I don't understand "Age of Money"

Hi! I used the "old YNAB" happily for several years and was very pleased with how it helped me manage my finances. I'm not enamored of "the new YNAB" yet. One of the things I really don't understand is "Age of Money". One of the things I did to get my finances in order when I started using YNAB was to start putting all my purchases on a single credit card, and pay it off in full every month. Getting 2% back on literally every purchase I make is pretty OK with me! But apparently YNAB thinks this is bad and dumb. Since I started using the new YNAB my "Age of Money" has been steadily declining. I gather it only counts non-credit transactions. I don't get it. Can I hide this number?

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  • Neither do I, but I've decided to see it as entertaining rather than be annoyed by it.   This morning I spent $6 and it jumped by 2. 馃槻

    Over the last year mine went from 26 to 137. Sometimes the monthly increase is 2 and sometimes the increase is as much as 30.  I like to watch it and see if I can puzzle out what is happening or try to predict what it's going to do based on scheduled transactions. Mine pretty much flat-lines in a low-spend or no-spend month, then spikes straight up in dramatic fashion in a month immediately following a low-spend month.  If you use the toolkit, you can hide the AOM or leave it where it is and also add a days of buffering metric.

    Reply Like 4
  • To me, Age of Money isn't a scientific number, but rather a little pulse on how your finances are doing. It's the idea of "spending money that you received as far in the past as possible". Mine does fluctuate, but as long as it's above 40-50, I'm happy. I usually have next months budget done by the 1st of the current month, so it feels about right.

     

    I also put everything I buy on a credit card, but I don't have any issues with it not being counted. I've also found that Age of Money is basically useless at the beginning because it doesn't have all the data it needs. Once you get past the initial hump and start tracking everything, it becomes more accurate.

     

    I second the use of using the toolkit!

    Reply Like 1
  • Hi devin c !

    To answer your question, there isn't a way to hide the Age of Money number.

    Your Age of Money is the average number of days between when you receive money and when you spend it. It essentially completes the statement, "I'm living off money that I received XX days ago!"

    Older money means a more secure, stable, and flexible financial life. You'll naturally age your money by implementing YNAB's first three rules. You can also age your money by allocating some money toward next month's expenses. As you do, YNAB knows just how old your money is.

    The Age of Money calculation does include your payments to credit cards. That's a cash transaction (unless you're paying one credit card with another, or with some other debt account.) As you go through the month using a credit card, you're committing the dollars in your budget - but they're still there until you send them. Your buckets of income haven't been touched by those credit card transactions. Once you do send the payment, you may take a good leap through a bucket (or two!) 

    If you use credit cards a lot, your Age of Money may be slower to react, have a smoother curve, and you may want to consider shooting for a higher age for your money.

    You can learn more about the Age of Money metric here.

    Reply Like 1
  • Faness at YNAB said:
    Older money means a more secure, stable, and flexible financial life. You'll naturally age your money by implementing YNAB's first three rules. You can also age your money by allocating some money toward next month's expenses. As you do, YNAB knows just how old your money is.

     So what's the purpose of Rule 4 if aging your money naturally occurs by following the first 3 rules?

    It should also be pointed out that Rule 2 will also naturally de-age your money eventually, because it (artificially) inflates your money's age during the time you accumulate it until the time you spend it since it not a monthly expense. The larger the accumulation time and the larger the Rule 2 expense, the bigger the drop when the spending eventually does occur. But because AOM is a passive metric, you won't know the effect until the spending happens.

    Budgeting ahead and accumulating funds not intended to be spent except in case of emergency are the real measure of your money's age. Not income and spending dates. Three people with the exact same income and expenses but one person paid quarterly, one person paid monthly and one person paid weekly will have very different AOM numbers, yet their financial situations are for all practical purposes identical.

    Reply Like 5
    • nolesrule Yes, Rules 1-3 naturally lead to Rule 4. However, Rule 4 is something you should be aware of and able to track. It's a rule but also a goal and a way of monitoring progress. There is no paycheck-to-paycheck cycle if you're living on last month's income. :)


      There is a way to calculate your next transaction as far as Age of Money (and I'll include it below in case anyone is interested), but you're right that there isn't a way to calculate transactions planned months in advance. While that money sits in your budget and grows your Age of Money, it's letting you know that those funds haven't been touched - which is great. The drop once that transaction is paid is expected, since those funds are gone, but going back to the first three rules will raise your Age of Money again.

      For the three people in your example, their Age of Money may be different, but so long as they're not spending more than they make they should all see that number rise over time.

       

      Here is a back of the envelope calculation you can do to see how old your next transaction will be:

      1. Add up all of the money in your cash accounts (cash, checking, savings, and any positive credit card balances).
      2. Keep that number on the calculator and go to All Accounts. Start subtracting your most recent Inflows, not counting any budget transfers such as credit card payments.
      3. When you get to $0, look at the date of the next inflow (or the current one if you went below $0) 鈥 the age of that inflow tells you how many days old your next outflow transaction is going to be. If it is significantly less than your current Age of Money, you can expect to see your Age of Money decrease the next time you spend.

      Reply Like 1
  • Faness at YNAB said:
    However, Rule 4 is something you should be aware of and able to track. It's a rule but also a goal and a way of monitoring progress. There is no paycheck-to-paycheck cycle if you're living on last month's income. :)

     The problem is that the current Rule 4 is not actionable. It's a passive natural occurrence of the other Rules. Note your last sentence in the bit I quoted. That was the old Rule 4... and YNAB4 had an actionable mechanic to support it.

    The issue I have is that the rule implies that you should be using the AOM metric to measure how well you are doing. But it doesn't measure how well you are doing. It's not forward looking. It does not take into account Rule 2 spending.

    Rule 2 spending isn't getting about getting ahead. It's keeping even. 

    The only difference between Rule 2 spending and monthly spending is when you make the payment. You are accumulating the money the exact same way, you just spend it differently... but the timeline isn't really a choice, you are still spending it on the payee's schedule. 

    Even the basic guidance provided in YNAB materials suggests there is an absolute number to achieve, but that absolute number uses all the "keeping even" money, and  doesn't adjust for different pay cycles. So when spending occurs, it behaves differently.

    Faness at YNAB said:
    For the three people in your example, their Age of Money may be different, but so long as they're not spending more than they make they should all see that number rise over time.

     They should also see the total money in their budget rise over time. As I've often said, the real metric for how well you are doing is the size of your emergency fund + money budgeted to the future... and perhaps you could throw in discretionary savings amounts. But even that gets thrown out of whack once you start sending money off-budget.

    Reply Like 6
    • nolesrule I wouldn't say Rule 4 isn't actionable in the new YNAB. If you receive funds in December, you can move forward and budget those funds in January. I know it's not the same as sending those funds to the next month, like in YNAB 4, but it's still putting last month's income towards next month's expenses.

      The factors you mentioned (emergency fund, money budgeted towards the future, savings amounts), all factor into the Age of Money. While Rule 2 may be to blame for some fluctuation, overall Age of Money should still be on the rise with having an emergency fund, savings, etc. 

      I completely understand those factors being a more tangible example of stability, but Age of Money is meant to be a metric to help guide those savings. :)

      Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 5
      • Reported - view

      Faness at YNAB I think you are underestimating the fluctuation that can be caused by Rule 2. And because of that (and other factors) the metric doesn't tell you how you are doing, but rather how you did. It isn't a metric that helps measure saving, because it measures spending.

      It's a poor measure because there can be no universally applicable guidance on interpretation. Too many variables affect the calculation. The number can increase with bad financial behavior and decrease with good financial behavior. People with effectively identical situations can have vastly different measurements because the specifics of their situations differ.

      In a way it reminds me of the Credit Card handling... if you follow the happy path, it works as intended, but when you start veering from the happy path, it becomes a head-scratcher and difficult to understand.

      Reply Like 5
      • jenmas
      • jenmas
      • 1 yr ago
      • 7
      • Reported - view

      nolesrule Faness at YNAB I think the fact that AOM goes up if you are unemployed and living off of severance and/or other loss of income savings illustrates the Rule 2 fluctuation that nolesrule mentions. Sure I knew that I was unemployed and didn't have money coming in but during that 5.5 month period, my AOM went from 249 days to 400 days. So there was absolutely nothing actionable in the AOM information.

      Reply Like 7
    • jenmas I understand why it increased (stretching out that severance and living off of it) but also how that 400 days wasn't exactly helpful. It was accurate (that money may have come in 400 days ago), but I can see how that's more of an accomplishment ("You made it 400 days on this income!") rather than a display of how you're doing - which goes to nolesrule 's point of those results being past tense, because Age of Money can't take into account the future. 

      In all of these examples, the circumstances play a major role in how the Age of Money should be considered. We don't want this to be the only metric taken into account, but an additional metric to take a look into how long you're able to keep your money in hand (on average). 

      In the How Old Is Your Money? blog post, Jesse goes into detail about exactly what Age of Money does and doesn't tell us - and I think he addresses a lot of the points brought up here. 

      "Age of Money is not your burn rate. It doesn鈥檛 tell you how long your money would last given the same historic spending patterns. It doesn鈥檛 tell you how much money you have (net worth). It doesn鈥檛 tell you if you鈥檙e about to spend your last dollar (account balances do). It doesn鈥檛 tell you if you鈥檙e properly diversified in your investments, whether your savings rate is appropriate, or whether you should really spend that much on organic fill-in-the-blanks (I don鈥檛 want to offend people that buy those, after all鈥). It doesn鈥檛 tell you if you鈥檙e increasing your debt (your credit card balance), or whether you should eat out tonight (your restaurant category).

      If you push on Age of Money to do any (or all!) of those things it will break down. Just like any other metric."

      I believe it was nolesrule that mentioned Age of Money is less useful past the beginning stages. No metric is perfect, but this one is helpful for new users because it allows them to see progress instead of 'all or nothing' if you're living on last month's income or not. While those who are more seasoned can use Age of Money in conjunction with other tools (like the Income vs. Expense report, Spending report, calculated averages), to come to other conclusions. 

      Age of Money isn't wrong or a poor metric, it's just more useful in certain situations and, especially in the mentioned cases, best used in addition to other tools. :)

      Reply Like 1
      • jenmas
      • jenmas
      • 1 yr ago
      • 4
      • Reported - view

      Faness at YNAB I think that is absolutely a fair assessment. The only issue I have with AOM is the prominence with which it is displayed. As noted, it doesn't tell you anything about your debt levels, how much money you have, etc. The information most needed to make a decision today about what to do with the funds available is in the account and category balances. But AOM is right up there in the header and (depending on your screen size) nice and big. Like it's telling me to do something about it. Should I wait another week to pay back my sister for our parents' Christmas gift just so the number won't go down, even though the money is fully allocated to the gift category?

      Whereas to me, it should be more like the option in Word where you click on word count in the Review ribbon to see # of words, # of pages, # of characters without spaces, # of characters with spaces. These are all data points for your document, but you don't need the info all the time. So if AOM was moved to the Reports section and you could track it over time, then it would provide more interesting information for analysis. Does my AOM trend in a particular direction seasonally? What's going on every March that the # shoots up? 

      Reply Like 4
    • jenmas I appreciate you ( and nolesrule ) for sticking through with me on this one! I see it's the focus on AOM and not necessarily the fact that it exists that's the point here. The original poster asked for a way to remove that Age of Money number, and I really like the point you made about other metrics being no less important, so I'm going to pass along a feature request for the option to toggle that amount. 

      I can't guarantee new features or options, but this will at least bring it up for discussion. :)

      Reply Like 3
    • Faness at YNAB I agree that Age of Money is just one of many metrics. It would be great to see it displayed on a report, but not permanently pasted at the top of the page. I'd also like to see more reports in general. 

      Reply Like 3
    • doctor_who There is an Age of Money report in the mobile app, but not in the web app. I'll pass this feedback for more reports along to the development team! :)

      Reply Like 1
  • I'm very new to YNAB and I don't understand age of money.  I thought the idea was to budget every dollar as it comes in.  

    So, I get paid today.  I budget it all.  I follow my budget perfectly.  My expenses match my budgeted amounts and the money is all gone after 2 week.   When I get my next paycheck, I do the same thing.  So my money never gets old.

    Or consider this scenario:  I make $1,000 every 2 weeks.  I only need $100 to live.  So I budget the $100 and also budget $900 to savings.  That $900 comes out automatically the day after I am paid.  Wouldn't my age of money be 1 day? 

    What am I missing? 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 1
      • Reported - view

      Mad_Angler 

      Mad_Angler said:
      What am I missing?

       Rule 2. Save for your true expenses. You shouldn't be spending your entire paycheck every paycheck. You undoubtedly have upcoming expenses that you should be saving for with every paycheck.

      As you accumulate this money, your AOM will go up, and when the time comes to spend it, it will go back down.

      There's more to it than that.

      If you are sending your savings to an account that is not in your budget, then YNAB sees that as an outflow... money leaving your budget. You should have the account as part of your budget and categorize it so your budget makes you aware of everything you are saving that money for. If you do that, you'll see your AOM increase.

      Reply Like 1
  • Mad_Angler

    From what I can understand, the age of money metric seems to be geared towards helping people who are struggling with  true "paycheck to paycheck" living (ie "I make $1000 every two weeks but somehow have $0 in savings" ). 

    What you are doing, if it matches your example, is not paycheck to paycheck living. You are already putting a substantial amount of your money towards savings. So... other elements of YNAB might be more useful to you. The age of money metric is probably something you can just ignore.

    From my limited experience, all of YNAB is heavily geared towards helping people who are not yet putting anything into savings. Even the concept of "saving" within the YNAB budget is about short term saving, ie saving up for a large expense a few months away - money you still want showing up in your monthly budget so that it can be spent in the near future.  YNAB can be adapted to account for long-term savings that you don't want showing up in your everyday budget (hence off-budget accounts), but I feel that it's not really set up to reward users for that kind of saving - a pity, since the majority of people should be doing more of that. I think the "age of money" feature treats money transfers to off-budget accounts the same way it treats spending, which makes it a not-so-useful metric in that case.

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