Age of money and paying bills before due date
I´ve just restarted using YNAB and am trying to understand how to get the most out of tha Age of Money concept.
The other day I got my paycheck for the month and filled the budget posts I needed to - including a small entry to my emergency fund. Feeling safe and happy, I promptly paid the budget I´d put aside for my credit cards, and some other bills - all several weeks before their due date, as this made me feel less stress about those bills.
I´m still juuuust on the verge of riding the paycheck float, seeing as this was my "method" before YNAB. And I´ve just started paying down my credit cards with a snow ball - to get of that debt rollercoaster. Thus why I was so happy to pay all those bills within my paycheck - and leaving enough in the other budget posts.
But - Had I left this money in my bank account until the due date - would that have given me a better "Age of Money" score? And would that be the clever thing to do if increasing AOM is what I want to do - of course given that I wouldn´t spend that money on something else?
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Yes, you probably would have temporarily had a better Age of Money score, since you would have waited longer before spending the money. But that number would adjust when you eventually paid the bills anyway.
Don't make financial decisions based entirely on the AoM. It may be a helpful guideline to some people, and may help motivate some to save more, spend less, or generally make smarter financial decisions. At the same time, it's simply one number that can't possibly capture your entire financial situation, and it's easy to fake it so that number increases (for example, if you stopped spending money in your checking accounts, and started to take on credit card debt instead without making payments, that would increase your AoM). Yes, generally, the longer you can wait between earning money and spending it, the better... but you have to balance that with other factors too.
Ultimately, I don't think the exact payment date matters significantly in this situation. One way or another, the money was going to be spent, and if paying it a little early helps give you peace of mind (and you aren't struggling in some other way due to paying early), then that was the right decision.
Consider the AoM when making financial decisions like "does my spending match my values?", "can I save more?", "can I spend less in this category?", "do I really need to buy ___?". If you find increasing your AoM is fun and enjoyable, great! Just don't try to game the system, and be wary of making questionable financial decision in pursuit of a higher number.
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Age of Money is a useless novelty. The biggest problems with it are that it is entirely susceptible to income cycles, spending cycles, credit card usage and spending of built up savings, none of which have anything to do with your financial health.
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I think I will be happier/safer when I´m fully budgeted up to 1+ months ahead so I can visibly _see_ that myself. Then I will (hopefully) know what´s going on and can feel safe about it
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Violet Tape Your budget is actually the best indicator of your financial health. Being able to budget for everything every month, including Rule 2 funds, and having an adequate emergency fun, all mean you are living below your means and are able to deal with most emergencies.
Other than that, you don't need to be a month ahead. You just need to be able to budget for the entire month in full by the start of the month. Depending on your paycycles, that probably won't necessitate a full month of paychecks. The advantage to this is that you can see your budget differently when you can budget an entire month in one go. You can make better budgeting decisions with your categories, for both efficiency and practicality, and you can see how much below your means you are really living.
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Violet Tape said:
But - Had I left this money in my bank account until the due date - would that have given me a better "Age of Money" score? And would that be the clever thing to do if increasing AOM is what I want to do - of course given that I wouldn´t spend that money on something else?IMO don't try to game the AoM number. Just make what you believe to be sound financial decisions and have a goal of getting one month ahead. If it's more important to you to know that your bills are taken care of, then that's more important to you. 'Nuff said.
Ideally, that would look something like YNAB4's Rule 4 where you send all income that you receive this month to the following month, every month, so perhaps with whatever margin you currently have you can start sending money to certain bills next month... then certain master category groups next month... then before you know it the whole month is covered before it ever gets here.
