Difference between monthly and annual targets
I'm actually resetting my budget for the new year (and I'm a little behind my schedule, I know...) and my experience from last year is that monthly targets does seems a little tricky for me when I overspend a month (or underspend, I'll walk you through it in a bit).
Let's take groceries for example. My currency is not US Dollars, so the amount may seem off, but bare with me. :)
For the context: I want to spend 8000 (or preferably less) a month on groceries. Every december, I use 11000 because of more expensive habits and gatherings (and that's fine!). The year's total would be 99000, which means 8250 each month on average.
If I set up a target on 8000 a month, I feel like I'm not on the right track if I overspend a month (and have to move money from another category) - the next month it's just saying "use 8000", not "use 8000 - the overspending from last month to stay on track".
And if I don't spend 8000, but 7500, and have 500 left, it still urges me to set aside 8000 next month, so now I can use 8500?
Should i rather use the target "by date", and say 31st of december (every year), and set it to 99000 - and spend as I go?
Another option is of course to use another category named "Holidays Food Extragavanza!" and put the rest of the money from underspending there, hopefully setting a side 250 each month - and therefore spend less on groceries this year?
I currently do what you said regarding the underspending - I put the leftover amount in a leftovers category so I can “borrow” from there if needed. However, knowing that I have that safety net can be tempting, so it’s important for me to be diligent and stay on budget. What made it easier for me was when I broke down my grocery category into less overwhelming weekly sub categories. I start fresh each month. If a month has 5 weeks I just add another line. It’s almost like a game. Maybe something like that could work not just for your groceries, but for your other categories as well?
Polar Cow said:
if I overspend a month (and have to move money from another category) - the next month it's just saying "use 8000", not "use 8000 - the overspending from last month to stay on track".
The overspending in the month needs to be covered in the same month by moving money from another category. Can’t spend money you don’t have. In YNAB lingo that is called WAMing (a weird term that comes from an acronym for a very North American carnival game called Whack-A-Mole).