Inflow: To be Budgeted vs. Direct Category Assignment

Greetings, all!  2-day user of YNAB here.  🙂

BLUF: When funding my HSA via direct deposit, is it better to directly assign a recurring income transaction to the True Expenses: Medical category or to first assign to Inflow: To be Budgeted category and then set the budget amount each month?  Why is one better than the other?

 

My health benefits include an HSA funded by a pre-tax direct deposit into the bank account while the rest of my paycheck goes into my primary checking at my credit union.  I get paid semi-monthly, and $50 is deposited into the HSA every paycheck every month every time.  Since I can't use this money for anything except healthcare, this money will always be used through the True Expenses: Medical category.

What is the right way to incorporate this into my budget?  I see two options.

First option, set up a recurring semi-monthly transaction in my HSA account with an inflow amount of $50 and put it directly into the True Expenses: Medical category.  (This has the fewest moving parts.)

Second option, set up a recurring semi-monthly transaction in my HSA account with an inflow amount of $50 and put it in the Inflow: To be Budgeted category.  Then every month, I set the True Expenses: Medical budget amount to $100.  (This has more moving parts, thus more room for error.  Plus, I could accidentally budget this money for something other than medical expenses when I don't think I can legally spend that money on anything but.)

I end up with the same result with both options:  $100 per month added to my True Expenses: Medical category.  I still have the flexibility with both options to supplement this by adding additional money to the budget for a given month.  For example, to add an additional $30, in option 1 I would budget $30 (since $100 is already directly assigned) and in option 2 I would budget $130.

What's the difference between these two approaches, are either of these the correct approach, and (most importantly) why is one approach better than the other?

Thanks for listening, all!

Kevin

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  • I think I've seen someone mention they kept their HSA as a tracking account so that the money was never moved to another category. 

    I do put all my paycheck deductions in YNAB. Some line items, like medicare, are just expenses. Some line items, like taxes/medical, go to a respective tracking account. 

    If you don't want to put all your paycheck deductions in YNAB to give you a gross income, and you'd prefer to keep the HSA on budget, I would probably just do a split transaction for each paycheck with the HSA contribution categorized directly to the medical category. 

    If you need to protect that HSA spending from other medical spending, consider using a separate HSA category. 

    That's my first glance thoughts. I thought I remembered others (Patzer, TechieM2, but I could be wrong) talking about ways they actually structured their HSAs. You may have more luck searching the forums than I just did.  I always feel dumb while searching the forum for things that I know are there and don't show up.

    Good luck, and hopefully someone with more experience in this can help you!

    Like 1
    • Oh, and the main difference between your two options is that, in reports, option #1 will display your HSA contributions as negative spending in the category, while #2 will include that amount as part of your income. 

      I'm again leaning towards #1 because there's less room for error and it tracks the contributions. However, I'm not sure that's hands down the best way. 

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  • Hi Slate Gray Projector !

    We have an article on adding your HSA to your YNAB budget. 

    Like Move Light Sound Life mentioned, we recommend setting up your HSA account as a Tracking Account in YNAB. This will allow you to enter your transactions and monitor your account balance.

    If you choose to add it as a budget account, there isn't a way to make sure those funds are never moved to a different category. If you categorize those transactions to the HSA category, those funds will be placed there but there isn't a way to lock those funds so as not to cover overspending with them. 

    Like 1
      • PhysicsGal
      • Nerdy female homo sapien
      • physicsgal
      • 2 wk ago
      • 2
      • Reported - view

      Faness That's exactly what I do, my HSA is a tracking account and I reconcile it once a month, after I get paid and do my budget for the month. 

      I do have an HSA category in my budget, but only so I can spend out of it with my credit card and then reimburse myself from my HSA, so I can get my 2% cash back on my HSA spending that I get when I use my credit card.

      Like 2
  • I track net income. I don't plan to spend that HSA money, so it doesn't belong in my spending plan (aka budget). Heck, even if I do spend it, it will always be on Medical expenses, so a category is redundant.

    Like 1
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
      • Reported - view

      dakinemaui Same here. It's just a tracking account for Net Worth purposes for me.

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  • Hello, all!  Thank you for the replies!  My searching didn't come up with the article on Health Savings Accounts, so obviously I was searching the wrong thing or the wrong place.  I appreciate the guidance.  Your responses helped!

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