Maintaining your Buffer: Usable Solution?
I was (and still am) a big fan of the Buffer as used in YNAB4. AOM just doesn’t give me any useful information. Also, I hate the fact that you can accidentally still from your future funds.
I’ve been using this Buffer workaround for YNAB which:
allows me to maintain my Buffer (like in YNAB4);
doesn’t let me accidentally spend my Buffer (i.e. steal from next month);
allows me to account for new income for each month; and
isn’t overly complicated (but does require a couple of additional steps every month).
I apologize for the long post, but I wanted to make sure everything is clear.
First, let me explain this Buffering method in YNAB (and I’ll be the first to admit that this may not work for everyone):
1. Create a Tracking Account called “Next Month’s Money,” or whatever you’d like. This will not be an actual “account” in the real world, but just a way for you to track your monthly Buffer.
2. As money comes in that is to be used for next month, record it in your “Next Month’s Money” account (e.g. I have our paychecks set as recurring transactions recorded in our “Next Month’s Money” account).
You should note that in YNAB, the balance in your “Next Month’s Money” account plus the balance in your Checking Account balance in YNAB will equal the balance shown by the bank. In other words, you add these two YNAB accounts together to get your actual bank balance.
For example: let’s say my Checking account balance in YNAB is $1000. I receive a paycheck of $2000, which I record in my “Next Month’s Money” account. The balance in my “Next Month’s Money” account is now $2000. The total of my YNAB Checking account balance plus my “Next Month’s Money” account (in YNAB) equals $3000 – which is what my bank shows as my Checking account balance.
(YNAB Checking Account Balance + Next Month’s Money Account Balance = Bank Account Balance)
3. Continue entering your income into the “Next Month’s Money” account as it comes in for the month. By the end of the month (if not sooner) this balance should equal your Buffer (or more).
4. When the first of the month comes around, transfer (in YNAB) the amount in your “Next Month’s Money” account (i.e. your Buffer) into your YNAB Checking account.
When you make this transfer, the budget considers this to be "new" money in YNAB. That is, it will register this transfer as money to be budgeted for that month.
For example, if on February 1st, you transfer $5000 from your “Next Month’s Money” account to your YNAB Checking account, this $5000 will show up in the “To Be Budgeted” icon at the top of your budget, AND will show up in the “Funds for February” category at the top of the page (i.e. this amount will also be $5000).
After you make this transfer, you budget to zero as normal (i.e. give every dollar a job). If you try to budget more than you have, it will show up as a negative (red) in the “To Be Budgeted” icon alerting you that you are trying to budget more than you have on hand.
Using this method:
my Buffer is completely separated and easy to maintain;
I cannot accidentally over spend and steal from next month (eat away at my Buffer); and
I am able to account for new income for each month accurately.
Since I have our income set up as recurring transactions, I just have to make one YNAB transfer at the beginning of the month.
As for keeping track of balances and reconciling, I reconcile my “Next Month’s Money” account after I make the Buffer transfer (when it shows $0.00). This is the same as I reconcile my Cash Account.
I reconcile my Checking account as normal, but I like to see an actual transaction in my register.
My solution was to set up a recurring transaction with has no $ amount, but has a memo which says “Deposit - $___ recorded in NMM Acct” (i.e. this doesn’t affect the balance, but gives me something to clear).
I also clear the income deposits in the “Next Month’s Money” account at the same time.
Is it too complicated?
I’m interested in people’s thoughts or tweaks on this workaround.
I confess I stopped reading at "make a tracking account."
1. Mark all income transactions to a single "Buffer" category. This will happen automatically after you do the first one or two.
2. At the end of the month, filter your transactions by that category, select all transactions, and re-categorize them as TBB. Then budget the next month, and begin again at step 1.
And I find that budgeting directly into the following month isn't nearly the burdensome task that it's made out to be; but I understand the desire to keep something similar to "Income For Next Month." This does that, very simply.