Budgeting for annual or one time expenses
I've been using YNAB for a few months now and it has really improved my ability to manage my money. However, I'm having a hard time figuring out how to use the software to account for one time expenses or annual expenses that don't necessarily need to go into my monthly budget. For example: I saved up for a certification exam I had to take for work, paid for it out of the budgeted amount, but now I no longer need the category. When I attempt to delete the category I have to categorize the transaction and it messes with my entire budget. How does everyone handle these kind of expenses? I hate to have an entry to every single annual expense or one time expense that I run into
If you don't need a category anymore, you should hide it. Only delete a category if you never assigned it to a transaction.
For the annuals, it kind of depends on what it is. If you have a bunch of annual subscriptions, you could just have one category for subscriptions and make sure you are budgeting enough each month to the category so that when they come due, the money will be there. Just takes a little up-front math to figure out how much that monthly allocation should be.
Annual Expenses are easier to deal with if you save up 1/12 of them each month. You could group them under an "Annual Expense" master category at the bottom of your budget if you don't want to scroll past them.
One-off expenses that don't have any connections to existing categories could be put in a category used only for those types of things, & funded only when needed. I've found I can usually assign a category (parking gets assigned based on what I was doing when I had to pay for parking), or it's something that could happen again (Random Bank Fees, for example) and should have a category.
For one off categories, either hide them or repurpose them.
For recurring non-monthly expenses, you should be budgeting the same amount each month so that when it is due you have the full amount saved up. Then you spend it and repeat the process. This will normalize your budget. and make it easy to see if you are living below your means.
I’m a new user, have read this topic about handling one time expense, but I’m still unclear. I get the idea of budgeting 1/12 of an annual expense. But there are expenses that don’t occur predictably. Auto repairs for example. I can budget 1/12 of a guess of what annual repairs may be, but half the budget amount could be needed next month when I haven’t accrued enough. How do you handle a situation like that which I think of as budget busters?
Hi @Slate Blue Captain,
I would guess everyone here has a different answer to your questions. I will start with how I deal with them, then recommend you take the appropriate classes, they really help.
I have two separate category groups for the expenses you list.
I have one for annual expenses, which splits my known, upcoming costs, into 12 equal payments which I add to each month, resulting in having enough when the bill is due next. I call this my "annual expenses" category group and list each one I have. The categories gets kind of bulky but collapse it most of the time and only look at it when one of the items comes due, then reset for the following year. Every month this category group is automatically funded with $xx.
For things like auto repairs, I figured out how much I have available to save, then how much I figure I might spend in a given year, then divide by 12 and budget that much monthly. Over time, I hope to have enough in the individual categories when I have to do some spending here. I call this category group my "true expenses" and break it down for most of my known upcoming expenses, things like vehicle repair, medical/personal, vet visits, home maintenance, gifts, that sort of things. I know they are coming, I just don't know when or how much. Every month I put $xx in here also.
So far, this has worked for me. Hope you find something that works out for you also.
Some expenses really are 1-off..,. or they better be.
Like my rolling red-light ticket (This was actually a safety maneuver, but gov't doesn't care about my intent). Hello $600 expense!
I setup my YNAB after watching a number of Youtube videos on the topic. One popular vlogger there suggested a category of "Things I didn't budget for"... first couple months I didn't see a need for this so I removed it.
But this generic 'bucket' is where I put my ticket, it's better than throwing off my other categories and I'm not going to stuff money into a Ticket category every month that I won't need.
So long, long time fan (back to the YNAB excel sheet days) - first time actual user.
As I'm just starting this month, I'm struggling a bit here with these annual expenses. Maybe, I'm misunderstanding, but I don't have 12 months to budget 1/12. I have different annual expenses due in the current month (in this case October), that need to be paid right now.
I don't want to budget 1/12 for a $60 annual fee. That's a level of tedious I don't quite get and I know I wont maintain. I'd like to budget in say October for the full fee and next October for that same full fee. I'm an entrepreneur I have tons of software and services that bill under personal and business group categories. Too many to splice into 1/12 payments.
These expenses aren't errors, they are approved, irregular expenses.
So is the only option (per above), to create a Category Group of "Annual Expenses", create a category for each subscription, enter the full price of that expense in the current month and then "hide" the subscription category until the next year?
More importantly, you don't have to short anything else in the month of the outflow, as you would if you didn't accumulate things
If outflows are "small", you may choose to just cover them last-minute from discretionary categories instead of saving up throughout the year. Ultimately, I think that's more work than setting up the goals and running on auto-pilot. It is an option, though.
On the flip side, you can reduce the number of categories by combining anything due in the same month. The categories would then be NonMonthly Expenses:January, etc. Keep notes about what goes in that category so you can update the goal amount when things invariably increase.
Orange Lobster said:
So long, long time fan (back to the YNAB excel sheet days) - first time actual user.
I’m puzzled over your statement. What does that mean? You were a fan of the method but never used it until now? Or, you used it as an excel sheet but not since?
As for your question, you can fill categories as slowly or as fast as you’d like. If you want to wait until the month your expenses are due, then wait until then. No need to hide and unhide. It’ll just have 0 funds until you fund it. And as mentioned, you don’t have to have categories with only one purpose.
Hello everyone. Just started trying out YNAB and this seems to answer my question for the most part but I wanted to be clear on what "funding a category" means in the context of YNAB. Is that just another way of saying, set up a category, set a budget, let the budget carryover and accumulate over time? The actual money is just sitting in my account and not doing anything, right?
I might be confusing myself because prior to using YNAB, which is only last week, I've been transferring set amount for the annual expense to a savings account. This I've been staring at this transaction and trying to figure out how to categorize it.
- Expense 1 - $120/yr
- Expense 2 - $480/yr
I have been transferring $50/m at the beginning of the month (scheduled transfer). Now there is 1 transaction showing Transfer activity of $50 outflow in my checking account, the another transaction showing $50 inflow in my savings account.
Should I stop the transfer activity and just keep the money in the checking account and just let me budget amount accrue in YNAB? Does it matter?
Maroon Lion said:
Should I stop the transfer activity and just keep the money in the checking account and just let me budget amount accrue in YNAB?
Yes, that's absolutely what it means. With YNAB it doesn't matter where the money is, it's just whether you have it accounted for in the budget that matters. And your interpretation of that was spot on. Yes, just budget into the category every month, and let it accumulate. There is no need to transfer to or from Savings in order to save for it.
You still can have savings, simply for the fact of earning interest, and keeping a large portion of your cash away from your checking account. But Accounts don't matter any more, only categories are what you look at to see how much money you can afford to spend on a certain item.
A lot of people (myself included) will use the running balance, and scheduled transactions to see what the balance of the checking account will look like in the next couple weeks or for the month, and accounting for a buffer that makes you feel safe, Anything above that can be siphoned off to savings. Or if there's a big transaction scheduled for this month (biannual car insurance, for instance), and it will take your balance lower than you're comfortable with, then a transfer from Savings to cover it will be in order. But the savings account is no longer there to tell you what money is ear marked for "savings" it's simply there to earn more interest than your checking account does.
YNAB it a good budgeting system. But unfortunately it does not allow for setting up an expense item quarterly, semi annually, or annually. It allows for income to be budgeted quarterly, semi-annually, and annually but not expenses. This is one the most significant short-comings of YNAB. So, you have to break the expense up into single months even though this is not how you are paying it. This sort of works but is very awkward and misleading.