Age of Money

I started ynab last month and the age of money calculation just kicked in, but I don't understand it. I started at $24000 with monthly expenses of about $4000. I was expecting to see my age of money around 180 days ($24K/$4K=6 months x 30 days/month=180 days), but it is showing the age of my money is 16 days. what's up with that?

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  • It shows the average time of the difference between your last 10 spending transactions and the date(s) that money came into your budget as income. It has nothing to do with your average monthly spending.

     

    Just ignore it. It's useless triviality.

    Like 7
  • There is a browser extension called Toolkit for YNAB that, among other things, will hide AoM and display a metric called Dates of Buffering, which is roughly how many days your current balances will last at your current rate of spending, which sounds closer to what you were thinking. It has a number of other customizations that can be done by the browser (text size, color, a few reports, some other things I wouldn't have expected but make life easier). It works well in Chrome, I don't use Safari or Firefox but I know they have had versions for those in the past

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    • Patzer
    • Retired at age 60. Thank you, YNAB!
    • Patzer
    • 1 yr ago
    • 3
    • Reported - view

    Even if you believe Age of Money has any meaning (and I don't believe that), it still doesn't measure anything until you've spent more than you brought into the budget.  This is because it measures from when the money entered the budget to when you spent it; so while you're working through that intial $24000 bucket of money you started with, AoM is just a surrogate for how long you've been using YNAB.

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  • It also restarts when you "fresh start" a budget

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  • Jesse just hit this afresh in the podcast this week.

    Here is the youtube link

     

    .

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

      canman 

      Summary for those who don't want to spend 9 minutes of their lives listening to a podcast:

      - Age Your Money means letting your money sit for a little bit, maybe 30 to 60 days.  80% of people are living paycheck to paycheck, and we want to get away from that.

      - Age of Money metric measures how long it is since the dollar you just spent came into the budget.  If the dollar came in 4 days ago, that's not very good.  Spending day old money is stressful.  That money should sit 30, 40, even 60 days.  This will happen as you build your True Expense categories.  Some users have AoM as high as 200 days.

      - A dip in AoM is normal when  you spend for a big item you've been saving for.  Jesse gives an example of budgeting $1000 per month for Christmas, then spending all $12000.  AoM might dip from 100 to 80 days, and that's OK.

      - AoM is supposed to fluctuate, but will probably stabilize in a general area when you have all your True Expenses funded normally for an ongoing budget.  Don't shoot for a specific number; it might be 100 days for one user and 150 days for another.  But there should be some equilibrium where it dips as big expenses are paid, then builds back up till the next big expense.

      - If your AoM just keeps growing and growing, that could be an indication that you're over-saving and this money is more than you need.  You might re-evaluate the purpose of those large True Expense funds and send some to investments or some other purpose.  (Sending it out of the budget seems to be implied, but is not explicitly stated.)

      My observations:  Jesse is very definitely speaking for an audience of beginners who are living paycheck to paycheck.  The sound track is reasonable, but . . . you've got that number there.  People are going to want to make it grow to the sky, because it's gamification of the budget.  Couple the AoM metric with budgeting into future months as far as your money reaches, and the metrics create an incentive to do just as Jesse warns against late in the podcast:  Build more money than you need and not think about what is more important.  Jesse talks about an excessive car repair category, but IMO the newb is more likely to have an excessive grocery category in the form of funding groceries 3, 6, or 8 months into the future instead of thinking about what better use there is for today's money than buying groceries half a year from now.

      There is no discussion in the podcast of the actual mechanics of how AoM is measured.  I continue to believe AoM is somewhat coincidentally correlated with how well a budgeter is doing when it's below 30 days, then loses meaning as it grows to the point where AoM becomes totally meaningless somewhere above 60 days.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      Those middle points about stabilizing and revolving around some central point are not really accurate. There will always be true expenses or lumpy one-time spending that will cause a drop in AOM like falling off a cliff, but the theoretical limit of an AOM increase is 1 day per day (theoretical, because everyone has regular monthly expenses that limit the increase). The velocities for the two directions are not equal and not exactly predictable, so you will not have a central point to stabilize on.

      I have nearly 5 years of AOM history I can look at.

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  • I am new to YNAB and am also struggling to understand how this concept will help me in the long run. I came in with roughly $28K, but my income has just been significantly reduced. Once my spending goes beyond the $28K in the YNAB "Day 1 bucket," wouldn't the average show a precipitous decline, and wouldn't it only be at that point that the AOM is really telling me anything useful?

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      • Reported - view

      Green Projector You aren't wrong. I prefer to go in with the attitude that AOM doesn't tell you anything useful at all, and then you won't be surprised or disappointed by how it acts.

      Like 2
      • bret
      • bret
      • 1 yr ago
      • 1
      • Reported - view

      Green Projector 

      It sounds like you're asking, "How can I make sure I'm living within my means after a recent reduction in income?"

      If you expect your new income to be permanent (for the foreseeable future), then you simply need to spend less than your earn, which could require painful adjustments to your lifestyle. 

      If you believe this situation is temporary, then you might consider dipping into your savings for a while so you can maintain your current lifestyle. E.g. If your salary is $2k less / month than before, you could decide to take $2k / month from your $28k savings so that you could continue budgeting (for 14 months) as-if you had your full pay.  You could accomplish that in YNAB by putting that $28k into a category like, "Deferred Income" and then budgeting negative $2000 from that category each month.  

      The "Deferred Income" approach is generally useful for anyone who has irregular income and wants to smooth over the shortfalls/windfalls.

      Regardless of what approach you take, AOM isn't going to give you much valuable insight into anything. Seriously, just ignore it.

      Like 1
  • Thank you. Your responses let me know that at least I am thinking logically about how the system works. And yes, Bret, I did want a tool to help ensure that I am living within my new means, which is pretty much permanent...it's called retirement. :-)  I have money saved for the long-term, but don't want to run through it before I kick the bucket.  I believe I can make the adjustments with little pain, if I pay attention, but we'll see how it goes. I appreciate the input. Overall, I'm enjoying using YNAB and participating in the community surrounding it. I've already canceled three bank accounts!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 3
      • Reported - view

      Green Projector Patzer is our chief YNAB-in-retirement advisor.😁

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 1 yr ago
      • 6
      • Reported - view

      Green Projector 

      YNAB is how I control expenses in retirement.   I have an external income planning process, where I decide how much of a raise I'll give myself each January, then I live within my income (small pension, Social Security, interest earned in on-budget accounts, and draws from investements) for the year until I start the cycle over.

      The basic concept within the budget of, "This is how much money I have and no dollar can have two jobs," is still very useful.  But to make the money stretch for my lifetime, I can't include the balance of investment accounts in the budget.  My crystal ball won't tell me precisely how much I need to budget for groceries next month, let alone how much I need to budget per year 5 years from now.  So I monitor withdrawals from investments as part of the investing protocol, then those withdrawals become income for YNAB as part of the budgeting protocol.

      Like 6
    •  In a couple of months I will be 60, and my wife not too far behind me. We will retire later in the year. So thank you for this post. It sounds to us very wise to allocate a year's income in January each year, and then let YNAB  do its job for the next twelve months. (In other words, spend no more than the annual drawn-down allocation; do not be tempted to raid the remaining nest egg.) What I like about this is it is simple and manageable. A great post! We've been using YNAB since 2007. We're so looking forward to using it in retirement. Our one hope is more and more posts like this. Very grateful.

      Like 2
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