Credit Card arrears payments
How do I budget for credit card expenditure when the payment is made in arrears, for example I paid today for activity recorded in Sept. I pay off the full balance every month, but it's hard to record that in YNAB.
So any expenditure I make this month, won't be paid for until January 6th. How do I makes sure my budget always looks correct, as when I make that payment in January it will show as activity on January's credit card activity.
Is there any advice you can offer?
I've found that the credit card budget categories are only useful if you carry a balance. If you pay it off every month, all the activity is really recorded in the categories you assigned the credit card transactions to and the credit card category is essentially just showing all that activity again (note: the software properly takes this into account so there's no actual double counting in totals). As far as I can tell, the credit card category is only useful as a way to budget money to pay off debt, a way to budget money to cover credit card spending that exceeded the balance of the category the transaction was assigned (personally, I would put the money towards the budget category of the spending to reconcile this instead of the credit card, but to each their own), or as a way to check that the amount available equals the amount in the activity which proves that you've properly covered your payment.
Since I always cover my credit card spending and have no debt, I just hide the credit card budget category since it's not useful to me and I find the number in there confusing like you do.
Hi Silver Lion ! So glad you asked :) That credit card payment category is there so you always know what you have available to send toward your payment! With YNAB, it matters less which month you make your payment and more that you have exactly what you need for that payment.
Here’s a video explaining the two ways money gets into your credit card payment category:
1. When you purchase something you budgeted for and use a credit card, we call that budgeted spending. Dollars from budgeted spending on a credit card will automatically be moved from the category where you budgeted them (like groceries) to your credit card payment category. Your grocery Available goes down by $70, your credit card payments Available goes up by $70.
2. When you budget additional dollars to your credit card payment to pay down that balance even more. They'll be added to the dollars that got there via budgeted spending. For example – budgeting for the starting balance on the card.
No matter which way dollars get into your Credit Card Payments category, the amount Available is your payment. Here’s an article that covers making credit card payments in detail.
So, if this was your first ever payment in YNAB, you most likely were covering a bit of a starting balance on the card (transactions which took place before you began your budget). You'll want to budget the amount of that starting balance directly to the Credit Card Payment category. That’s what lets the budget know you plan to take some of the money you have and use it to pay off that existing balance.
Going forward, as long as all your purchases are fully budgeted, you'll always have what you need for your full payment :)
Let us know if you have any questions about this!
Thanks for all the help, but I just can't get my head around it. If someone could physically show me what I need to do that would be helpful, but fat chance of that! ;-)
I might just start my budget again at the start of the month and see if I can get it right next time. Or give in!
I'm loving YNAB, but I can't ever seem to work out how much money I physically have left or what I can budget for my savings category!