Budgeting monthly automatic payments
I'm new to YNAB and not sure they best way to budget for my monthly payments that are automatically deducted from my account.
For the case of payments that are the same each month, such as my internet bill, I suppose I would set up a scheduled transaction and set up a goal to match that transaction? As I get paid twice a month I'm thinking I would then decide which paycheck should have a job of paying for the internet bill (it's paid for after my second paycheck). Either way I'll manually duplicate the amount of the bill in the budgeted column. Does that sound correct?
For variable payment amounts, such as my electric bill, would I have a goal for my electric category that's about average for the time of year the month is for? When I get my electric bill I would enter a transaction for the amount/date when I will be auto paying for it. Then because of the orange bubble in the available column for electric I would be reminded I have to budget for it? But if I enter a budget amount equal to the bill amount and the bill amount isn't the same as the goal could still get the orange bubble showing up.
Thanks for any help as this is all still pretty confusing to me trying to budget for these transactions that don't require me to do anything to make happen.
In the budget, ensure money is in the category before the outflow. The fact it's automatically deducted vs. manually paid is immaterial. The budget is simply the PLAN for your money.
If you use a scheduled transaction, that makes an implicit goal in the outflow month. If the recurrence is less often than monthly, you can use a dedicated goal to do the math for you to save as you go. (Rule 2)
For variable amounts, I budget at least the average (avoiding overspending when necessary). Average == 1/12 of the yearly total. This builds up a surplus part of the year that's used in the more expensive months. When starting out, though, you might already be in the expensive months, so you have no choice but to budget for the entire expected bill amount. Update this when you get the actual bill.
Many people paid multiple times per month will match certain bills to certain checks. As such, trying to find a "fit" can be difficult. To make matters worse, larger bills, however, often must be split across multiple checks anyway. The inconsistency may be difficult to remember, so use the category notes. A category group for Check 1 and Check 2 may help some, but that doesn't work with things that are being split. You don't want a Rent #1 and Rent #2 categories.
I personally find it's easier to split ALL budget entries, regardless of size. The math is trivial -- it's the additional needed amount divided by the remaining number of checks until the outflow. (Monthly bills = 1/2 the amount from every check.) For easy reference, I put the per-check amount right in the category name. When I get the second check, I just add that amount to the existing budget entry. (To add $100, just tack on +100 right in the budget cell.)
When starting out, for example, a quarterly bill may be due after receiving 2 checks, so obviously budget half from each check. Once that first instance has been paid, however, the amount can be split across 6 checks (reducing the per-check demand). You should allocate the most important priorities (categories) first. Some lower priority categories may have to wait until the per-check demand of higher-priority categories drops. That's just life -- make sure the important things have money.
An alternate approach is to use some of your cash you have now to put you "on track" for the "normal" contributions moving forward. For instance, that quarterly bill normally requires 1/6 the amount from each check, but you start with only 2 checks to go. If you use savings to put 4/6 (or 2/3) in the category at startup, then moving forward that category only needs the normal (1/6) amount from each check.
Hi Byerun !
I'm also new here, and working hard to make sure my finances are as automated as possible. I get paid biweekly and worked out many of our expenses and savings categories with a biweekly amount. So, the pay goes in and then over the next 2-3 days the transfers and withdrawals happen.
For monthly bills that are auto-paid via credit card the exact date isn't as important. For utility bills or the mortgage, that come out on a known day, I'm going to budget for them with the 'oldest' money possible. Right now, that will be the paycheque just before the expense is due.
I'm going to keep my accounts 'connected' so that transactions are imported automatically, and hope that will help to reduce the work. I'm also going to auto-schedule everything I can, even if the numbers need correction from time to time.
I think I'll be watching the bank balance and fine-tuning things a lot at first, and I expect this is normal. Once there is a bit of a buffer and things are moving more smoothly, then I hope to only have to pay attention to the numbers in detail every 2 weeks. I'm expecting this to take a year.
Great question, and you got me thinking.