When *are* you buffered?

So, finally, we can think buffer in my household. Having quite a lot income moments I think the idea to be buffered and just budget the first of the month for my expenses sounds like heaven.

Now, I know what a buffer is and that it is not an emergency fund. But I'm wondering; when exactly is one buffered?

When you can budget all your monthly and irregular but expected bills?
When you can fill in *all* your category goals (which includes luxuries)? 
Or, is it simply the amount of my net monthly income?

Let's say I need 1000 a month for all my regular and irregular/expected bills and all the other categories add up to an extra 500. Am I buffered with 1000 or 1500?  Or is it when all my income moments add up 1700 a month, it's when the buffer hits 1700?

I get that more is better and budgeting for all the luxuries as well must be bliss, but when do you really start to experience the benefit of being buffered, is what my question comes down to.

The idea of paying with last months income is -as you can tell- quite abstract to me, since it's always been a month to month thing for us. 

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  • When you can budget next month using only income received this month.

    Like 7
  • Yes, I know that's the rule, but as I said, those words are just so abstract to me. So it's *all* my categories added up, incl. luxuries? Or is it my monthly net income? Still don't really get it ::blush::

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      • nolesrule
      • Been waiting 5 years for the Stealing From the Future fix...
      • nolesrule
      • 1 yr ago
      • 4
      • Reported - view

      Cacti If you can put all your income in a holding category this month, flip over to next month, take it out of the holding category and fund your entire monthly budget. That's about as non-abstracted as it can get.

      Like 4
      • Habanero Salsa
      • Second generation user
      • Aquamarine_Pony.8
      • 1 yr ago
      • Reported - view

      Cacti Aren't all of your categories added up the same as you net, though?

      To me, it's like NolesFan78  said. If you can put all of this month's income aside to use next month to fund the entire month, you're buffered. 

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    • Cacti I'm not very experienced myself. So for what it's worth: I think I count *all* as all the things I set goals for. So it includes true expenses and very specific long term saving goals (those are the same in a way of course, all money not spent now is saving). It's easy to come up with new goals whenever there is room though..! So I try to shift between normal categories and new goals whith a whisfarm; new things go into the wishfarm. Investing or paying extra on mortgage do not have a goal but are funded when I have money left over after funding the month.

      Like 1
  • I think I get what you're saying, as I've only considered myself "officially" buffered for a few months, even though I've been using YNAB for several years.  Even though I've been paying my bills just fine, it was very easy to dip into this month's income to cover some overspending or on a luxury, as you say.  I tried to send more and more into the next month, but it very rarely met or exceeded the current month's income.

    I think the best way to be fully buffered is still what nolesrule said, but to be diligent about it.  You make a category for Income for Next month, and all income in the current month goes into it and does NOT come out until it's time to budget the next month. Then it's up to you where you put everything -  immediate needs, true expenses, income replacement, luxuries, etc.  Whatever your priorities or goals are.  If you overspend in the current month you force yourself to cover it from green categories, not a recent paycheck.  

    Does that make more sense?

    Like 3
  • All budget entries are supported by money received last month. Monthly, True Expenses, Someday-Hopefully-Savings, EVERYTHING.

    That's one of the reasons people use a holding category so it's out of the way and cannot mix into categories this month.

    The benefit is you work with a month-sized chunk on a calendar basis. It is incredibly obvious what you can and cannot afford, because ALL budget entries must total up to that monthly amount (because Rule 1). All expenses are normalized (via Rule 2), which eliminates the need to forecast.

    It is also very convenient. With judicious use of scheduled transactions and goals, you should be able to set your nominal budget values at the beginning of the month with a couple clicks. There is no "piece-meal" budgeting that occurs with every income event.

    Like 4
  • Cacti said:
    Let's say I need 1000 a month for all my regular and irregular/expected bills and all the other categories add up to an extra 500. Am I buffered with 1000 or 1500?  Or is it when all my income moments add up 1700 a month, it's when the buffer hits 1700?

    This is the commonly misunderstood part. The buffer size varies greatly, and it depends on both income and expense timing/amounts.

    The size of YOUR buffer is determined by your budget entries that you make after your first check of the month and that are made in the current month's area. Those budget entries might be for actual outflows, contributions toward True Expenses, or anything else.

    The astute reader might therefore choose to skip some True Expense type contributions to make it easier to switch. The benefit is you can switch earlier. The drawback is they may have to make up those amounts in successive months (e.g., for anything with a fixed amount & timeline like semi-annual auto insurance), in which case, lower priority categories would have to be delayed or reduced in scope. The money's gotta come from somewhere.

    As an example, someone paid on the last day of the month with no actual expenses on that day has a buffer size of $0, and it is therefore trivial for them to switch to Classic Rule 4. Someone whos first check is received on the 1st of the month, on the other hand, will have a buffer that is equal to their entire amount budgeted each month (i.e., the entire month's income), and it is therefore much harder for this person to achieve Classic Rule 4.

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    • FWIW, the typical "test" -- you can budget all your income into next month's area -- doesn't care about the size of the buffer. If you can do that, it is implicit that your buffer has already been saved. The above discussion about the size of the buffer becomes quite moot once you're there.

      Indeed, if you use YNAB's recommended approach of budgeting into next month's area, you never have to understand the buffer even has a size or even that there is a buffer at all. (The "Stealing From The Future" design flaw makes that a questionable approach, but that's a different topic.)

      Like 3
    • dakinemaui this statement explains my confusion because YNAB says to do it that way but Jesse Meachams book and these community posts say use the buffer category. 

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  • One distinction in being buffered in YNAB 4 vs nYNAB is that 4 had a mechanism for selecting all income to be used for next month. In 4, if you wanted to use some of next income’s funds in this month, you’d have to actually move the funds back into this month. That or use the fabled red arrow which would take it from next month for that category or the default which would just take it from the next month total budgeted funds but leaving negative budgeted amounts this month.

    In nYNAB, I use the Income for Next Month category method and release it and budget next month as soon as I receive my last paycheck of the month. This allows one to SFTF(tm) (Steal from the Future) which I’m personally OK with but many purists aren’t. So they wait until the last day of the month or the 1st to budget their IFNM funds.

    Like 1
      • Annieland
      • I was told there would be no math.
      • Annieland
      • 1 yr ago
      • Reported - view

      Superbone Hmm.. are you sure it allows SFTF?  When I do the pass-through and release next month I've found over budgeting firmly stays in the appropriate month.  But I haven't been doing it for that long so maybe I just haven't encountered it (I do have the warning on in Toolkit for now).

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    • Annieland Resistance to SFTF varies depending on how you release those funds. If you recategorize transactions as TBB, or delete any budget entry in the current month, those funds are prone to be stolen after being released. Of course, you should be focused on next month's area by then, so the odds of that are are reduced.

      If you release funds with a negative budget entry in the new month, then it's true they can't be stolen after release. However, this practice basically mandates that you put money into the category with manual budget entries, so it's possible that you would make an error when budgeting one of the (possibly many) income events.

      Either way, next month may not have what you think it should.

      Like 2
      • Annieland
      • I was told there would be no math.
      • Annieland
      • 1 yr ago
      • 1
      • Reported - view

      dakinemaui Ok, I guess I get it.  I do want to do it right, because I've been stealing from current paychecks for years.  I admit the budgeting income straight to INM walls it off the best, but I've been okay so far with TBB then a manual move.  And because I'm too impatient to wait, I release into next month and go at it.  But at the end of the month I empty INM in the current month and delete the negative budgeted amount in the new month (red TBB for a split second) so that I can see at the top what I've sent to the next month.

      Maybe the key is that I have no problem messing around with my budget every day doing all sorts of manual finagling.  I really need a day job...

      Like 1
    • Annieland I think what you're doing is fine. In fact, I would encourage anyone who is only partially buffered to put funds in via a budget entry. It's only once you're fully buffered that I think putting funds in via direct categorization is a more efficient workflow, with slightly more incentive to leave it in there. There's not a lot of difference, TBH, and any of the variants are superior to directly budgeting to the future.

      Like 1
  • Don't overthink it. It doesn't need to feel so mystical or abstract. IMO the easiest way to understand "the buffer" is to consider the problem that it's intended to solve:

    In a traditional forecast-style budgeting system (e.g. Mint.com) you create monthly budgets based on projected income.  "I'm going to earn $4000, how should I divide that money up between my various expenses?"

    There are plenty of good reasons for budgeting in monthly increments. A lot of expenses occur monthly, and budgeting paycheck-to-paycheck is really inconvenient. But YNAB won't let you budget with projected-income; you can only budget with cash-on-hand. How can you resolve this (apparent) conflict?

    Answer: the buffer.

    The buffer enables you to create a monthly budget (at the start of the new month) using cash you already have on hand -- cash that you earned (and saved) in the previous month. That's all. 

    Like 3
  • In my experience, you are buffered when you can pretty  much forget it's payday. :)

    In other words, your budget is fully funded on the first of the month with money you have on hand. Any paychecks or income of any type you get in this month just sits until next month. That amount can vary, depending on your income sources. 

    If you have been saving for a buffer, you can choose what that amount is. There have been a lot of people who have done one very lean month, not funding extras and cutting their expenses as much as they can, to be able to send all future paychecks to the next month.

    Buffer isn't a "goal" per se. Once you are buffered that "pot of cash" doesn't sit there like a 1-month emergency fund. It becomes your living, breathing budget, as every month your paychecks move forward to the next month.

    I also come from YNAB4 and living on last month's income was the game changer for me. Therefore I use a holding category that all of my income sources are categorized to and near the end of the month I re-categorize them as "to be budgeted" and budget the next month. That is "buffered". The new YNAB and many people will say the goal is to continually push money forward into future months of budgeting, but to me that's unnecessary as I would rather have the funds defined as an income replacement fund (emergency fund, whatever) and build up several months of "Survival mode" money in there.

    Like 5
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