How To Handle Pre-Budget Savings
Howdy all. New to YNAB and have a question. I typically receive an annual bonus and from that, I have always pre-budgeted for certain things throughout the year. I do not set money aside monthly, like a savings goal, but will draw on the pre-budgeted money throughout the year. For example, I may draw on one account each month (kid activities), but another I will only draw on once a year (Christmas). Would you just create a new category with a goal and fully fund it right away? I thought to do that, but how to handle the transfer each month out of the activities account?
Transfers merely change the location of dollars, and that doesn't affect the category. Furthermore, money is fungible, so you can often spend money already in checking for kids activities without having to make a transfer.
This needs a better explanation. While I do understand that "transfers do not affect the budget" that answer is not helping the question how to budget initial dollars (for me, at least). Insert smiley face, since I'm looking for help here!!!
When starting YNAB let's assume one has money in two accounts: checking and savings.
Now, let's assume one does not want to "spend" or "budget" the savings money. They want to save it. Of course, for a long term goal.
And thus the source of confusion - where does this money get budgeted? Into what category?
My scenario is that I have a "college savings" budget category. Great, throw all the savings into this category. That will result in a $$$ "available" in this category, but in fact it is not "available to spend" it is meant to be saved, so it should not show as "available."
That's my confusion.
If there is a video tutorial which goes over how to setup YNAB from the beginning with practical examples for linked accounts which include savings accounts please point me in the right direction.
I like the concept but I am just trying to "get it."
If you give yourself a fixed amount for kids activities each month, you could initially set that money as Income to be Budgeted and then go ahead and portion it out over the next X months in the budget.
If you just use it to cover those things and the amounts fluctuate, you could just keep doing what you're doing and letting that account balance float from month to month, spending out of it as needed. Unless you find yourself spending too much and want more fine grained control over it, I don't think there is anything wrong with having a category that has several months worth of money in it that you pull from.
As dakinemaui mentioned, there is no reason to move it into another budget line item just to spend it - just fill your "kids activity" budget item and assign spending to that category when it fits.Reply
Cyan Wizard said:
Now, let's assume one does not want to "spend" or "budget" the savings money. They want to save it.
Savings is merely delayed spending. Might be saved for a week, a month, or a decade. It's saved in a category until you spend it or change your mind about how you want it used (eventually).
Create categories representative of the various purposes or goals and budget money as desired.Reply
Thanks all. Crazy week, so I haven't been able to check back in.
Very helpful stuff. I think part of my 'confusion' is how actual bank accounts translate to the categories in YNAB. Also, the fact that YNAB doesn't really care about accounts, so you start thinking in a less confined manner. I like my separate accounts due to the higher interest they receive, and they are in a separate online bank where it's a small pain to make the money available. Read: only moves money when really needed.
I think I'll use the categories to mirror my bank accounts, continue to operate as I have been - transferring monthly, while updating the money in the categories as I do so. This is my second try at YNAB, so hopefully I get it this time.Reply
Irish Man I too am confused. I put a new post in the #savings forum on this.
Like, do you need to manually edit a transfer into a savings account somehow in order to place it in the activity column in order to increase the "available" balance in that category. That is what I'm trying to figure out.Reply
That doesn't mandate categories must be synchronized to those accounts. Doing so is more work: you must make real world transfers for every budget adjustment, which you cite as undesirable.
Read the link monkeyhanger provided, and transfer money to higher rate accounts without regard to category balances. It is much simpler.Reply