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?

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  • Yes, in the first month you use YNAB you will budget the full amount you have set aside. Then that money will stay in the category until you use it!!

    Reply Like 2
  • 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.

    Read this:

    https://www.youneedabudget.com/the-relationship-between-your-budget-your-accounts-its-complicated/

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  • 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."

     

    Many thanks!

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      • jenmas
      • jenmas
      • 3 mths ago
      • 2
      • Reported - view

      Cyan Wizard budgeting money in your savings account does not require you to spend it. As far as YNAB is concerned, you save money by assigning it to a category and not spending it. Location is irrelevant. 

      Reply Like 2
      • Tobias
      • Toviathan
      • 3 mths ago
      • 2
      • Reported - view

      Cyan Wizard The biggest new budgeting concept that YNAB wants you to operate under is that available does not mean available to spend. It means that money is available to do whatever job that category balance is for. If it's for your rent or mortgage, that money is available for that purpose. If the category is an income replacement category for if you should ever lose your job, that money is available for that purpose should it ever happen. And that money will sit there until you either need it for the designated purpose, or you make the conscious decision that you no longer want it there.

      Just because you budget money to a category doesn't mean you are saying "I am going to spend this much this month." You are simply setting money aside for specific purposes, however short or long the time horizons on those purposes may be.

      Reply Like 2
      • cochranjd
      • cochranjd
      • 3 mths ago
      • Reported - view

      Cyan Wizard 

      If you truly want to keep it out of sight (and out of mind) then I recommend keeping it in an off-budget account.  I have money diverted from each paycheck into an account that I don't even have in YNAB for just this reason.  I'm not the most disciplined person and if I see an account with $X sitting around unspent, I mentally account for that, even if only giving myself slack in other areas because I have a "safety net". 

      If the account IS in YNAB, then you need to give it a job.  That doesn't mean "give it a job that includes spending it now" though.  It's "job" may be to go into a Savings budget category where it just sits.  

      I prefer to move these into off-budget accounts so you don't mentally see that money and think of it as spendable, but if you want to keep it in an account that YNAB tracks, that is what you'll need to do.  

      All YNAB is doing is telling you what you've accumulated in that category.  That money IS available to spend - you just don't want to spend it yet because the time hasn't come.

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      • satcook
      • satcook
      • 3 mths ago
      • Reported - view

      Cyan Wizard that money should be budgeted to a category called ‘college savings’. It will then be available for college unless you decide to change its job. 

       

      Once it goes into the college category it will not leave there even when the month changes. 

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  • 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.  

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  • 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 Like 3
  • 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.

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  • 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.

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  • IrishWolf said:
    I like my separate accounts due to the higher interest they receive

    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 Like 3
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