They were designed to be a line of credit... a loan you can self-draw from at any time. Many U.S. LOCs have a limited draw period, usually 10 years. That's another con in the use it to avoid a mortgage "super secret trick". And there's obviously no guarantee you can refinance at the same (or lower) rate before the LOC draw period ends. Heck, there's no guarantee you can refinance at all.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
      • Reported - view

      nolesrule My impression for the "super secret trick" was that you're supposed to have your mortgage paid off within the 10 years and if not, you'd still have the repayment period to pay off the (what should now be relatively small) remaining balance.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 mth ago
      • 2
      • Reported - view

      Superbone Yeah, that's all fine and dandy, but then all your money is locked into the LOC. It would suck to not be able to use the money in my budget without taking out a loan at a higher interest rate than my mortgage.

      If you want to pay off the mortgage, just pay off the mortgage. Don't take out a higher interest loan to pay it off and then tie up all your liquidity to avoid the higher interest.

      Reply Like 2
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 wk ago
      • Reported - view

      nolesrule Oh, yeah, I totally agree.  I wasn't saying it was  a good idea. I think these  schemes are meant to make the scheme overseer money at your expense.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 4 wk ago
      • 1
      • Reported - view

      Superbone It's also possible that true offset mortgages in other countries don't carry the same risks as storing money in a LOC. Just like a U.S. mortgage is not callable.

      Reply Like 1
      • jenmas
      • jenmas
      • 4 wk ago
      • 2
      • Reported - view

      nolesrule yeah, it's all trade-offs. We don't have mortgage offset accounts, but when we take out a 30-year mortgage, the interest rate is for all 30 years unless you choose to refi, whereas in many other countries they have to renegotiate the interest rate every 3-5 years no matter what.

      Reply Like 2
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