Maintaining cushion in checking account
I am just getting started with YNAB and am not sure I've got it down conceptually yet. I typically like to keep a balance of about $3,000 in my checking account just to be sure I don't accidentally overdraft. How do I account for this in YNAB? Should I have a category just for "checking cushion" and budget $3000 there each month?
Also, do the budgets have to be monthly? For example, I have an emergency fund that I have almost fully funded. Do I create an emergency fund category and budget the whole amount from my savings there? Will it go back to zero when the next month begins?
Thanks for your help!
If your emergency fund is larger than $3000 I see no need to have a category just for a checking cushion. if all of your bank accounts are in your budget, it doesn't matter which account you keep your money in. The purpose of the money in your budget and the location of the money in your accounts aren't linked and do not need to be.
I'm also new to YNAB, but I'm also worried about "location of money" concept. In general I agree that location of money and purpose of money are separate, but there are exceptions:
- Debit orders (in the US you call them autopay, I think) will go off against a specific account. I will default on an insurance premium if the money for it is not in my checking account, regardless of whether I have it under my mattress or in savings.
- I plan to put my investments on-budget, so I can track the purpose of the money there. But those have varying levels of liquidity, the money there may only be available in 2-5 days. Perfectly fine to back a future auto repair bill, but not so good for groceries.
- I have my kitty of cash on-budget, for the simple reason that I pay my gardener's wages in cash from there, and if I don't have cash on hand, I'm late for work because I need to take a trip to an ATM.
All of these one can manage outside YNAB like HappyDance suggest, but it does feel like the kind of thing YNAB could help with (although I wouldn't want to over-complicate the beautiful simplicity of YNAB either).
What does YNAB do if you have an upcoming transaction scheduled against your credit card account, say, and you have enough money for it in the budget category, but not in the account? Does something show red/yellow?
Not disagreeing with any of the other answers from more experienced YNAB-ers, but I have a bunch of categories devoted to various account minimums. They are in a supercategory called, unsurprisingly, "Account minimums". I like a lot of padding.
Some of them are super-small, like the $5 in one of my savings accounts that can't be spent due to a quirk of how my credit union works. One of them, the required minimum in my checking account, is quite hefty. Maybe this is overkill, but I like to account for these amounts and know they are earmarked.
I wish YNAB let us 'bake' this in to the accounts, because I still have to remember not to let the balance of that particular checking account fall below the required level. However, at least this way I can be sure that money won't be promised to something else.
Hey Forest Green Keyboard !
I had this same worry when I first started YNAB, not only for my checking account balance, but for when I had to make a big purchase (annual car insurance, etc) and the money was set aside in a savings account.
My "a-ha" moment was reading the Simplify Guide (long after I started YNAB!) when I realized I could use my checking account as one big bucket account, and not use a savings account at all! Then, as long as I have a "buffer" (like mentioned above) it doesn't matter the actual location of my money, I just use categories to define my savings/purpose for the money. Then, I can rest assured that I won't overdraft and it cuts out the whole transfer debacle too, for those big purchases!
Anyway, I'm not sure how you handle the details, but that's how I've been doing it for our family! 😊