Savings- activity or budget?
Hi! I can't for the life of me wrap my head around how to budget savings.
I set target balance goals on my six "quality of life", or long-term savings categories. In my accounts, I split the "to be budgeted" inflow between these six categories which counted as an activity on the account. Is this correct? Or should I simply budget the savings to each category, carrying over the budgeted amount month to month?
Bring in new money as Inflow:To Be Budgeted and distribute the money to categories with budget entries.
Putting money into a category directly from a transaction is not typically what you want, because it reduces the total spending. The only time this is appropriate is for a return or a reimbursement.
Just to fill in the "why" here, because this was something I wondered about too when I first started YNAB. Why do the two-step process of categorizing into "To Be Budgeting" and then distributing that money into various categories when I could take a shortcut and directly categorize them into those categories? Same result, right?
It's mostly about reporting and making the various goals and quick budgeting features work properly. YNAB classifies "To Be Budgeted" transactions as "Income" and all other transactions as "Expenses." So if you record an inflow directly to (say) "Vacation", that'll show up in a report as negative vacation spending. Probably not what you want, unless that inflow truly was some kind of refund/reimbursement for prior vacation spending.
Likewise, quick budget features and some goal types are based on budgeted amounts -- i.e. the numbers you enter in the "Budgeted" column. They won't work properly if you're not actually setting any budget amounts.