Month Ahead vs Emergency Fund

Hey everyone,

Looking for some advice.  I'm currently trying to get a month ahead in my budget while also saving for an emergency fund.  I put away about $200/month for the emergency fund and I'm about 60% of the way to my goal, but struggling to get a month ahead in the rest of my budget.  Should I take a break from saving for my emergency fund until I can get myself one month ahead in my budget, or should I stick it out and keep doing what I'm doing?

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  • Depends on your income arrival time. If you're paid multiple times per month, I'd prioritize getting ahead. In fact, I'd reallocate the EF to facilitate it. You can always reallocate back to an EF if necessary, but until then, that money is making things easier and providing clarity by budgeting on a cycle aligned with your expense recurrence cycle.

    The amount of savings required to be able to push all income into next month varies from person to person, but it's almost always less than people think.

    Like 4
      • PhysicsGal
      • Nerdy female homo sapien
      • physicsgal
      • 2 days ago
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      dakinemaui I second this answer.  I personally get paid once monthly at the end of the month, so I haven't bothered getting a month ahead because I can already budget the whole month when my paycheck arrives.  I've never had to do it any other way, but I imagine if I got paid weekly or bi-weekly, I'd really want to get a month ahead so I can just budget the whole month at once.  As mentioned, you can always reallocate the money to your EF if an emergency comes and you still haven't built that up (fingers crossed you don't have an emergency!) but until then you make your budgeting life easier every month, assuming you're not paid once monthly, like me.

      Like 2
  • I think having an emergency fund is more important.  At least $1000 for now.   Aging your money 30  days takes awhile.  It could take up to a year .

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      • jenmas
      • jenmas
      • 2 mths ago
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      Orange Cyborg Please be aware that aging money to 30 days is absolutely not the same thing as getting a month ahead. Getting a month ahead means that you are able to fully fund July with income received in June. AOM of 30 is merely a statistic about the average of your last 10 cash-based transactions.

      Like 11
  • I used to prioritize savings and never seemed to get a month ahead on budgeting.  I decided to transfer enough savings to buffer one month of budget and that was a game changer for me.  It seems like filling all categories at the beginning of the month from the buffer has increased my attention to budgeted spending and the savings has now increased as well.  I would work on getting a month ahead on the budget first.

    Like 5
      • RIP_MSMoney
      • FinTech Programmer
      • rip_ms_money
      • 2 mths ago
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      ynaber2613 i fully agree. We had a similar experience when we started ynab. One month ahead was a game changer.

      Like 4
    • ynaber2613 I did the same thing and it's really simplified my budgeting, as I only have to do it once a month. 

      Like 3
      • bobbucy
      • Tomato_Snow_237e7f17927
      • 2 days ago
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      ynaber2613 I know that this has been out there for a couple of months but I'll add my vote as well for getting a month ahead.  The original poster may or may not have the breathing room to move part of their existing emergency fund ahead to next month but that's what I did.  Getting a month ahead was transformational for my wife and I, and the forward thinking this creates has been the greatest benefit of YNAB for us.  And while this may not be the case for others, in the process of getting a month ahead I actually found and reclaimed money in the budget that I didn't need.  Sitting down at the end of the month and budgeting money that you already have for the next month is just a completely different mindset.

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  • My standard advice is save up a $1000 EF. After that, Month Ahead vs EF, Month Ahead always wins out. First of all, Month Ahead is powerful, secondly, it can be raided in an ahem..., emergency, and then built back up again.

    Like 5
  • Hope you don't mind if I add a related, I think, question. My question regards sinking funds, for those "emergencies" that should be planned for like a pet getting sick or needing to replace a broken cell phone.

     

    The questions are should I ignore these funds until I am budgeted a month ahead? And does budgeting a month ahead mean all your categories are budgeted a month ahead, including these sinking funds?

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      • dakinemaui
      • dakinemaui
      • 2 mths ago
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      KrypticPhish Opinions vary on this one. Personally, I'd prioritize being able to push all income into next month, but then again I have bi-weekly income where being ahead is much more useful. My take is the money that's just sitting there for such emergencies is doing nothing until you need it. I'd rather it do something useful until then -- like make my budgeting process far easier and significantly clearer. IF, and I repeat, IF, I actually needed to reallocate from those future categories for an emergency, then so be it. Cross that bridge at that point. 

      So yes, I'd skip budgeting toward those emergency categories until all income can be pushed. I would not, however, skip budgeting for the known/known obligations (amounts/timelines) like non-monthly bills, Christmas, birthdays, etc.

      "Budgeting a month ahead" simply means that none of your income is budgeted in the current month. When you get a check in July, you either temporarily put it in a holding category until the end of the month (my preference) or scroll over to August and budget it there to various categories (including a New Cell Phone category, etc.)

      Like 2
    • dakinemaui I feel I read this conversation 100 time and I still have a bit of a challenge understanding the best way to address this. So between these 2 choices you express in the last paragraph:

      1. Put it temporarily in a holding category until the end of the month
      2. Scroll over to the next month and budget ahead.

      I am actually budgeting ahead by using option 2 and it does *seems* to work. But I would love to understand why you prefer to sue a temporary category instead to see if I could benefit from this strategy.

      And I guess that temporary category is not the same you shared with me previously called "Deferred Income", to be use when your money fluctuate compare to an average?

      Thx! 

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      • dakinemaui
      • dakinemaui
      • 2 days ago
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      Eric Poulin First of all, you're correct that the temporary holding category (often called Income for Next Month or INM) is different than a Deferred Income category.

      Option 1 you mentioned is how the old version of YNAB (Classic) was designed. Option 2 is how the latest version is designed. Unfortunately, there are some drawbacks to the new design that have led me (and many others) to conclude Option 1 is better. None of these are showstoppers, but irritating nonetheless compared to the classic workflow:

      • Stealing From The Future: the current month's TBB will typically stay locked at $0 even when next month's TBB is negative. It's very easy to get yourself to where funds are double-booked without realizing it.
      • You have to budget with every income event: money always shows up in the current month, and leaving TBB nonzero is a bad idea for several reasons. Clarity suffers since your expenses are typically monthly, but you budget in paycheck-sized chunks.
      • Mixing of late & early income: Income posting late in last month can easily mix with income posting early in this month. The latter income should be sent into next month, but that amount isn't obvious when looking at TBB. You'd need to budget between the arrival of those incomes, which is complicated by "life" and Direct Import running the show for many users.

      Classically-minded users typically use a holding category to circumvent all these issues and increase efficiency. Here's one description of specific workflows I would recommend (elsewhere in this thread) for both the fully and the partially buffered cases (i.e., when all or only some of this month's income can be sent to next month's budget).

      Like 3
    • dakinemaui That is actually making a ton of sense (except of the existence of the TBB behavior that has been discuss ad nauseum here... :))  But I understand the idea. 

      I'll respond under the threat above about the workload. 

      Thanks for always diving deep in the details to help fellow YNABers!

      Like 1
  • Get that emergency fund built first. You will not believe the feeling having 1k knocked back will give you. then as you go, build up the monthly.

    Kudos on what you are doing

    .

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  • @dakinemaui  how do you use a "holding category"?

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    • Green Flute The mechanics I would recommend vary depending on whether you need any of the money from September paychecks in the September budget or not. The following may seem like a lot of words, but in practice it's easier done than said. 😉

      I don't need September money in the Sept. budget, so I automatically categorize income to the holding category (scheduled transactions or Payee categorization rules). This keeps it out of the way until I have accumulated the entire month's worth of funding.

      At the end of the month, you can release it from the holding category by recategorizing as TBB (Search for the holding category, select all, Edit | Categorize As... | Inflow:To Be Budgeted. Takes less than 10 seconds.)

      Switch over to the new month's area and the money for the entire month is in TBB, waiting to be distributed (budgeted). Many use goals to make this a one-click affair.

      ---

      If you still need some of the Sept. paycheck in Sept's budget, then I recommend you put any money you don't need in Sept. (i.e., money meant for Oct.) into the holding category with a budget entry (rather than directly categorizing the transaction). This makes it a little easier to add to it (e.g., if you have leftovers later in the month) or pull back (e.g., if you were a little too optimistic about allocations elsewhere). At the end of the month, switch to next month's area first, and move those funds into TBB in the new month. (This results in a negative budget entry.) Budget TBB to $0 as normal, as far as it goes. Similar with any additional checks.

      At some point, you will again have money in TBB that can go toward the holding category (and next month), and the process repeats: Move money you don't need that month into the holding category. Either use the Move Money tool by clicking on TBB or use the inline calculator to add to the existing negative budget entry. 

      You will know you are making progress if by the end of the month you have added enough to make that budget entry positive. (Some people will instead release funds by deleting the budget entry in the previous month, but that approach loses the progress indication which I feel is beneficial.)

      Like 2
    • dakinemaui THANK YOU so much for taking the time to explain this approach. I have been struggling ever since YNAB switched over to the new platform to figure out the best practice way to designate income from this month for next month. This makes sense and excited to try it moving forward from here! 

      Like 1
    • dakinemaui Thanks for this incredible post; I clearly owe you a few rounds!

      I wanted to clarify one element here. The first workflow you outline applies to if you do not need any of the current month income *within* this same month. So if you have an income coming today, the inflow goes directly into your Holding Category. Anyway, your current month is already fully funded from last month.  Where it is a bit unclear to me is why you release it at the end of the month, but before the month flips over? What would happen if you leave it in the Holding Category, and transfer it to TBB on Day 1?  

       

      As for the second workflow, it applies if I will need current month income in current month budget. My understanding is that you send your Income into TBB, and you put the remainder in the Holding Category using the Budget. And I guess the reason you wait for the next month before releasing the fund into TBB is link to what you shared before in this thread, that leaving TBB nonzero is not a good idea. My question would be then what would be the impact to leave the money in that holding category until the month flips for real? In the example of September/October, what is different between if I wait to October 1st to release the fund from the holding category to TBB compare  to on September 30th, flip YNAB to October and release the funds to TBB? Knowing myself, I will probably forget to do this within month so I'd like to understand the impacts.

      Thanks!

      Like 1
    • Eric Poulin 

      If you release at the end of the month, you might have a day or two of needing to watch for SFTF. If you release at the beginning of next month, you might have a day or two without a completed budget. 

      I used to wait for the month to turn because I hated SFTF and it bit me more than I'd like. Now I'd rather have my new month allocated  at least the weekend before the month turn so I can look at the budget for spending guidance - even if the 1st is on a Wednesday and I got busy during the week.

      Because the nYNAB doesn't wall months off, the calculations happen as you release money - there's no difference except visibility. 

      I'd say it's up to you!

      Like 2
      • dakinemaui
      • dakinemaui
      • 2 days ago
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      Eric Poulin said:
      What would happen if you leave it in the Holding Category, and transfer it to TBB on Day 1?

       Nothing special, release on day 1 if you like. As Move Light Sound Life alludes, YNAB typically doesn't care about time in the real world. (The sole exception are Spending Goals, but that's a rant for another day!) Move Light exactly nails the rational for the "release on the last day" advice.

      The "not-recommended-for-beginners" aspect of my actual YNAB workflow: I have my next month entirely populated at the beginning of this month. I don't care about the negative TBB in next month's area or the fact those dollars don't exist because I don't use next month for spending guidance. It is, however, a great place to store my nominal budget values, obviating any need for Goals and their nagging when applying Rule 3. I don't even care about the future negative TBB consuming any funds released while shifting between categories during the current month because the months are intentionally walled off. (Technically, there's an indicator that money has leaked into the future.)

      In fact, I may not release that money until I'm several days into the new month. Again, no big deal assuming sufficient funds in the holding category to cover the deficit in TBB. I know this is true well before the end of the month. Even if it didn't quite cover the deficit, I'm not going to blow through the entire month's worth of money in the first few days. There would be plenty of time to get TBB to $0 on a timeline that is not exactly "recommended practice".

      So yeah, feel free to blur the line on timing to suit your needs as long as you understand what's going on and make spending decisions on month that is actually Available.

      Like 1
      • dakinemaui
      • dakinemaui
      • 2 days ago
      • Reported - view
      Eric Poulin said:
      I guess the reason you wait for the next month before releasing the fund into TBB is link to what you shared before in this thread, that leaving TBB nonzero is not a good idea.

      Again, the timing is not critical in the second approach, either. You can release it on Sept. 20th and distribute it if you don't expect any more income. When you release it in next month's (Oct) area with a negative budget entry, it doesn't show up in this month's (Sept.) TBB.

      You can also release it on Oct. 3rd if you like. Just don't blindly release it when TBB is nonzero as would be the case when you have early-arriving income. In that case, I would release the old and capture the new simultaneously with the inline calculator.

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    • dakinemaui Move Light Sound Life , thanks for both of your answers. Does make a ton of sense now. I guess I wanted to make this more complicated for no reason. I'll apply the workflow and learn from it!

       

      Thanks again for all the details! :)     

      Like 2
    • Eric Poulin 

      If you get in a mood to read more, I tried to summarize everything I'd learned about the Buffer here.

      https://support.youneedabudget.com/t/m1hqyb3/trying-out-the-ynab-buffer

      Like 1
      • Yes I can
      • yesican2020
      • yesterday
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      Great discussion Eric Poulin dakinemaui and Move Light Sound Life  I only have a few large early month bills so far in my Income for Next Month category but plan to  work towards this in the future.   I’m using Option 1 based on past reading on this forum in the topic 

      I also found your post on the topic really useful thanks Move Light Sound Life

      Like 2
  • If it were me, I would fund the emergency fund first.  At least $1000, then work on getting a month ahead.

    However, it's really up to the person.

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      • dakinemaui
      • dakinemaui
      • 4 days ago
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      Scythe Can you elaborate why the EF would be your priority?

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  • I'm not sure all this makes a difference as you can play with the names to suit what motivates. I started with the goal of $1K emergency fund and the category is still called that. I have continued adding to that category with the aim of building it up to one month's expenses (now over $5K).

    Once I have achieved a full month of pay I will re-label it 'buffer' and use it as a holding category. On the last day of the month allocate all those dollars to the following month.

    From that point I will just start another 'emergency' category of $1K. I am getting very excited about being finally buffered after many years (I may be using YNAB4 terminology here) and I really don't think it will take long to save that final $1K now that all my true expenses are well funded.

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  • Green Python said:
    Once I have achieved a full month of pay I will re-label it 'buffer' and use it as a holding category.

    Just wanted to point out that if you are also budgeting some funds directly to next months area, then you don't need to save an entire month of pay in that category. It only has to cover the budget entries made in the *current* month's area. (Early outflows next month will already be covered by directly budgeting ahead.)

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    • dakinemaui Thanks for that. I'm not completely sure what you mean. My money is aged to 37 days which I'm very happy with. On the last day of the month I budget ahead with 2 weeks pay (which is sitting in that buffer/emergency category). My goal is to have a whole month's worth of income in that holding category so on the last day of the month I can budget a whole month ahead. That's how I understand 'live on last month's income'. Have I misunderstood what the one month buffer is about?

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      • dakinemaui
      • dakinemaui
      • 2 days ago
      • Reported - view

      Green Python No, you have it right. I misunderstood your earlier message.

      I described a workflow above you might find useful (the second case). It's a slight tweak on what you're already doing that provides a progress indication.

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