Auditing Strategy for Budgeting Ahead?

Howdy! I'm still relatively new to YNAB so maybe this is something that I'll learn as I gain experience. However, I wanted to post to this awesome community first to see how others handle this.

My goal with YNAB is to budget out my expenses 3 months in advance at all times and then put all remaining funds into my investment accounts once all 3 months have been fully funded. While I understand that I should only focus on what my budget balance shows in YNAB and the funds available left for each items, I was wondering how others conduct audits to ensure that their future budgeted dollars ultimately match up with what's in the bank. While the goal is to not miss entering anything while importing (I enjoy the manual aspect of YNAB), there is always a chance a small charge slips through. 

My questions for the community are the following - 

1. How many months in advance do you budget for?

2. How do you conduct an "audit" at the end of the month between what's been future budgeted for and what's actually in your account?

Appreciate anyone's input (especially if I'm missing anything since I'm still new to this).

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  • First of all, I only budget one month out as I don’t want to have to change three months every time something changes this month. I just keep an emergency fund of X months of salary to know I have that many more months of funds. Secondly, the only audit is making sure my accounts are reconciled periodically and match my account balances online. If my accounts are right, my budget values are right.

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  • The only future budgeting you need to do is budgeting next month using ONLY this month's income. Future months will be funded by future income, one month at a time... August income funds September, September income funds October, etc. This keeps you better in tune with your budget, keeps you from projecting what your spending needs will look like too far ahead (which can often be wildly inaccurate, and having to deal with those changes across multiple months is needless additional work), and keeps you at a better pace for managing your budget.

    I use a holding category to collect the income, and then release it when it's time to budget all of it at once. That's the only auditing I need.

    For the additional months, as Superbone said, it goes in an Emergency Fund or Income Replacement category.

    You can do it other ways, but it's less efficient and more prone to error.

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  • It's September so I won't budget any farther than October. I have an investment category that I budget to every month and on the 30th there is an automatic debit to send that money off to my taxable investment accounts. Occasionally if I have extra money, I'll send extra off to the investment account (after budgeting that extra to the investment category). If my on budget account balances are correct and reconciled and none of available amounts for my categories in my budget are red, there is no need to do further audit. Since I do have multiple accounts, I have to keep an eye that the money is in "right" accounts, but I do that by making sure that on the 1st of the month my main checking account has $X+$1500 in it.

    Now, just because I only budget into October doesn't mean that I don't have needs beyond that covered. I have a category for Loss of Income that could get me through 6-8 months. At the beginning of my medical plan year (Oct 1-Sep30) I have my annual Out of Pocket Max fully funded. I have categories for home and vehicle maintenance. I'm saving up for a Kitchen Remodel. I've saved up for several vacations (one that was supposed to happen in July but was canceled, an annual trip to the beach with friends, a dream vacation that is fully funded, but not scheduled, etc). Every month I budget funds for Christmas so I'm able to buy presents and such throughout the year as I find them.

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  • nolesrule said:
    You can do it other ways, but it's less efficient and more prone to error.

    Yet another vote to not budget past next months area. Grow an Income Replacement category for more security to hold those additional 2 months. (Consider making it larger, however.)

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  • One fundamental relation that is ALWAYS true: the funds in the budget equals the cash in your YNAB accounts. Red values (categories or To Be Budgeted), however, distort things and should be corrected immediately. (The math is still correct, but negative cash isn't a thing in the real world.)

    Assuming no red numbers and account balances that agree with the real world, every penny shown anywhere in the budget is real.

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  • Thanks to all that answered. After reading your responses, it makes sense to not budget to far in advance. I think budgeting in advance is something that just made sense in my head as even more buffer. However, it's not really needed as I already had 6 months worth of budget set aside for emergencies and these 3 months extra just bumped it up to 9, which probably isn't needed. Thanks again everyone. 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 mths ago
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      Sea Green Wizard Awesome. If you want 9 months, just put it in your EF but if you don’t need 9 months worth, put it elsewhere. It could be something fun like Vacation or Gadgets or maybe something more practical like car replacement.

      Are you budgeting next month with this month’s income? That’s the most practical way to budget ahead and remove yourself from the paycheck to paycheck cycle. It also makes the budgeting process a lot easier when you’re budgeting a month at a time.

    • Superbone Thanks again for your response. I'm very fortunate to earn enough per month to cover 3 months worth of expenses so I was using extra money to plan ahead first, and then put the rest towards principal mortgage over-payments (that's the only debt) and investing. I grew up without much money and saw what layoffs can do so I have this tendency to try and set-up a large amount to keep things afloat if something like that were to ever happen to me. Per advice above, I'll plan one month in advance and keep 9 months worth of money in my EF. Thanks again!

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