A little bit of clarification...
This is going to be long, but I have a couple of questions that I can't seem to get my head around. I will try my best to explain...
1) Starting Balance:
Such a simple thing but it is messing me up. I started (again) at the end of October from fresh and entered my bank balance at that time. It was the end of the month so nothing was left to come out "in that month". Let's call it £1,000 for easiness :-)
What is messing with my head is how to allocate this, as it is just whatever is left at the end of that month, but I get paid on 25th of the month so technically, my pay month runs from 25th to 24th. This means that it is what is left from October payday. New income amounts would be added on 25th November which is what I see at "To be budgeted in November". That is the true amount that should be budgeted.
YNAB is wanting me to budget that out and therefore to me, I am budgeting more than I really have. I do get that it is still money I have and of course we budget every penny, but it is messing me up because for the first time in 10 years I went overdrawn in November because to me I budgeted out more than what I really had to spend. I don't know, this could be pure coincidence as October/November was also a tricky time because I paid off a loan and i re-mortgaged, so I think I've mis-calculated what I thought I had spare somehow (rather than it being over budgeting).
My question is, what should a "starting balance" be treated as? I classed it as "Stuff I forgot to budget for", but in my head each month it says I have all this money but my bank balance never agrees LOL
I think I have got this right, but again, looking at the figures doesn't seem right to me.
I have added my Credit Card in to the budget mix. Now when it comes to budgeting for the things I pay for on my card, I am budgeting against another category but my AMEX budget is 0. And I always pay the full card off each month (not necessarily the balance, as some is only billed on the next month) and so the payment I make (transaction) is assigned to my AMEX line. Effectively a transfer I believe.
Is this correct? Or should I budget to the AMEX line? I have noticed that on the card transactions itself, I classify the budget and I think that is what I am doing, which in turn assigns to my own categories. Getting myself confused I think. I think it is just the zero budgeted against AMEX that makes me think it is going to end up wrong on the balance.
I can't count the number of times over the years I have "started from scratch" and then just stopped as it hurts my head and doesn't seem to match what my brain expects to see LOL
Anyway, any help would be appreciated.
Thank you all, and have a great new 2021!
About your first question: when you started in october you had the 1000 pounds to budget. Assign those to the things you need it for, before you get paid again 25th of november. At least Some groceries I imagine :-). Then , when you receive more money on the 25th, only then, fill your other categories.
I’m not very experienced with creditcards, so I’ll leave that question for someone else to answer.
Future income or future spending does not affect your budget in YNAB. You can't budget your November funds until it's November and you've received them. YNAB works on the money that you have right now/today. It does not work on money you are planning to spend or income you will be getting tomorrow or in the future (you can create future/scheduled transactions in YNAB but they don't affect your budget until they are realized).
Great questions, Andy Perry - let's take them one by one!
1. When you add an account, your starting balance should flow into your To be Budgeted header. From there, you'll give every pound a job, based on your most immediate obligations.
I like to ask myself the question: "what does this money need to do for me before I get paid again."
What it really boils down to is this. No matter when you start, or when you get paid, you'll:
-Record your income.
-Give your pounds jobs.
-Spend! (But check your categories first, of course!)
Wash, rinse, and repeat!
2. Credit Cards
When you add a credit card to your budget, you'll want to be sure you budget for the starting balance on the card (if there is one!) directly to the Credit Card Payment category that YNAB automatically created when you added that credit card account. If you aren't able to budget the full amount owed to pay the card down to zero today, you may be riding the credit card float.
From there, budgeted for spending will move automatically from your spending categories and into your Credit Card Payment category, keeping the amount available for payment in line with the amount owed on the card.
If you pay your card in full each month (even if the amount you pay doesn't always equal the current balance on the card), you'll want to be sure that the positive available balance in your Credit Card Payment category matches the negative account balance on your card.
You can read more about getting started with credit cards in YNAB here, and let us know if you have more questions!
Andy Perry said:
I get paid on 25th of the month so technically, my pay month runs from 25th to 24th.
I suggest you move beyond this viewpoint. If you put slightly more than a month's worth of funding, the category lasts more than a month... say to Jan 31. If you then put just a month's worth in, the category is aligned with the calendar boundary.
Much about YNAB is simplified when this is the case with all categories.
Andy Perry said:
I went overdrawn in November because to me I budgeted out more than what I really had to spend.
Don't take TBB negative (or at least stay negative) and this won't be the case.
The other issue is your money may be in a different account; for example, if you have a savings account. In a multi-account setup like that, you first evaluate affordability with a category and then assess whether you can pay with a particular acccount (check it's balance). 2 steps.
Yeah my main issue was whether to leave the 1,000 as unbudgeted, i.e. don't budget anything in October since it was 30th October when I was setting this up. Anything that did come out 30th and 31st I budgeted for but it was whether to let the balance roll over as "Budgeted in the Future".
That is easier said than done. It is my aim to be in a position where when my wage goes in I have a full months worth of income in my account so that I am able to do this, but at the moment, I have bills that come out throughout the month. I have sufficient funds overall, but the timing of the bills (that I cannot change on some) mean that I have to budget for things before my next wages have gone in. I know that this is not desired as this is ultimately what leads to being overdrawn part way through the month, but then I am positive by the time my money goes in. I like to see everything that is due to come out in the month, budgeted at the start. So I think the answer to this is that I have to take the hit during the month until such time I have built up my reserve.
By the way I am planning on using the "Stuff I forgot to budget for" as my reserve pot. That way I still budget it out and if any month I don't need it, it effectively keeps on accumulating with the goal being my 1 month income (or just over for emergencies 🙂)
I suggest you move beyond this viewpoint
This isn't really my viewpoint, it is just a fact. I can't change when I get paid and as I mentioned above, having the buffer of 1 months money in my account at the point where I get paid (or at least a positive balance) should rectify this so that it doesn't matter when things come out.
The other thing was that I kind of wanted to budget for any overdraft, as technically I pay that off as soon as sufficient income goes in, but this just confuses me more. I am hoping that next month I will be clear again and back to always having a positive amount in my account at all times throughout the month. I just have other income coming in at different times, and this is paid 4 weekly so changes throughout the month.
It all just confuses me I think, and hopefully all will come clear. Just like to see balances match my bank balance at the end of the month.
I also think I have sorted the Credit Card now. I think I am just over complicating things because I like to categorise everything and when things don't add up, it scares me!
I do have savings accounts, and I do save quite a bit to be honest, but again I like my categories for savings too as to me, it is all for different purposes, even though it is now just in 2 main accounts. Categorising that confused me at the start and still does to some extent as I save 1 amount each month, but struggle making sure it is being allocated to the right category. Having these telling me I had thousands to budget at first scared me, which is where I am hoping that now I have allocated all these to categories, some of which have goals "gets rid of" the available to budget and of course that was only showing for October anyway.
Thanks again everyone.
Andy Perry said:
I suggest you move beyond this viewpoint
This isn't really my viewpoint, it is just a fact
When your pay arrives is a fact. When you plan to spend that money is a bit less fixed. As I said, things are much simpler when that plan aligns with the calendar.
Andy Perry said:
It is my aim to be in a position where when my wage goes in I have a full months worth of income in my account
A better goal is to aim for your wage to be budgeted entirely into next month's area. You'll find that account balances are less important to the plan/budget, especially since you'll be moving funds into a higher rate account. (Account balances can be whatever split you want subject to the totals agreeing.)