Utterly confused by budgeting feature

How on earth do you set up and manage a budget in YNAB? By this I mean starting with the amount you have available to spend in a month, allocating it to categories, then tracking your spending across those categories during the month?

I know YNAB calls the whole thing a "Budget", but here I'm asking specifically about the setting a budget aspect, not setting up accounts and transactions and reconciling them with   bank statements.

We've used YNAB for several years to keep track of multiple accounts, manage regular payments, categorise our spending, reconcile against bank statements etc.
We've never used the "budgeting" facility of YNAB because we know what we have to spend and know that our outgoings are less than our incomings. We hive off money for bills, savings etc at the beginning of the month, then just keep an eye on our actual account balances in YNAB to make sure we don't spend more than we have left. 

Besides, every time we've tried to set up the budgeting aspect, I've found it non-intuitive, difficult and/or plain impossible. So I've put it off for another day, since for us, it is very much the icing on the cake.

We've recently moved to a web subscription, so I thought I'd give it another try, but seriously, what on earth am I missing? Where do I start?

We have years of transactions in YNAB, so I don't want to throw it all away and "make a fresh start". I simply want to, within our existing framework,

  • set the amount available to be budgeted for this month (May) to be the income that we received at the end of April.
  • go thorough all our budget categories and set the initial budgeted amount for each to be the amount (if any) that is scheduled to be spent in that category from the scheduled entries for the month of May (as quickly and simply as possible, we have lots of categories).
  • see what we've got left to be budgeted, and work out where to allocate it (or, more likely, save it)
  • check back each week after we've balanced our accounts, see what we've actually spent in each category, what we've currently got left available in that category, what's known to be coming up for the rest of the month in that category
  • tweak as necessary.

But where on earth do I start?

  • The "To Be budgeted" figure is large and negative. That's a lie. I'd like it to be our April income, but I can't seem to set this manually without starting a complete new "budget", and hence losing several years worth of transaction history. Where does this figure come from, and how do I get it to reflect reality? Until I can sort this, no other figures are going to make sense. 

All the information I can find assumes that you are starting with a clean slate, and I'm simply not.

Here's hoping. I want to make this work, but I'm really struggling . . . . 

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  • First you need to reconcile your accounts so they show the correct balance....

    Like 2
  • Wow. What are you missing? It seems everything. YNAB is a budgeting system. The accounts are just a byproduct. 

    M Squared said:
    We've never used the "budgeting" facility of YNAB because we know what we have to spend and know that our outgoings are less than our incomings. We hive off money for bills, savings etc at the beginning of the month, then just keep an eye on our actual account balances in YNAB to make sure we don't spend more than we have left. 

    It sounds like you came in with your own budget plan and felt like you didn't need or want to use YNAB's budget plan. I think that's the main thing you are missing. YNAB has 3 actionable rules that go hand in hand. Give every dollar a job. No more, no less. Embrace your true expenses. Be prepared for any possible expense that may occur at any time backed by cold hard cash. Roll with the punches. If your priorities change, no big deal. Move funds from category to category as you wish. No judgement here. They are your priorities and yours alone. I think you need to study these rules:

    https://www.youneedabudget.com/the-four-rules/

     

    M Squared said:
    The "To Be budgeted" figure is large and negative. That's a lie. I'd like it to be our April income, but I can't seem to set this manually without starting a complete new "budget", and hence losing several years worth of transaction history.

    You should be able to fix your current budget. Start with Rule 1. To Be Budgeted should be $0. I'd start by using the Reset Budgeted Amounts quick option on the bottom right of the app. You're best bet is probably to work with support to get your current budget to the state you describe above.

    Best of luck! I've been following the YNAB system for over 10 years and it has changed my financial life immensely. There is no better budgeting system for my money. (No pun intended.)

    Like 2
  • M Squared said:
    set the amount available to be budgeted for this month (May) to be the income that we received at the end of April.

    The first month's budget will be unusual from dealing with startup capital. This will be true for you even if you migrate transactions from YNAB4. Ignore past months' areas. (The budget is the plan for your cash, and you hardly need to plan for those.)

    Get TBB to $0 in May's budget area, then things will work as you describe moving forward. Income at the end of May can be budgeted in June's area, assuming you don't need any of it for expenses after receipt in June. (Consider that when planning your startup capital.)

    I should underscore the advice to make sure your account balances are correct (as of today) first. This ensures the money in the budget matches that in the real world.

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  • Here is my "script" for helping someone set up a budget from scratch in YNAB.  It all starts as the others have said with the amount in the accounts being accurate. That is because we can only budget the money we actually have.  So as a precursor to this script, I recommend you check the actual balance of all the accounts and reconcile them to the same amount that is shown online. Be careful with credit cards because they sometimes have pending transactions that aren't taken into the balance. Reconcile in YNAB and let the software create balancing entries which you can sort out later if you want. Once all the accounts are reconciled, the TBB number should be positive and equal to the total of all the accounts. Let me know if you don't get there. 

     

    Otherwise, here is what you do from that point to get the budget set up.

    Now that you have all your money in YNAB, you need to give every dollar a job. Have you read the 4 Rules for YNAB? (YES) Perfect. Rule #1 is Give every dollar a job. This is all budgeting is. Have you ever done a budget before? (I will assume the answer is NO). 

    No problem. So when you started your YNAB budget, there were already categories set up for you to get started. Don't worry. You don't need to fill them all up and you can even move them around to suit you better. But for now lets go through them so you can see how we do this

     Immediate obligations. These are the total basics. Food, shelter, transportation. Lets start with the first one. Rent/Mortgage. Do you rent or own? (Assume answer is own). OK. How much is your mortgage payment? Click on the first column beside rent (under budgeted). Enter your mortgage payment there. 2 things happened. The available column has the mortgage payment amount showing. This means you have the money to pay the mortgage. Also the amount at the top in the To Be Budgeted (called TBB in YNAB lingo) bubble went down by that amount.  (confirm that makes sense - assume YES).

    Next we have the utilities. Do you pay the same amounts every month for these? (Assume NO). That's ok. The budget doesn't have to be perfect to work. Do you know how much your next electricity bill will be? (YES). Lets put that number in the budgeted column beside electric. Do you have any other utilities that aren't shown in the list? (Assume YES - Propane). OK, well we need to add that because it is part of the basics.  

    To add a new budget category, hover over the Immediate Obligations words and a PLUS pops up. If you hover over it you'll see it says Add Category. So go ahead and click the + and type Propane. A new category is added. Its right at the top but we can fix that later.if you want.  For now just go ahead and enter the amount you will need for propane this month. Great, now comes the hard one. Groceries. Most people have no idea how much they pay for groceries every month. Do you know? NO) Okay, well lets take an educated guess. That's the great thing about budgeting in YNAB. Its meant to be flexible and real. So go ahead and put a number in that you think is correct for now. Same goes for transportation. Some people like to break this down further but for now lets just put what we need for this month (gas, insurance). 

    Good. all of your immediate obligations are covered. The next group is True Expenses. Rule # 2 is Embrace your True Expenses. These are the things that we know are going to happen and we probably know when they are going to happen, but they are not happening right away. Gifts is a great example. I'll use Christmas. Christmas is on December 25 every year. Always. So even though we are now in May, we know Christmas is coming. In 8 months. So we can plan to have money for Christmas now and it won't be a surprise when it arrives. Everyone's Christmas spending is different. Do you know how much you spend on Christmas (NO). No problem. For now, we will assume $1000.  We have 8 months to get there so divide $100 by 8 which equals $125. So every month, if you put $125 in the Gifts category, when Christmas comes, you will have all your Christmas money. Believe me, when it happens the first time, its awesome. So lets put $125 in the gifts category. You need to do that for all of the rest of the expenses you have that you know will happen. You may not know the exact number (like car maintenance) but some you will (like home insurance). Go ahead and put numbers in all the rest of the True Expenses categories. If you need to add categories, go ahead and do that by clicking on the True Expenses heading and clicking the + sign to create a new category. 

    Now just keep going down the list of categories and enter amounts in the budgeted amount column for each. As you do this the TBB amount will decrease. When you are all done, the TBB category will either be green with money left or red with a negative amount. Green means you have money left over. Do you have savings? Well in YNAB that needs a category too. So add that category and make sure you put the amount in there that you have set aside for savings. Still green. Then go ahead and top up categories or add more to savings, or increase debt payments. The goal is for TBB to be zero. All your money has a job. 

    Was TBB red when you got down the first round? Don't worry. That usually happens when people first start in YNAB. But YNAB is a spending plan meaning we only budget money we already have. So if TBB is red you have budgeted more than you can pay for right now. So you need to go back and reduce some categories. Usually you won't reduce Immediate obligations. True expenses can be reduced depending on what it is. Christmas is still 8 months away so maybe you're not ready yet to set money aside for that. Or maybe there is no money for Dining Out or a vacation. You decide. Its your money. Just remember, you can't plan to spend more money than you have. TBB must be zero. 

    Ok, you've done your first budget.  Any questions?

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  • Thanks to everyone who took the time to reply.  A couple of you gave me key clues in sorting out this confusion. I'm still not there, but it's looking clearer. I'm hoping that in time I'll be able to love YNAB as much as you do.

    TL;DR;

    The To Be budgeted figure that YNAB was showing for this month was simply wrong (it was around 1/4 of what it should have been!). In order to fix it, I had to dig back several months, and reassign various random amounts that YNAB decided I'd budgeted on previous months (I hadn't). Eventually, when I'd dug back far enough, and reassigned enough items, I reached the correct starting point for the May budget:

    • The overall To Be Budgeted figure equal to the state of our accounts at the end of April
    • £0.00 in the Budgeted column for each category.

    The longer read . . .

    I was slightly further along the process than some of you assumed. I had reconciled everything (I do that every week and have done for years in YNAB4),  I do have a budget, which has stood us in good stead for many years, all our expected outgoings are set as scheduled transactions (and, again, have been for years in YNAB4), any credit card spending is paid in full each month, and thankfully, we have no debt. We are in credit at the end of every month.

    What I was trying to do was formalise that budget in YNAB, so we could be more proactive in saving, rather than saving a lump at the beginning of the month, then saving anything else that's left at the end.

    Every time I've gone to the Budget pages in YNAB, rather than the accounts pages, the information I see there makes no sense, because the numbers I see are simply wrong.  I haven't been able to find any documentation about how the various figures shown are calculated, and in some cases, even what they mean. If I knew, I could work out which historic transactions or settings were causing problems in the figures now - I have a degree in Maths - then I could fix them so I could trust the figures shown and go forward.

    All the documentation I've found so far is vague and non-specific. For example, I'd like to know how the "To be Budgeted" figure  is calculated and what it means: that's so important, as it's the starting point for everything else. I need to understand and trust that figure before I trust a budget derived from it!

    MXMOM actually gave me the first clue.

    Once all the accounts are reconciled, the TBB number should be positive and equal to the total of all the accounts. Let me know if you don't get there. 

    It wasn't! And that was exactly what I was struggling with in my original post. But knowing that was what should happen, I had the confidence to dig. For anyone else who's struggling, here's what has helped get me started.

    I went through each category (all 109 of them in our case!) and selected Reset Budgeted  Amount (as Superbone suggested). That sets the amount you have budgeted for this month to zero. That should have left me with lots of numbers in the Activity column (we're half-way through the month, so we've done lots of spending!), lots of corresponding and identical red numbers in the Available column (at this point, we haven't budgeted for any of it yet!) and a To be budgeted figure of around our total April income, which is the basis for our May budget (give or take a few pounds depending on how much we actually had left in our accounts at the end of the month, and whether some end-of-month scheduled transactions were included or not).

    It didn't, and the To Be Budgeted amount was approximately 1/4 of our May income.   So that's why, when I had budgeted (or "given  every dollar a job") we were left with a large negative number (unsurprisingly, approximately 3/4 of our April income!).

    So then I went digging. Now it starts to get weird! I still don't know what is happening, and if anyone can explain, I'd be grateful!

    With each budgeted amount set to zero, it was easy to see where the discrepancies were - several of the entries in the Available column were higher (that is, less negative) than the values in the Activity column. Some of them were even green and positive. I'd not put them there. Every time I tried to move them to the To  be budgeted category, they popped back somewhere else (I think in the Budgeted column for that category?). So I couldn't get to the point where the overall To Be Budgeted figure was our April income, each entry in the Budgeted column was zero, and each value in the Activity column matched the underbudgeted value in the Available column.

    Eventually, I went back to the April budget (which I've never touched or attempted to set up). I then checked that for each category, the values in the Budgeted and Activity columns were identical (I can't remember if it happened, or if I had to select the Underfunded quick budget option to make that happen for each category). Then, I was left with some green entries in the Available column. These were precisely the items that were causing problems on the May page.

    Again, I tried to move these green amounts to the To be Budgeted category. Now it gets even weirder. Some of them "stuck" and left me with a category where Budgeted and Activity were identical. Some of them popped up as adjustments in the Budgeted column as before.

    Then, I went back to March, made sure the values in the Budgeted and Activity columns were identical for each category, and observed that there were still some green entries in the Available column (the ones that hadn't "stuck" in April's budget). I did the same as before, and again, some stuck, some didn't.

    I repeated in February and then in January, at which point all my adjustments/fixes/whatever appeared to have all stuck, and when I went back to May, I've now got

    • an overall To Be Budgeted figure that is close to our April income (I'll check this exactly in a bit)
    • a zero value in the Budgeted column for each category (I'll select Underfunded from the quick budget for each of these in a bit, to fund them properly)
    • for each category, a red negative number in the Available column that exactly matches the corresponding value in the Activity column.

    The documentation was little help. Unless there's a whole tranche of content I've been unable to find, it's very simplistic and doesn't describe what most of the figures mean, or how they're calculated, nor what most of the quick budget options do and why you should use them. Can anyone point me to anything more comprehensive that explains the workings of the Budget screen (the figures shown, what they mean, how they are calculated, the various budgeting options available, why you may went to do them)?

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      • MXMOM
      • MXMOM
      • 6 days ago
      • Reported - view

      M Squared HI, just jumping in with a couple of questions. Have you done any of the live classes with YNAB? They're free.  Have you sent an email to support? They will work with you and even look at your budget to see what the issue is.

       

      YNAB is very simple yet can be overly complicated at the same time if you try to run before you walk. 

       

      M Squared said:
      t wasn't! And that was exactly what I was struggling with in my original post. But knowing that was what should happen, I had the confidence to dig. For anyone else who's struggling, here's what has helped get me started.

       I'll pop back in later and see where you went from here.  Because yes, if you started from the wrong place, all directions will be useless in getting you to your destination. 

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    • Hi M Squared ! It sounds like you've migrated your data over from YNAB 4. Is that right? 

      Since you were tracking transactions in YNAB 4, and not using the budget, your situation is a bit different than most. To be Budgeted can also be impacted by changes in the handling of overspending and future-dated transactions in the web-based version of YNAB. This article on migrating your YNAB 4 budget has more details on that!

      I highly recommend a Fresh Start and moving forward. The current transaction data will be archived, and stay saved in YNAB—just in a separate budget. You can always reference it, if needed.

      If you decide to move forward with the current budget, you'll need to do a few things:

      • Consider re-migrating the data
      • Don't worry about making changes in past months
      • Reconcile your account balances, as of today
      • Use the Reset Budgeted Amounts option in May, if needed
      • Budget all your dollars to categories until money is where you need it, and To be Budgeted is zero

      To help you get started with a Fresh Start in the current version, I think you'll find the YNAB Video Course helpful and a smoother process. Let me know if you have any questions!

      Like
    • M Squared You asked for more detail on some of those calculations, and I wanted to include a few resources:

      You can always send us a message in the app as well, by clicking the question mark in the bottom right hand corner!
       

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  • M Squared said:
    The overall To Be Budgeted figure equal to the state of our accounts at the end of April

    In afraid you are still very much confused. To have TBB equal to your cash on hand means you have not assigned jobs to any of your money. You basically undid all your previous efforts.

    The desired value for TBB is ZERO. At that point, all your dollars have jobs. Many of them will have been given jobs in prior months, and their jobs usually don't change. For example, if in Feb you give $50 the job of paying for Christmas gifts, it's likely in May that you still want those dollars to pay for Christmas.

    If TBB is zero, but you don't like the category balances, feel free to move funds from low priority categories to high priority categories. (You can *temporarily* move money from low priority categories to TBB and then to high priority categories.)

    Like 2
  • M Squared said:
    for each category, a red negative number in the Available column that exactly matches the corresponding value in the Activity column.

    Any red is bad, as it is a sign one or more categories does not actually have the money shown as being available. It indicates the plan (aka budget) is infeasible.

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