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?
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.
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!
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.
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!
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?
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?
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.
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.
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!
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."
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.
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.
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! 😁
Violet Rain said:
there is no guarantee that once you're a month ahead you will be able to stay there
Very 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. :)