How do I know if I'm spending/budgeting too much?

I am loving this method of budgeting, as I am very new to budgeting in general and it seems to be helping me keep my finances in check. However, I am concerned with actual spending. I know you aren't really supposed to look at your bank account to determine whether you can afford something, but rather your budget, but what's stopping me from overbudgeting and not really realizing it? 

For example, let's say I get paid $2000/2 weeks, or $4000/mo, but my monthly expenses *generally* fall around $3500/mo. It's a pretty tight ship... But I wanna budget for things like clothing, auto maintenance, laundry, gifts, and "fun money." Stuff I really don't ever budget for or think about because they generally don't end up being very much money every month. What's stopping me from putting too much money in these categories that I can't afford? 

I would understand if I had $0 in my checking and relied solely on my $4000/mo paycheck, but I do have some sayings. So really how do I know whether I'm budgeting a good amount or whether I'm very slowly eating into my savings because I'm spending too much on random things like "fun money"?

OR, if I budget a small amount like $25/mo on fun money, what's stopping me from using that money to buy more food (where I normally wouldn't)? I don't spend $25/mo on fun stuff normally, it's sporadic. Some months I'll spend nothing on fun stuff, others I'll spend $75. But if I fund $25/mo, I feel like I have an obligation or a reason for spending that money, even if I wouldn't normally. 

How do I separate the absolutely necessary categories from the "I could spend this but I don't have to, and I probably shouldn't use this to cover other budgetary spending because I'll probably need it somewhere down the line" categories?

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  • Ok, I feel like you have quite a few different questions rolled into one so I tried to break it into smaller things.

    What stops you from overbudgeting?

    Nothing except yourself. YOU need to have the awareness that you cannot budget money you don't have and to budget enough money to those categories you absolutely need to have money to cover before you get next paid.

     

    Never budget money that you don't have

    When you budget your incomes, never let the TBB to go from green to red. You should budget all your money so your TBB is 0$, but if it goes below that it means you have put in your budget money you don't have and thus you can't trust your budget.

     

    Prioritize your spending when you budget your income

    You should - at least mentally - make a prioritized list of your expenses. The often cited way of doing this is splitting your expenses into needs (the expenses you need to cover so you'll have food, roof over your head, etc.) and wants (everything else), but I personally have three tear system: needs, important wants (what i prioritize higher within the wants), and nice to have wants (all the other wants). You can also mark the priority level in the category names some way, like with different color hearts (a common choice). I personally use moon emojis so needs are a full moon, importants are half moon, and nice to haves are a crescent moon.

    Now that you have a clear prioritization in your mind, when you are budgeting your paycheck you first make sure you have all the needs/top level priorities funded before you fund any of the lower priority categories. This ensures you can't overbudget to something lower priority while not having enough funds for the top priorities.

     

    Categorize your savings

    You mentioned having savings on your account before paycheck hits your account and not wanting to eat those accidentally. You need to give also those savings jobs. In its simplest for this can mean you create a category called savings and put all those savings in that category. How ever especially in the long term I would give your savings more clear jobs as in make clear what your savings are for. Saving is just delayed spending so you should have a clear vision what you are saving for, be it a down payment for a house, new car, fancy vacation or income replacement in case of job loss.

    When you have put that money in a category/categories and you let your budget to guide your spending (=you check that and not your account balance when deciding if you can afford something or not) you cannot accidentally use the money you have put towards your savings goals - you have to actively choose to spend that money.

     

    Follow rule 3 - roll with the punches

    Speaking of actively choosing to spend money for other purpose than you originally planned.  I think possibly the most important rule of all in the YNAB method is rule 3. Your budget is a plan but when does life ever go perfectly according to a plan? Never if you ask me. So when something unexpected happens, your plan (=your budget) need to change to fit the changing reality of your life. In practice this means you go and move money from one part of your budget to another. Need more money for groceries this month than you expected? Well go through your budget and check in what less important category you have money left that you can give a new job and move the money to groceries. Have no money you can spent from the non-saving categories? well you might have to dig into your savings to cover that need and try to fix the dip in the savings next paycheck/month. Don't want to move money from anywhere? Well then you have to get by without that spending until you next get paid.

     

    "If I budget a small amount like $25/mo on fun money, what's stopping me from using that money to buy more food (where I normally wouldn't)?"

    Again, nothing but you will stop you from using money budgeted for use X for use Y. BUT you also don't always have to stop yourself from doing that. You just need to be conscious about re-prioritizing the use for that money. But what I've found is that when you actually start to rely on your budget to guide your spending, you start to feel more confident about either denying yourself from going over budget in a category or about reallocating the money according to your priorities.

    Also, if you repeatedly find yourself reallocating money for X to Y, that should tell you your budget isn't reflecting your real priorities or needs. If your grocery money is always running out before the end of the month and your need to reallocate money from other categories again and again, you just have to accept hat that category is something you need to start to budget more money towards that you have so far.

     

    How to deal with sporadic spending categories

    I have these too, especially in the fun money part of my budget. What you do is you simply let the available money left in one month roll over to the next month. This way you can built up that budget until you have that one purchase that will use more than what you allocate to that category in a single month and have money to cover that.

    Like 13
      • MXMOM
      • MXMOM
      • 1 mth ago
      • 1
      • Reported - view

      Rakuna awesome answer!

      Like 1
      • Rakuna
      • rakuna
      • 1 mth ago
      • Reported - view

      MXMOM Thanks!

      Like
    • Rakuna Very solid advice! I like how you broke out all the implied topics and made it easy to understand!

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      • Rakuna
      • rakuna
      • 1 mth ago
      • 2
      • Reported - view

      Navy Blue Pegasus Thanks. I've found through my job that it often helps me to answer more complex questions better when I break them into smaller parts. Sometimes I do it just for myself to help me structure the answer better, sometimes I break the answer down to smaller parts like I did here.

      Like 2
    • Rakuna Thank you for the insightful answer. What you said definitely makes sense, but I'm still having trouble understanding what I can do with YNAB to make sure I can afford the budgets I'm making. Like for example, I want to get a cat but my apartment requires a $500 down payment. I would like to save up some money each month to do this, but I'm afraid that there's not really a way to tell how much money I can budget before I start creeping towards living paycheck to paycheck. 

      I have all my savings just budgeted towards the next the months' bills, but I'm worried that if I were to start a $100/mo fund for my cat, after 4 months of paychecks I'll be closer to living paycheck to paycheck than before because I used money that would've been budgeted into future months. 

      I'm just not seeing a way to know whether I'm spending more money than I'm making, and I'm afraid that I could be doing that and won't notice until one day I realize I can't budget next month at all. 

      I would say looking at the "how much I've budgeted this month" stat and comparing it to my income every month would be a good way to tell, but the issue is that my current budget is purposefully over budgeted because some of my bills fluctuate in price rather dramatically. My electricity is anywhere from $90 to $190 every month, so I budget $200, which I definitely can't afford every month, but my electricity bill averages at around $145 so I can afford it. The thing is, because I budgeted $200 every month, my budgeted amount is misleading and doesn't represent what I'm actually going to spend each month.

      So overall, when I get a new paycheck, I usually disperse funds into this month and next month, and without an accurate way to tell whether I'm funding further into the future now than I was last month, I'm not sure how I can know that I'm truly saving any money. Sorry this is confusing, I tried to explain it as best as I could. 

      Like
      • Rakuna
      • rakuna
      • 1 mth ago
      • 1
      • Reported - view

      Orchid Mainframe Have you looked into the reports section of YNAB? There is a report called Income vs. Expense which does have a net income sum at the very bottom of the page. That will at least tell you if the flow of money in your accounts was positive or negative in the past months. For me this has been an important and very revealing metric to see.

      If I understand correctly, after budgeting current month, you are moving to the next months area and star budgeting there. I used to do this too but honestly think it was making things more foggy for me in a similar way you are describing. So what I do now is when I've funded this month, I don't move froward to the next month but put the excess money to a category called "Next months budget". In the name of the category I have also written what my monthly paycheck will approximately be (there is slight variation in the sum month to month so I don't know the exact sum but I do know the ballpark). This gives me more clear idea of how far ahead I am both during the month and especially at the turn of the month when I move all the money from that category to TBB and go fund the next month as far as I can. This isn't an exact science but it does give me more clear idea of what direction I'm going - getting further in funding ahead or creeping back towards P2P.

      With the deposit: You could do so that you that you create category for that with a goal of 500$ but without a set date when you need to hit that goal. Then at the turn of each month you could see if you have money left in categories you don't want or need it to roll over to the next month in their respective categories and reallocate that money to this deposit category. Some months it might be more and some less but this is one way you could guarantee you are not budgeting in that category money you would need in another category this month or stealing money you'd rather spend in the next month.

      Like 1
    • Rakuna Thank you! The reports are very helpful it seems, but sadly only helpful for past months, not future planning. I do like your idea of taking all the money I'd normally budget into future months and putting it into a "Next Month's Budget" category. The only issue I have with this is that it makes my Total Budgeted stat misleading. I'd ideally like my Total Budgeted stat to reflect my projected spending this month, so I can know whether or not I can afford to fund certain categories like a "cat fund" ahead of time. Since the whole point of a budget is to restrict spending to a certain amount. But having a category for next month's extra budgeted funds adds a whole chunk of money to that, so I can't get an accurate representation of whether I'm spending too much and will creep back to P2P or not

      Like
      • Rakuna
      • rakuna
      • 1 mth ago
      • Reported - view

      Orchid Mainframe Your Total Budgeted is already misleading because you deliberately overbudget some categories like your electric bill. "My electricity is anywhere from $90 to $190 every month, so I budget $200, which I definitely can't afford every month, but my electricity bill averages at around $145 so I can afford it." You know your bill is basically never the whole $200 but you still budget that much to that category because that makes you feel safer and that's completely fine (I have few categories like that too where the bill fluxuates). But then you can't consider your Total Budgeted to give you an accurate picture of your projected spending. It will always be $10-$110 off because of this budgeting choice. And even more if you have other categories where you budget in a similar way. And of course any contributions towards non-monthly expenses/bills will also throw it off.

      Like
  • Orchid Mainframe said:
    I would say looking at the "how much I've budgeted this month" stat and comparing it to my income every month would be a good way to tell, but the issue is that my current budget is purposefully over budgeted because some of my bills fluctuate in price rather dramatically

    Nope. The amount budgeted this month should equal your income. In other words, you've made a plan for every dollar. That's Rule 1.

    Do not overbudget -- meaning allocate more than you have right now. To Be Budgeted should not be negative. That might mean you have to budget multiple times per month, each time money arrives.

    Non-constant bills are best handled by budgeting a MINIMUM of the average (yearly total / 12) in order to build up a surplus during the low months. Unfortunately, if you start during the high months, you don't have much choice but to budget for the larger amount, giving you sufficient funds in the Available column to pay the bill you need to. That means less important things may have to wait. That's just how things go.

    Like
    • dakinemaui Sorry, I should've clarified what I meant by "overbudgeting." I'm not budgeting more than I have, meaning nothing is red, it's all green, my TBB is $0. I "overbudget" meaning I put the highest amount of money into the categories as I think I could possibly need, but I do not plan on spending that every month, as I would eventually bring myself closer to being P2P, since my ability to budget in the future months would diminish over time. 

      On the other hand, I do not understand the idea that the amount budgeted this month should equal my income. Doing that makes me feel as though I'm living P2P, when I would rather be spreading my savings and income over multiple months if possible. 

      In short, every month I want to be able to budget further into the future. Right now, I can fund about half of next month's bills. I would like to be able to fund maybe 3 months into the future entirely, which would show me I am clearly increasing my savings. Whereas budgeting my entire income to the month would make me think I can put more money in other categories and spend more than I'd really like.  

      Like
    • Orchid Mainframe Even if you budget, say, 1/4 of your income in next month's area, next month you will budget 3/4 to finish the job.

      I suggest you do not budget past next months area. Just put the money you would have put towards 2+ months out in an Income Replacement category and grow that to the 4-8 months everyone recommends (depending on how difficult it would be for you to get another job).

      Just think about changing numbers in various categories across the next 6 months when your priorities or bills (and therefore allocations) change. There's simply no need for such busywork.

      Like
  • Orchid Mainframe said:
    my ability to budget in the future months would diminish over time. 

    Sorry, math doesn't agree with you, assuming income is consistent. You can continue to put the max away just as you are, which leaves exactly the same for contributing toward other categories as you are now -- including whatever you're putting toward getting ahead. You maintain the current trajectory, which you've said is getting ahead.

    The ONLY things that change that trajectory are overspending (which you said isn't happening) or simply a change in your priorities.

    Realistically, you will reach a point where you have enough "padding" in some categories, and you will be able to reduce the contribution level to those categories. This let's you put the difference toward something that may have had to wait or accelerate something that's very important to you.

    Like
    • dakinemaui My current trajectory is getting me closer to P2P, actually. I'm not overspending in anything, but if I continue budgeting like this the money I have already saved up independent of my income is going to decrease, and eventually I will run out and won't be able to sustain this. The only reason I know that the current month I've budgeted for is heading downward is because I had to calculate it using Excel. YNAB doesn't seem to have a method to know that I'm budgeting well and will save money vs. bringing myself closer to P2P until the month is already done (which is the income vs. expenses).

      Like
    • Orchid Mainframe It's not uncommon for spending in some months to exceed that months income. That's the entire reason we save!

      Are you using Rule 2 so non-monthly expenses are converted to monthly equivalents? If you can make those contributions (and those for monthly expenses, of course), why would you expect you cannot meet any of those obligations (and therefore be losing ground)?

      Like
    • dakinemaui Well I know that my total inflow per month is about $4000, but I'm saving for a lot of things right now like a new car down payment, a vacation this December, a vacation in Feb 2022, and my cat fund. But the problem I'm really running into is that I'm funding these categories thinking I can afford to be saving up for them, but in reality, I'm not spending the money I get from my paycheck to save up for them, I'm spending my savings, meaning I can't afford to fund these categories long term and will eventually run out of savings and be out of luck. The only reason I know that is because I put it all into an Excel spreadsheet to calculate my monthly expenses. Without that, I'd just be throwing money into categories I can't afford. 

      I want my budget to be a static indication of exactly what I spend every month, with the peace of mind of knowing that what I've budgeted for is affordable, not siphoning my savings towards things I can't afford. These long-term categories I have are going to stop being funded when I run out of savings, at which point I'll have to relocate other funds to attempt to cover them, or possibly stop funding them altogether for the time being. That's fine, and I understand that but what if those categories I have weren't savings categories, but rather just fun money I could spend? What's stopping me from allocating way too much money every month to a fun money category and I actually spend it? Without that Excel sheet, I'd actually be spending that money every month instead of saving it, and only when I've used up all my savings and can no longer budget that category will I realize how much I screwed up. 

      Like
      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      Orchid Mainframe Did you give jobs to the money in your savings account? (I presume that's what you mean by "savings".) If so, then all current budget allocations are from recent income.

      Like 1
      • Rakuna
      • rakuna
      • 1 mth ago
      • 1
      • Reported - view

      Orchid Mainframe Your big concern seems to be about how much you can afford to put towards longer term savings items like down payments and vacations. I have few suggestions how you might approach funding these savings items bit differently. (This might have some repetition to what I mentioned before and mention things you already know but it makes it easier for me to explain this in a way that assumes you know non of these things before.)

      These are built on top of the process I have (mine currently most closely resembles approach 2). A key element of my approach has been following Nick True's End of month process.

       

      1. Never fund any of the savings items until the end of the month.

      This approach will prioritize getting a month ahead with your money over saving quickly towards any of your savings items.

      During the month you first fund all the more day to day expenses (monthly bills, contributions towards non-monthly bills, groceries, clothing, fun money, etc.). Put no money towards the savings item yet. When all of those are funded, you pull all the rest of your income to a "Next months budget" category. Any money put in this category will stay there until the beginning of the next month (unless there is a huge unexpected financial situation you HAVE TO cover some how) when you'll move it back to TBB and start funding the next month with this money you put aside in the same way.

      When you reach the end of the month, go through all the categories you have been funding through  the month. If a category has money left in the available column, you have two choices: 1. Let it roll over to the next month (something like non-monthly bills or fun money you want to grow until you need the money) or 2. Re-allocate the available money to one of your savings categories.  The sum you can contribute towards the savings will not be equal each month but you will be absolutely sure that you are not falling backwards toward P2P life again.

      This will eventually lead to a situation that your "Next months budget" category will reach the sum of your average monthly income ($4000) before you hit the end of the month. When you reach this point and you have already $4000 put aside to this, you know you can fund everything next month from the get-go. So now, if you have any income after hitting that $4000 you can with peace of mind put all of it towards your savings categories.

      Now when you reach this point that you have all the funds you need for next month before this month ends, you can move away from this strict approach and simply budget the whole $4000 from the "Next months budget" towards any and all your categories, including the savings categories on the first of the month. Any income coming in during the new month how ever are put straight to the "Next months budget" category. You know you should reach approximately that $4000 by the end of the month.

       

      2. Prioritize what you want to save for

      This approach is a variation of the first one and will save quicker towards some of your savings items but will be slower in getting you one month ahead.

      In this approach you take all your savings items and choose what you most need/want to save towards right now. You can choose one or two items to prioritize. After your chosen your top priority savings items, go ahead and give these items monthly savings goals. These prioritized savings items will now be pushed to the group of things you fund from your income before you start putting money to the "Next months budget" category. 

      Other than that the process is the same as in the first approach. At the end of the month you can choose if the money you choose to re-allocate to savings will be put towards your other savings items or if you want to contribute even more towards the prioritized ones (or you can do a combination of these).

      When you feel more comfortable with the approach you can obviously start to play around with how many savings items you want to prioritize or how big sums you feel comfortable budgeting towards each of them monthly.

       

      3. Savings items before getting month ahead

      This approach will be the slowest to get you a month ahead.

      In this approach you will simply give all your savings items monthly goals and fund them all before you start funding your "Next months budget" category. Again the rest of the process is the same as in approach 1. This obviously runs the risk that you will never have anything to put to that category or the buildup in that will be super slow.

      I personally think this should only be your approach if it's very important that you get all your savings items funded as quickly as possible. So basically if they are needs that absolutely have to be funded by a specific date. But of course if you don't have too many savings items and you don't have to save huge sums towards them every month, this approach can work fine and still let you slowly built up your "Next months budget".

       

      With approaches 1 and 2 you will most likely over time start to get an idea how much you can safely put towards all your savings items without damaging your attempt to get a month ahead and after that you can loosen up your approach. But to get there it will probably help to have a structure to work with first.

      Like 1
      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      dakinemaui oops, I just wrote the same thing below.  Guess I should read all the comments before adding mine.  So - ditto. 

      Like
    • MXMOM Nah, everyone explains things slightly differently. Don't sweat it. Even saying the same thing may resonate better with your words.

      Like
  • Orchid Mainframe said:
    I'd ideally like my Total Budgeted stat to reflect my projected spending this month

    You really don't. That would mean you aren't saving anything toward non-monthly expenses (bills, vacations, Christmas, etc.)

    You know you can afford a cat category if you can budget a sufficient amount to it every month. Since income is presumably fixed, that mandates something else receive less funding (possibly $0). If you can identify something else less important than a cat in the budget whose contributions you can take moving forward, then you're golden.

    Like 1
    • dakinemaui What's the Total Budgeted stat for then? I would assume it would help you budget so you don't overspend each money. As I said, I could spend more than I make every month but it'd eat into my savings, but I have no way of really knowing that I'm doing that without using Excel or something.

      Like
      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      Orchid Mainframe I find Total Budgeted to be useless. The number that matters is TBB.

      Like 1
      • Scott
      • In the beginning the budget was created. This has made many people very angry and has widely been regarded as a bad move
      • Scottgoeshiking
      • 1 mth ago
      • 2
      • Reported - view

      Orchid Mainframe Total Budgeted should exactly equal the income you've earned so far for the month. If it's higher, that means you're giving jobs to dollars you don't yet have (and some category will be red or TBB will be negative). If it's less, than TBB will be greater than zero and you should give those dollars jobs ASAP!

      Everyone is giving great advice, but I think the issue you're having requires a simple approach. An easy way to see if you're earning more than you're spending is to look at total available at the end of every month and see if that goes up or down. The way YNAB is designed, as long as your TBB is 0 at the end of the month and no budget categories are red, you're automatically spending less than or equal to your income (as long as all your income and expenses are tracked).

      Let's hypothetically walk through what happens at the end of the month:

      If you're using YNAB well you'll have $0 in TBB and all your categories will be green (or maybe yellow, don't worry about that right now).

      Since TBB is 0, you chose a budget category (job) for every dollar you earned this month. All your income has been given a job, and since no categories are red, you haven't planned in YNAB to spend more money than you're earning. Your "Total Budgeted" equals your monthly income, and your "Total Activity" equals all the spending you did. If your Total Activity is less than your Total Budgeted, congratulations, you spent less than you earned!

      Now lets look at that cash in your accounts. All that cash has also been given a job, but those existing dollars were given jobs in previous months, being assigned to categories that now have an available amount. Those dollars will roll over month to month until you need to spend that money. The "Available" column will equal the total cash in all your accounts.

      In order to plan for future expenses that you need to save up for, you need to create specific categories and budget into them each month so they grow until you have enough money for your expense. Then, when you spend that money, the available balance tied to the category will be reduced by your expense. Because you were saving up, you might end up spending more than you earn in that month, but that's ok because you know you set aside money in the category. It doesn't matter what account that money is in, just keep in mind that the "Available" column is always the sum of the dollars in your accounts. Feel comfortable that this indicates every dollar you have is being given a job, either this month or in some future month.

      Lastly, the "Age of Money" count is a way of understanding how long dollars sit in your accounts before being spent. It's most easily understood as imagining all your cash as a tall stack of dollar bills. Whenever you earn money, those dollars are added to the top of the stack. When you spend money, you pull dollars from the bottom. Over time, dollars move down the stack until they reach the bottom and are spent. Age of Money tracks how many days it takes from when a dollar lands on the top of the stack until you pull it from the bottom. If your Age of Money is going up, it means that you are consistently spending less than you're earning.

      Like 2
    • Scott , I'm going to have to burst your bubble about Age of Money. The implications don't necessarily follow from the facts. 

      Scott said:
      If your Age of Money is going up, it means that you are consistently spending less than you're earning.

       An increasing AOM could also mean that you're spending your last dollar, or increasing credit card debt, or are not adequately finding true expenses. Similarly, a decreasing AOM could mean that you saved up for a large purchase and bought it, which does not indicate "falling behind," either.

      This thread goes into more details. https://support.youneedabudget.com/t/35h3r7w/getting-a-month-ahead-and-age-of-money

      Sorry I can't link to a specific reply right now, but here's a good quote: 

      • nolesrule
      •  
      • YNAB4 Evangelist
      • nolesrule
      •  
      • 3 mths ago
      •  

      dakinemaui 

      dakinemaui said:
      Put it this way: getting ahead will raise AoM, but a rising AoM does not necessarily mean you're getting ahead.

       Falling behind can also result in an increasing AOM.

      So if getting ahead, keeping even and falling behind can all result in an increasing AOM, you can't attach any meaning to it.

      Like 2
      • Scott
      • In the beginning the budget was created. This has made many people very angry and has widely been regarded as a bad move
      • Scottgoeshiking
      • 1 mth ago
      • 1
      • Reported - view

      Move Light Sound Life Yeah, you're right. Oof. I didn't realize credit card debt increased age of money since I think about it as a budget move, but if I was spending more on ccs than I could cover with income in a month then yeah, you're absolutely right. 

      I'm going to burst my own bubble further. The "budgeted amount" can easily NOT be the same as your income if there was any money in TBB that rolled over, or possibly for other reasons. There's another metric called inflows or income (not at my computer) that is better to compare against spending. Even then, that is just a per month take on inflows and expenses, and doesn't indicate whether a person is prepared for future expenses. It is still useful though, in this case, since OP is concerned that his savings is declining. YNAB can tell you when that happens.

      Like 1
    • Scott My budgeted amount always equals the "income for last month" which is a header available in the Toolkit. I never budget into the future. 

      Really, if the OP wants to be sure they're not eating up savings, they just need to look at their savings category Availables. 

      I know dakinemaui said this above, but, Orchid Mainframe , did you put your initial savings dollars into specific savings categories for new car/vacation Nov/vacation Feb/cat?

      In my opinion, that should be the first step in setting up a YNAB budget. You saved that money already, and you don't want to unintentionally lose progress. If you're me and you don't do that, then three months into using YNAB, you get to do the heart-wrenching process of pulling money you thought was Income Replacement but had found its way into other categories (because I didn't put it in the IR category. Dumb me.) I just thought I surprisingly had more money to work with... 

      Like 1
  • Orchid Mainframe said:
    how do I know whether I'm budgeting a good amount or whether I'm very slowly eating into my savings because I'm spending too much on random things like "fun money"?

    EVERY category is savings. (You merely hold on to some categories a little longer than others.)

    If you have to reallocate to cover overspending, then that's a pretty big hint! 😉

    That said, if the reallocation is in support of something important to you (from something less important than that), that is A GOOD THING! In hindsight, it probably should have been saved for that more important thing in the first place... if only you could have better predicted your future needs/priorities. (Don't feel bad, no one gets it 100% right all the time. Just adjust and move on.)

    Like 6
  • Orchid Mainframe , I think the thing that will ease your mind is to come up with your own "budget template" or nominal monthly amounts for your categories. If the total of those is less than your monthly income, then you can sustain that plan. 

    The only way this gets tricky is if you need to front some categories (i.e. you have an annual expense -say $1200 - due in two months, so you need to budget $600/month now, rather than the $100/month you'll be able to budget after you pay it the first time. At that point, you'll get to reevaluate your nominal monthly amounts and joyously put those $500 into categories that were previously waiting on a higher regular funding. 

    The first year you use YNAB will be full of this kind of revaluation, both for joyous reasons and for situations where you forgot about that annual expense and need to fund it now, thereby reallocating from what you had thought was a good nominal monthly amount. 

    If your priorities change, that's another cue to revisit your nominal monthly amounts. For example, after I paid off one debt, I snowballed that nominal amount into another debt. After I was debt free, I snowballed that nominal amount into a medical deductible category until I hit the deductible amount, then I used part of that money to continue funding a "next year's medical deductible" at 1/12 the amount. The rest got to be nominally involved in building other savings categories, like car replacement, home/auto repair, and house down payment. 

    Last month, we had some unexpected expenses that exceeded our Unexpected category, so we minimized discretionary spending as best we could, and ended up having to pull from the house down payment (currently a lower priority for us than other savings categories). Did last month's spending exceed our income? Definitely. But, we were able to take care of it without adding debt. Obviously, if we have multiple months with such expenses, we will be eating at our savings, so we're trying to sidestep that issue by increasing the (now depleted) unexpected category. This of course means we have to contribute less to other areas of the budget. 

    I'd also like to point out that your spending can exceed your monthly income when everything is planned for, and you wouldn't be eating at your savings: say all of your annual bills come due in November, and all your family's birthdays are in November, and you take a vacation in November, and you replace a car you've saved for in November, and you buy all your Christmas presents in November, and you still have normal bills and monthly spending in November. While this November might wipe you out because of only using YNAB a short time, next year, you'll have saved money for all of those categories. That spending will definitely exceed your income for the month, but it will have been all saved for in your budget. 

    Moral of the story: there is no normal month, but figuring your nominal monthly amounts in relation to your naturally changing priorities can help. 

    I'd recommend figuring them out on paper or in excel until you get comfortable with the YNAB interface. You can also figure them in an empty, future month (negative budget your income and budget to $0), but then you'll have to look out for SFTF. And my categories don't fit in the same screen without scrolling, but I can put them on one sheet of paper, which I find helpful when I need to cut $150 from somewhere and I want to see the big picture. 

    Like 2
    • Also, until you're budgeting each month exclusively with money earned last month, you may find it helpful to notate which categories will be funded by each paycheck. You can do a consistent fraction, or you can choose timeline priorities for full funding. 

      Using an INM category to sequester monthly funds is, IMO, a more concrete way of knowing your plan is viable and protecting your already established savings. Piecemeal doesn't work for me. If you're interested in this technique, I tried to compile everything I know about it in this post. It's long, but thorough...

      https://support.youneedabudget.com/t/m1hqyb3/trying-out-the-ynab-buffer

      Like 1
  • Orchid Mainframe said:
    My electricity is anywhere from $90 to $190 every month, so I budget $200, which I definitely can't afford every month, but my electricity bill averages at around $145 so I can afford it.

     Not sure if your utility offers equal billing.  Mine does and that makes it easier for the expensive months. they average out the expected annual amount and divide by 11 months. The 12th month is the reconciling month. I have heard it called budget billing or equalized billing.  For other bills that don't have this feature, I either just budget for the next months bill amount (usually I get the bill in this month for payment next month so I have time to do that). For my water bill, they bill every 3 months and don't have a budget plan. Instead of just setting it aside (and worrying that I accidentally pinch from it), I make an actual payment on the account every month of the average monthly amount. When the bill comes it usually is fairly low since I have made those payments already month by month.

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  • Orchid Mainframe said:
    I can't get an accurate representation of whether I'm spending too much and will creep back to P2P or not

     And by default, when you have that Next month or Next pay category, you get the immediate feedback that you are NOT budgeting paycheque to paycheque. For example, we are 1/2 month (basically one paycheque) ahead. Our Park for next month amount is currently running about $4000 which is 50% of net pay for the 2 of us.  So when I look at that Parked category in September and see $4K, I know right away that I have set aside enough to cover one paycheque ahead.  The goal is to make that number bigger and we have had to steal from it a couple of times.  The best way to stack that category for people who get paid every other week is to take that 3 pay month 3rd paycheque and dump it there. 

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  • Orchid Mainframe said:
    the amount budgeted this month should equal my income.

     The amount budgeted each month (after the first month) will generally only be inflows which will be your income for most people. However the amount available is the cumulative amount of all the months unspent and should equal all your money everywhere.  

    Like 2
  • Orchid Mainframe said:
    I'm not overspending in anything, but if I continue budgeting like this the money I have already saved up independent of my income is going to decrease,

     Have you set a category for the money you "saved up independent of your income"? If so, if you are having to pinch from it to cover general monthly expenses, you are spending more than you make aka overspending.

    Like 2
  • Orchid Mainframe said:
    the amount budgeted this month should equal my income. Doing that makes me feel as though I'm living P2P, 

     Nope, you're budgeting P2P, which is still somewhat a pain. 

    when I would rather be spreading my savings and income over multiple months if possible. 
    In short, every month I want to be able to budget further into the future.

    Budgeting in the future is inefficient and can bring in confusing complications.

    Right now, I can fund about half of next month's bills. I would like to be able to fund maybe 3 months into the future entirely, which would show me I am clearly increasing my savings.

    Make an Income Replacement category that will have your desired #of months' worth of funding (3 or more). As the category increases with contributions, you know you're saving more/have more saved.

    Whereas budgeting my entire income to the month would make me think I can put more money in other categories and spend more than I'd really like.  

    You need to include a normal monthly amount that contributes to your savings categories.  Budgeting your entire monthly income each month will show you what you can and cannot afford to save/spend. 

    Putting your plan (budget) in multiple, future months blurs the lines, as you've found out. 

    To see where your money is assigned, look at your category Available amounts. There is no graph/stat for this, but it will provide peace of mind by knowing what your current plan is. The nominal amounts you figure out will give you peace of mind by knowing what your future plan is. 

    Just wait until you actually receive money to budget it in YNAB, so that you can actually rely on categories for spending guidance without mental gymnastics.

    Like 2
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