Question about savings account

Hello,

I'm quite new to YNAB and I have a (maybe too  basic) question.

Since the first step is to budget all the available money to 0,  what do you do with the money that you don't need to spend right now, and that is just staying in the bank account for the moment? (like it is the case with my business account for ex). Would you create a "virtual" savings account?

Thank you!

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  • No, just savings categories. Budgeting is about saving just as much as it is about spending. What you don't spend you can save.

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  • If the job of this money is to be held for your Ex, put it in a category called Owed To Ex.

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  • FWIW, every category holds money not meant to be spent "now". My Mortgage money will be spent in a week. My Roof Replacement won't be spent for about 15 years.

    Saving is simply delayed spending.

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  • Thanks. So the actual account's balance (physical money) can be different from YNAB's balance, right?

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  • Still learning the basics.. :)

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  • Account balances should agree between YNAB and the real world. If you enter transactions manually, YNAB will be more up to date by having those pending transactions, but the real world will eventually catch up.

    The process of Reconciling is how you ensure YNAB is grounded in reality.

    https://docs.youneedabudget.com/article/166-reconciling-accounts

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  • Thank you! Will keep studying

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  • If you have a recurring expense, do you budget that in advance of many months? (like rent)

    And what about a trip in 6 months ? You budget, let's say, 100€ every month towards that goal? 

    I'm glad I decided to use YNAB. I'm sure it will dramatically improve my finances!

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    • Dan 

      Dan said:
      If you have a recurring expense, do you budget that in advance of many months? (like rent)

       Most people budget what they need for normal monthly obligations this month (if it's coming out on the 30th, make sure there's money in this month).

      If you'd like to feel very secure in your next 6 months of rent, you can certainly create a category called Six Months' Rent and stash an amount in there if you have it. 

      Some people go to future months and budget out there. This is not efficient, because every time a bill changes, you have to go change it each month. Also, this practice opens you up to a bug that allows to you budget more money than you have (look up Stealing From The Future).

      However, an easier approach to work for in the bigger picture of YNAB (if you're starting with some savings, and have regular income) goes like this:

      A1. If you can, try not to spend any money that you earn in one month - put that money in an Income for Next Month category and don't touch it until next month. 

      A2. When the next month arrives, budget your regular budget, including True Expenses (that include the vacation you mentioned, which was correct). 

      A3. To build savings/security, make one of your categories be a Loss of Income category. Stash your 6 months of rent in there (or whatever number is good for you). Most people seem to set a goal for 3-6-8 months of basic expenses. I'm still working on mine!

      A4. Throughout the month, hold your new money in the INM category, and repeat.

      This allows you to see the whole month at a time when you're making budgeting decisions, and you don't have to wait on your paychecks. 

      If you can't do that yet, no big deal, just budget each paycheck when it gets here to whatever your highest priorities are. It was helpful for me to write out (some put in the category name) what amounts needed to go where, from which paycheck. 

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  • Thanks!

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