HOW do you get a month ahead? What am I missing?
Is it just spending less than what you make and the rest gets rolled over? I'm a little confused on this. And does anyone have any tips for making this process smoother?
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That's about it. I'd definitely rolled over in terms of budgeting into the future months.
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I like the method of saving it in an "income for next month" category. I prefer this method to funding a future month because it makes it easier to deal with a change in priorities if nothing is funded in the future.
When you get paid, fill up any bills that are due before the next paycheck, a per-paycheck amount for things like groceries & gas, as well as to your annual bills & savings categories. Then what you have left (even if it's only $5) goes into "income for next month". Next month you have 5 or 10 (depending on # of paychecks) and some of your categories have money left from the previous paycheck. You budget your next paycheck, and this time you have a little more left because you had partially funded another bill with one of your previous paychecks, so now you can add 10 each paycheck. Then you hit a month with an extra paycheck and only need to use some to cover regular expenses so you put 200 in. And you get 3 in interest and 5 in cashback rewards this month and that goes in too. You can either take everything from this category to start funding the month & add more back or let it build until it is enough to fund the whole month.
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I focus on making my budget a little less than my income to start. Any categories I overspend in, I do my best to use other categories that have extra money instead of changing my overall budget. Any categories with extra money at the end of the month rolls over to the next month. You can use this rollover money to budget in future important categories like rent/mortgage, electric, etc. It starts out slow, maybe less than $100 rolling over but I promise it builds up month to month!
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Alex So, I should expect it to take awhile to get a month ahead? Maybe I'm thinking too Right now vs...soon in the future..lol
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Stacy C It's not a sprint, it's a marathon. 🙂
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Stacy C I was so ready for my finances to just be fixed when I started YNAB! It can be a little frustrating to wait but definitely worth it. It may take you a few months or even a year to get a full month ahead. It really just depends on how much you cut costs and roll over your extra money! I figured out that even cutting $5-10 from my clothing budget made a difference in the long run.
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Stacy C
bevocat said:
Stacy C It's not a sprint, it's a marathon.While that's true, not everyone runs marathons. I do. The most important thing about running a marathon transfers very well to the getting ahead analogy: Don't go out too fast. The first 10K is a warmup. For your first marathon, the first half of the race should be the slowest half marathon you've ever run in your life.
Translating to budget, that means don't get discouraged that you can't get a month ahead in one month. If you get paid biweekly, and can budget a month on 2 paychecks, you can look at the calendar and see when you'll be a half month ahead and when you'll be a full month ahead. But even if you get paid semi-monthly and have no extra paychecks to look forward to, you can use the method described upthread to get a month ahead. $5 or $10 may not be much, but make it a ratchet. $10 ahead this month. $15 ahead next month. $25 ahead the month after. And as you focus on how far ahead you are and how you improve that, you'll find places where spending on X is less important to you than getting a month ahead. So you'll cut spending on X, and get ahead quicker.
And that's like running a negative split, i.e. running the second half of the marathon faster than the first half. That's a Good Thing. In running, you're more likely to finish the race uninjured and have an easier recovery. In budgeting, you're more likely to have built sustainable habits so you can STAY a month ahead.
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Alex I had been budgeting a month ahead by putting the money into the future categories, but now I'm in a situation that makes me think your way is the better way of doing things. I had gotten just barely fully a month ahead- my last paycheck in August finished filling up my September goals. Now, it's the middle of September, and I want to spend a bunch of money on hobbies and travel. I just got paid, so I have a sum of money that doesn't necessarily have any pending priorities. I know that if I spend this money on hobbies and travel, I will be moving backwards on my goal to budget a month ahead, but I don't know by how much or what the implications would be. If I had a dedicated account, I would know about how much money I needed to fully fund the next month, so I could better be accountable to this. I'm still not sold that budgeting for next month is better than having an emergency savings.
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Stacy C Yes, it will, for most people, likely take several months if not more than a year. It all depends upon how much extra $s you have and how focused one is. You could also try selling some stuff or finding another way to generate some extra income and budget those $s into the future (or into a separate "month-ahead" category). One important thing to punctuate: whatever you do make it a part of your ynab process.
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Gray Clarinet I think the main benefit from getting a month ahead, other than the psychological goal of having that financial cushion, is that it simplifies budgeting for those paid every week or every 2 weeks or bi monthly. If you prefer to, you can budget your entire month in one category with a goal, an "income for next month" category, lots of people on here do it that way.
Emergency savings is a good goal also. I'd say you can include your buffer (your extra one month of income you have saved) in your emergency fund calculation, if you're going for N months of expenses covered. I've heard Jesse do that on the podcast the and it makes sense to me. I personally don't use a buffer because I'm paid for the whole month on the last weekday of the month, so I'm pre-buffered or administratively buffered because of my pay cycle, so I just save an emergency fund and my true expenses and don't do the buffer/month ahead thing at all.
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It can be hard to break free of the cycle. Even before YNAB, I had figured out I really needed to make a break with my frustrating cycle. I made the deliberate leap to get out of P2P by doing a couple of scorched-earth no-discretionary-spending months where I paid minimums on everything and allowed myself no discretionary spending. I'm single, so the only whiny person I had to deal with was me. 🙂 I think it was worth it to knock it out faster, but that's me. I'm ready to suffer for short intense periods, but I'm not very disciplined if it lasts too long.
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I have been on YNAB for a very long time, and I was frustrated by how slowly it would take to get a full month ahead saving $5-10 at a time. But if that works, then great.
For me what worked was acknowledging that I already used most of one paycheck for the next month. Get paid this Friday, 3/29? I bet nearly all of it goes to April expenses. In nYNAB I use the "Income for Next Month" category still, so I would budget that whole paycheck into that category and try to make the money I had on hand in my budget stretch for the weekend. I would consider myself "half-buffered" at that time, because I could send one whole paycheck forward to April. Yes, I used that money 3 days later by taking it out of the category and budgeting April, but to me that was ok.
(I get paid every other week so this is based on that). So the next paycheck, let's say April 12, my goal would be to send at least a little bit of that check into the "Income for next month" category and then my April 26 check as well. Every month I'd try to send more of the first paycheck forward and make the money stretch.
A key component of this is to try and get your budget down to only equal two paychecks every month. If you can do that, you'll be able to use the 3rd paycheck you get twice a year to build your buffer. Once you are able to send two paychecks forward (or all of them), then those "extra" paychecks are truly extra to be used for debt, savings, etc. -
It's not easy, but it will be worth it! I started YNAB on 2/19/19, so just a little over a month ago. Before YNAB I'd get a paycheck, pay bills, then buy ALL THE THINGS I wanted and leave myself just enough to make it until my next paycheck. I'd have like $200 left in my checking account until I got paid again. Now, I'm 3 days from my next paycheck and my checking balance is $1800. Some of that money is "spent" with things like YNAB/Amazon Prime memberships coming up, as well as bills that are coming, but in one month I was able to get half a month ahead on all bills aside from my mortgage payment. That's huge for me. I'd suggest immersing yourself in these forums, the FB forum, the reddit subgroup and the workshops and then wait patiently as your money slowly grows over time. I can't wait to see how I'm doing by this time next year!
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I don’t understand either, even after reading the replies. If the age of your money is 30, does that mean you are a month ahead? Or are you a month ahead when you have enough to cover your immediate obligations in the next month’s budget as well as the present month? What if you have enough to cover immediate obligations in your true expenses, does that count as being a month ahead?
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Julie the point is to make budgeting easier. It means that on March 31, you can budget every dollar that you’re going to need in April, however many dollars that is. It’s extra hard at first because you probably have lots of catching up to do for your true expenses. Like if your semiannual car insurance is due next month But only half of that money is saved, you need to save 3 months worth next month to pay it. After that, you only need to save 1/6th the amount every month. Does that make sense?
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Julie Age of money being 30 days doesn't necessarily mean that you'll have enough to pay everything for next month. What it means is you have money sitting around (maybe a couple months worth of True Expenses, maybe some Emergency Fund money, maybe some "whatever it's for" money), sitting in a savings account - or your checking account. That money will increase the age of your money, but unless you specifically devote some of it to a category something like "Next Month's Income", you won't get a month ahead.
My age of money, for example is I think 37 days, the last I checked. However, I am only 1/2 paycheck ahead right now, because some of the rest of that money is sitting in a vacation fund, and some is sitting in Car Repairs, etc. By the time I get a full month ahead in my "Next Month's Income" category, my age of money will probably be closer to 2 months old, because I'm not spending that saved money, and the "Next Month's Income" is just sitting there, getting older for a whole month.
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Julie - what Bruce said. For a long time using YNAB, my money never aged, because I was aggressively paying down debt, so all of my income was gone to paying the month's expenses, plus my debt snowball. Very little was going to "true expenses" - annual payments, Christmas, travel, car repairs, etc.
Now that I am budgeting for both debt repayment AND true expenses, my money is starting to age a bit. Right now, we're at 24 days old. I am okay with my money not being at 30 days, because debt repayment is a higher priority for me right now than being a month ahead. That said, the older your money gets, the easier it is to "roll with the punches" (YNAB Rule 3!) and move things around when life throws you a curve ball.
Check out the "Learn the Four Rules" class that YNAB offers to get a better handle on it, along with live feedback from an instructor.
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Julie
I find it hard to explain Age of Money. A number of 30 or 60 doesn't always mean that you are a full month ahead. An AoM of 30 is simply telling you that the dollars you are spending today were inflowed 30 days ago; it is not telling you that you can live on your current bank account balance for 30 days. You could have a lump sum in savings that must be spent on a big payment. That money would increase your AoM (until it was spent) even though you cannot use it for monthly expenses.
I know I am a month ahead when:
- all of this month's income can be left untouched and used to budget next month, and
- all of my annual expenses are caught up to whatever /12 they should be at based on the calendar year (Christmas should be at 3/12, my car insurance should be at 9/12 for a June renewal).
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Julie Age of money is a joke. Just ignore it. The others have provided a small handful of examples out of a rather large set as to why it's meaningless.
Here's another one. if you put as much spending as you can on a credit card and never pay the card and make tiny cash payments every now and then, your age of money will grow and grow and grow right into bankruptcy.
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bevocat Wouldn't it mean that on 3/31 all of April would be sufficiently funded without needing the 3/31 paycheck? So you could put the 3/31 paycheck into May?
PS, your tag line cracks me up. Yes sometimes it does suck to be me.
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Julie It's actually a reminder to myself! 😄
And nope, living on last month's income means exactly that. I earned it in March, it funds April. It doesn't matter if I got it on the 31st or the 1st, the fact is, I can budget all of April out all at once with income received in March.
If you want to be able to fund May on income from March, that's certainly something to work towards, but not required to be a month ahead. What you don't want is to be in the middle of April scrambling to budget money for bills that happen in April.
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bevocat Huh! Maybe we are better off than I thought. We can budget most of April on 3/31. Woot!
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Julie
If you can fully budget April while you're still in March, you're one month ahead. April is one month ahead of March last time I checked. 😀
Seriously though, the main point of the "month ahead" workflow is to stop fretting about the exact timing of your paychecks. Paycheck-to-paycheck budgeting is tedious and stressful! The goal is to "unlink" your income and expense streams so that you're not trying to line up specific checks with specific jobs anymore. That way lies madness.
You're very correct to observe (and worry) that using a 3/31 paycheck during April doesn't provide much financial security. "What if that paycheck is delayed?!?" The best way to address that worry (IMO) is to maintain a well-funded "Emergency Fund" category -- ideally with enough money that you could absorb a several month interruption in pay. The other approach (preferred by some) is to simply budget multiple months into the future. I personally find that more tedious, because it tugs you back toward paycheck-to-paycheck budgeting (e.g. should your 3/31 paycheck be budgeted toward your July mortgage payment??)
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nolesrule Lol, very illustrative.
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Julie said:
I don’t understand either, even after reading the replies. If the age of your money is 30, does that mean you are a month ahead?No.
Age of Money of 30 means, "the money you recently spent was earned about 30 days earlier." It does not say anything about how much money you have remaining or how long that money is likely to last if you continue your historic rate of spending. Indeed, you may have just spent your very last dollar.
When YNAB users talk about "being a month ahead", they usually mean that they can fully budget a new month using funds they earned in the previous month. E.g. On April 1, can you fully budget for all your April expenses using money that you had earned (and set aside) throughout March?The advantage of being a month ahead (in this sense) is that you don't need to budget paycheck-to-paycheck. Instead you combine multiple paychecks and budget them all-at-once in whole-month chunks. This can make it easier to see the big picture and make steady, consistent progress on goals.
Additionally, strict adherence to the one-month-ahead workflow creates a sense of scarcity: You don't allow yourself to solve March overspending by using money that you reserved for April. That money is "off limits." That sense of scarcity, or "walled months" as some YNAB users call it, can encourage better decision making. Scarcity brings clarity.
Some users will express concern that budgeting a March 31 paycheck in April isn't really "a month ahead" -- it's just a single day! What if that paycheck is delayed??? But IMO this misses the point. Being a month ahead describes a budgeting workflow. It's not a significant source of financial security. To achieve security you should have categories like "Emergency Fund" or "Income Replacement" (to handle the delayed paycheck scenario) that are sufficiently funded. And most experts would recommend that you have more than a 30-day safety net. -
All good suggestions so far. Not sure what I can add that would not distract you. My current Age of Money is a little over 100 and I'm not officially a month ahead. I don't have a specific category called "next month's income." Every month, when I get my income, close to the first, I budget out my month. I usually budget a few extra dollars to each category and let the extra roll over into next month. Those dollars add up and in most categories, I have enough to fund two or three months of expenses. Still working on getting to that point with my larger expenses. Now, if, for any reason, I didn't get my regular income next month, I have a "buffer" in the individual categories, with some categories I could pull from.
I haven't prioritized getting a month ahead. I have prioritized having extra in each individual category. I budget $5 per month to my "buffer" category and will normally use it first for any unplanned overspending in any of my other categories. It hasn't grown much since I started budgeting.
Everyone approaches this differently. I happen to like my way better than the way YNAB recommends. It all works. The goal is to have a buffer in your accounts so you don't overspend, in my opinion. I will achieve having one month's worth of income in my "buffer" category, eventually. I'm not in any rush to achieve it though. I'm happy with my progress.
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I will have to read these all a few times before I get it. I can tell that being a month ahead will take us a long time because we are prioritizing debt payments first. I feel satisfied with doing that and having some roll over in each category for now. Thank you everyone.
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Julie what is your pay schedule. If you are paid every 2 weeks if you budget using just 2 paychecks each month then the 3 paycheck months will help you get ahead.
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satcook I am paid every two weeks and my husband twice a month. My salary goes entirely towards the mortgage and retirement savings and his goes towards our living expenses. I hope I can get ahead somehow in July (with the extra paycheck) or at least put it towards debt. We are in debt-reduction mode.
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MsTJ said:
I usually budget a few extra dollars to each category and let the extra roll over into next month. Those dollars add up and in most categories, I have enough to fund two or three months of expenses.My criticism of that approach is that it blurs the line between what is "extra" (and should be reserved for the future) and what is actually available to be spent in the current month. That makes it a lot easier to overspend and eat into the buffer.
More generally, it's problematic whenever you have a single category performing multiple jobs. Anytime you access that category (to spend from or to move money in/out) you've got to consider the impact to each of those jobs. That can be a lot to keep in your head, which kind of defeats the purpose of YNAB (which is supposed to relieve you from that kind of mental math.)
Everyone approaches this differently. I happen to like my way better than the way YNAB recommends.
Can't argue with you there -- personal finance is personal.
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bret This is helpful!
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I'm almost 2 years in and I'm still nowhere near having my budget a month ahead, but I've been aggressively paying off student loan (sooooon), to be followed by car loan. The only 2 categories I'm current ahead in (money I budget for this month is actually the payment for next month) are the required payments for the two loans.
I'd like to get to the point where all money I put in this month's budget is for next month's payments, and have next month's budget filled as well, but that's a long process!
Those extra paycheck months and tax refunds help of course, but right now that all goes to the student loan. :)
Just keep at it and you'll get ahead eventually!
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TechieM2 good job on the loan. As said in another post, personal finance is personal.
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bret said:
the main point of the "month ahead" workflow is to stop fretting about the exact timing of your paychecks. Paycheck-to-paycheck budgeting is tedious and stressful! The goal is to "unlink" your income and expense streams so that you're not trying to line up specific checks with specific jobs anymore. That way lies madness. You're very correct to observe (and worry) that using a 3/31 paycheck during April doesn't provide much financial security. "What if that paycheck is delayed?!?"Probably the key thing people often miss is the decoupling of the idea of being a month ahead (and thus escaping the paycheck-to-paycheck dreadmill) from the idea of financial security. That's one reason why AoM ain't that great a metric. "You keep using that metric. I do not think it means what you think it means."
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Great discussion and lots to think about from this and as someone said above, some of these comments need to be read again. I suspect I'm confusing the discussion further, but I think as others have said, the importance of this goal will vary depending on your situation and preferences.
I'm newly returned to YNAB (end of May) and have a bunch of credit card debt plus reduced variable income (COVID-19 impacting the economy). For me, getting a month ahead is a longer term goal, not a current one. I think I'm now technically about half a month ahead - I'll fund early October bills in income due around 20th of the month plus top up some late Sept regular expenses, and then fund the bigger mid to late October bills in early October.
Now I've regained control of finances and am paying things on time, my focus is on filling up true expenses and saving an emergency fund (which I regard as unfunded true expenses). I'm also paying a little bit more than the minimum on credit cards and another debt, but I'm mostly focussed on 'debt prevention'. I had an extra fortnight in September one one income source, so flowed that money into true expenses and my emergency fund (YAY!).
While its not part of the YNAB definition of a month ahead, you could argue that some true expenses are about being a month ahead - for example I now have $900+ sitting ready to pay October and November non-monthly bills (annual loan charges, a quarterly water bill, a tax bill). In the past, I would have had to fund October bills from my October income...but there is that money sitting ready to pay the bills. This is a big step forward for me. Come October, I'll be looking at what is due in November and putting money in those true expenses ie. non monthly bills.
Once I have more true expenses funded, I'm going to start paying a bit more to one debt and topping up my income replacement fund which is a tracking account (off budget). I could take money out of this fund and create a next month's income category but am not sure I want to do that yet. Shall consider when I get there - but the purpose would be the same.
BTW, I also take the point re: the limited value of AOM. But I think its a useful / motivating metric for newbies, until it starts to mostly be 30 days or 60 days plus. When its still consistently low, it tells me that I don't have any longer term savings or expenses and I know that as I have almost no money in my day-to-day bank account before income comes in.
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Yes I can hi. Also if you use credit cards make sure you read the credit card float support articles.
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When I started YNAB in April of 2019, I wasn't even close to being 1 month ahead. But what I decided to do was take enough money for an entire month's budget from savings and put it into a category called Income for Next Month. This allowed me to be completely buffered for the following month. Over time, I replenished the money I took from savings. Being able to completely budget an entire month in one sitting has simplified the budgeting process for me. I budget the next month on the day before the month rolls over and all of the income I receive for the following month gets put into the INM category, waiting for the last day of the month, when it will be budgeted for the next month.
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It's been suggested that most YNABers get fully buffered (a month ahead) in anywhere from 3-6 months. In my case it took closer to a year and a half (and a pandemic stimulus payment) because I started out operating in such a narrow margin. My first month I was just trying to not be overdrawn. Getting a month ahead seemed like a pipe dream to me at the time. So it really depends on where you already are with your personal finances. If you have enough wiggle room in your discretionary spending, then it will probably be easier to find areas to cut back and put those extra funds toward the following month. If you're in the position I was, then you're more in survival mode and it will take longer to get to that place. BUT IT WILL HAPPEN EVENTUALLY, if you stick to your budget and the four (classic) rules. I suggest at first trying to get one paycheck (roughly half a month) ahead on just your monthly necessities. Let me tell you, when you can open up your budget in the first week of the month and see all of your immediate obligation categories already green, that is an awesome feeling. True expenses may take longer to get a month ahead on, but you'll get there soon enough.
Also, and I cannot stress this enough, there is no guarantee that once you're a month ahead you will be able to stay there - unless you stick tightly to your budget and you've funded your EF/Income replacement fund with at least a month's worth of income. Ideally you want this to be 3-6 months worth of paychecks, but again it will take some time to get there. But whatever you do, don't be like me and make the mistake of thinking that just because you're a month ahead on your expenses that you've achieved financial freedom for life. I finally got a month ahead in August, and then I loosened up the reins a bit too much on spending (plus I had unforeseen debt payments that snuck up on me) and...well, because I hadn't given myself time to build up those emergency funds now I'm no longer a month ahead. I'm back to one paycheck ahead and refining my focus to get back to where I was just a month prior. I'll get back there soon enough, and hopefully this time I'll be a bit wiser about it so that the habits stick and I can maintain being a month ahead. You will get there too, with patience and time and restraint. We've got this! 😁
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Violet Rain said:
there is no guarantee that once you're a month ahead you will be able to stay thereVery true!! I was buffered a month ahead from Dec-Jan but then my job went into strike action & I had to WAM categories to cover a lower paycheque. Then covid happened & I had more grocery expenses & travel we never took but still had to pay for. Saying that, being buffered meant I could move money around without having to physically dipping into my EF. Hopefully this month with 3 pay cheques, I'll fully fund Nov & my TEs. I like the idea of clicking on Nov & funding each expense vs a category but that is my preference. :)
