Handling returns or reimbursements in a different month

I'm sure this can't be a unique problem but I don't like the way YNAB handles overspending on a credit account especially when I get reimbursed or return something the next month.  For example, I budget $100 for clothing in January but I buy 2 $100 dresses knowing I will return one.  January shows an overspending of $100 in orange creating debt.  When I return one $100 dress in February, I get an extra $100 to spend in clothing in February but it doesn't clear the $100 in debt from January.  

 

I would rather YNAB have an option to not handle credit overspendings as creating debt but rather handle them like a cash overspending.  That way, the $100 overage from January will carry over into February automatically and then will be canceled out when I receive the credit.

Does anyone know a better way to handle this when you get credits against an expenditure from a previous month?

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  • You're basically asking for the "red arrow", an option from YNAB 4 that allowed you to carryover a negative category balance (overspending).

    That option was removed in the new YNAB because the designers felt that some users would misuse/abuse it and get into financial trouble.  Understand that a negative category balance means you can't trust the rest of your budget: The money has to come from somewhere.  So YNAB forces you confront that truth and resolve your overspending.  If it was cash-based, it gets subtracted from your available funds in the following month.  If it's credit-based, it gets rolled into your debt, and you'll need to payoff that debt sometime in the future.

    Given the constraints of the new YNAB, your two broad options are either:

    * Budget for the expenditure up front (i.e. do not overspend). When you eventually receive your reimbursement, you can re-budget the money elsewhere.

    * Don't budget for the expenditure and allow the overspending to get rolled into your credit card debt. When you eventually receive reimbursement, budget that money toward your credit card payment (to pay down the debt.)

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      • WordTenor
      • A polymath, a pain in the ....
      • WordTenor
      • 5 mths ago
      • 2
      • Reported - view

       Also note that for @bret  's second option there, there is nothing which precludes you from still recording the reimbursement as inflow to the category, thus cancelling the spending, then moving the resulting funds to the CC payment category. This is what I do so that my records are correct. 

      Reply Like 2
      • bret
      • bret
      • 5 mths ago
      • 1
      • Reported - view

      Thanks for adding that WordTenor !

      Yes, regardless of your chosen method for managing reimbursements, the categories you use for the original expense (outflow) and the reimbursement (inflow) should probably be the same so that the reports are correct.

      (If you buy $200 of clothes and return $100 your net- clothing spending over that period of time is $100.  You probably don't want your reports to say that you spent $200 on clothes and earned $100 of income, which is what would happen if you recorded the reimbursement as "To Be Budgeted.")
       

      Reply Like 1
    • WordTenor   That is exactly what I am doing now but it is a pain.  We use YNAB for multiple people in our household so we have many different credit cards.  As it is now, when I get the credit for the return, I have to go back to find the matching transaction in the previous month to find what credit card was used which can be difficult especially if the return was only one part of a larger order

      I guess what I really want is the option in YNAB to treat credit cards as "spending mechanisms" instead of "debt creators".  For those who pay them off every month that is exactly what they are.  I love YNAB but sometimes I do wish they would give experienced budgeters more options instead of forcing us into their philosophy.  

      Sorry for the rant.  Thanks for the feedback.  Maybe I can convince the good folks at YNAB to add this feature back in.  

      Reply Like
      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • Reported - view

      Beige Jackal 

      Beige Jackal said:
      when I get the credit for the return, I have to go back to find the matching transaction in the previous month to find what credit card was used

      I must be missing something -- which CC gets the inflow is right on the return receipt. Or train those multiple people to enter their own darn returns! 🙂

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  • Beige Jackal said:
    I would rather YNAB have an option to not handle credit overspendings as creating debt but rather handle them like a cash overspending

    The fact is that cash overspending causes your other categories to be overstated. You can easily do this by recording a $100 inflow immediately (categorized back to the Clothing category).

    Hopefully it's obvious that by lying to your budget, you obscure the amount of real cash you have. If this error (i.e., the pending reimbursement amount) is small relative to total on-budget funds, it's probably no big deal to ignore it. However, if this is an appreciable portion of on-budget funds, you should look at other methods that maintain accurate categories at all times.

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  • Beige Jackal said:
    I guess what I really want is the option in YNAB to treat credit cards as "spending mechanisms" instead of "debt creators".  For those who pay them off every month that is exactly what they are.

    I agree with you, and have good news: You can achieve what you want if you setup your credit cards as "Checking" account type in YNAB.

    When you do that, it'll eliminate all the automatic debt/payment management features and the account will behave the same as an asset account. There won't be a "Payment" category anymore; funds will leave your budget the moment you record an outflow. Unresolved overspending (i.e. negative category balances) will be subtracted from your available funds in the following month instead of rolling into your debt.

     The only real downside of this approach is you won't have an easy way to manage debt in your budget. But that may not be a downside if you don't have any debt (and don't expect to accrue any.)

    Basically, if you have a "same-as-cash" mindset toward credit cards -- if you only use them to reap rewards and enjoy greater purchase protections -- then this may be a good option for you. The YNAB credit card mechanics are primarily useful to folks who are managing debt and can't payoff their entire card balance each month.

    Reply Like 1
  • Hmmmm, that may be a good option.  I am wondering though how it will look when I make a payment. A transaction will be downloaded showing money moving from one account to the other.  Will it work and the "checking" debit card account will just always show a negative balance until I make the payment? That might be a good way to look at it.

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 5 mths ago
      • Reported - view

      Beige Jackal 

      Beige Jackal said:
      I am wondering though how it will look when I make a payment. A transaction will be downloaded showing money moving from one account to the other.  Will it work and the "checking" debit card account will just always show a negative balance until I make the payment?

       Actually, in an normal work flow where a credit card is paid in full on the due date, there is *always* a negative balance on the card.  That's because I will charge more things before I have to pay the statement balance.  So I may have a statement balance of $2000, pay it in full on the due date, and have a $1000 balance by then because I'm into the next bill cycle making normal charges.

      From the perspective of a user who could pay the card in full at any given time, that $1000 is sitting somewhere in an on-budget account, earning me interest until I have to send it off to the credit card on the due date after the next cycle close.  This is not shown explicitly on the budget page; my category available balances sum to the total of my accounts, which *includes* the negative balances on the cards.  So payment in full is implicitly reserved, it just doesn't show explicitly on the budget screen.

      The YNAB organization does not appear to understand this.  I've seen many comments from YNAB personnel indicating they believe the card balance will be zero after I pay it in full.  That is not usually the case.

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • Reported - view

      Patzer 

      Patzer said:
      YNAB personnel indicating they believe the card balance will be zero after I pay it in full

      Technically speaking, they're not wrong, because the account is either paid in full or it's not. You either owe or you don't. However, being able to pay in full  is just as good (actually better, as you point out, because additional interest).

      The biggest issue is one of education, because the vast majority of people that don't use YNAB think that "paid-in-full" is merely paying the statement balance. Upsetting a concept that many have believed for years is a bit of a shock.

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  • Beige Jackal said:
    Will it work and the "checking" debit card account will just always show a negative balance until I make the payment? That might be a good way to look at it.

    Don't credit cards in YNAB already display a negative balance?  (The outstanding balance is a negative number, right?)

    It's been a very long time since I've looked at real credit cards in YNAB. I adopted the checking account workaround a long time ago, for some of the very reasons discussed in this topic. So I could be misremembering...

    In any case, a credit-card designated as "checking" will usually have a negative account balance.  As Patzer  is correct to point out, there's rarely a reason to pay the entire balance of the card down to zero.  I just auto-pay the statement balance each month to avoid interest.  

    The negative balance subtracts from the overall funds available to your budget. Conceptually, it's as if the outstanding balance on your card is fully backed by cash at all times -- you won't have to explicitly manage a payment category anymore.  If you only care about rewards and don't use credit cards as a debt instrument, it can make your budget easier to manage and reduce opportunities for errors. I highly recommend it.

    Reply Like 1
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