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!
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!
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.