Credit card showing as “overspent” after payment
I know this is a somewhat common question asked here, as I’ve done my research. However, from that research, it looks like my situation might be a bit unique.
I think I have a good understanding of how YNAB handles credit cards. This is my first month using YNAB, and the starting balance was budgeted for. No budget categories other than this credit card are showing as overspent. Most still have amounts available as the month isn’t quite over yet. I’m also a professional accountant, so the double entry method makes perfect sense to me. I also fully understand the concept of assigning every dollar a job, but I always leave a bit of a buffer just in case so there is a positive To Be Budgeted amount that I will assign right before my next paycheck. All of my account balances on the Accounts tab agree to my bank account balances.
There were purchases made this month that we did not want to immediately pay off, so to avoid showing my entire budget as overspent I budgeted a negative amount in the credit card category, as we still technically had those funds in our checking account.
So today, I make a large payment to the card that doesn’t completely pay down the balance on the card. And now YNAB is showing a fat red number in the credit card available column. If I try to budget for that red amount, as I have seen suggested, then my entire budget shows as underfunded, which isn’t true as I still have that buffer to budget for. How do I fix this?
The amount in your CC payment category has no relation to what is in your checking account. You took money out of your CC payment "envelope" to cover a purchase for another category. You either have to pay the CC payment category back before you make your payment in full, or pay the available amount.
I'd advise not leaving money in TBB, even temporarily. I just set up a "Holding" category for the extra bucks I'm not sure about or think I may need to cover for something else before the end of the month.
Remember that YNAB is a cash based system. The payment category represents the cash you have set aside in your budget to pay your credit card, so the amount needs to be equal to or greater than what you plan on paying. So you paid more than was set aside for the payment. Move however much money you need to to bring the category available balance back to at least zero.
I find this sometimes happens if I pay the amount in the CC payment category but then some other category is overspent now (and I didn't notice yet) and it was a mix of credit and cash and it is now prioritizing the cash spending and the amount I paid on my CC was "too high" because YNAB stole from this category to cover the cash in the overspent account.
Ju Man Shu said:
But then how would you treat putting expenses on a card that you don’t immediately intend to pay off with current available funds?
If you are going to pay the card, then you must budget for that card payment before you make it. That really is the beginning and end of the story. Tobias has given you a method above to budget for the rent in two payments, but if you pay the card in between those two payments, it won't work to have only half the rent budgeted for. There's a way to temporarily increase credit card debt carried in the budget (by leaving categories overspent) but it relies on you not paying more to the card than is available to pay the card. If you are going to pay $X from your checking account to the card, $X needs to be available in the budget for that purpose before you do so.
Ju Man Shu said:
to avoid showing my entire budget as overspent I budgeted a negative amount in the credit card category
At that point, you should have budgeted the new funds that showed up in TBB to the negative (overspent) spending category. Did you?
Because you sent them more than was in the Available column. Effectively, you sent them money that is earmarked for something else in the budget. You'll need to decide what category doesn't have money as a result. (This will fix the negative TBB, discussed below.)
Ju Man Shu said:
If I try to budget for that red amount, as I have seen suggested, then my entire budget shows as underfunded
Which is correct, because money doesn't appear out of thin air. If you increase what you budget toward the CC Payment category, something else needs to decrease -- in this case TBB. If it was $0 before, it's going to be negative afterward. Move money from some other green category to fix TBB (mentioned above). Note, you could have also moved money directly from a green category to the CC Payment category.
That's a shame, as there are two excellent reasons to do so.
1. Convert cash overspending to new CC debt. You may note this is exactly what YNAB automatically does within a category whenever possible. Doing it manually can cross category boundaries.
With regard to Rule 3, sometimes maintaining debt is the lesser priority, especially when cash is needed. The methodology absolutely supports reallocation from the payment category.
2. Turn off the "nag" when the user has made a conscious decision to finance something on a CC. I think the yellow category looks like a mistake. Then again, I was introduced to the methodology when Rule 3 was actually a rule.