My Money's Old, so Why am I Still Having to Budget Paycheck to Paycheck?

I've been using YNAB for a couple of years now, and after a fresh start in January of 2017, really using YNAB more as it's intended to be used. We do much of our spending on a credit card that I pay off every time we get a paycheck (once a month for me, bi-weekly for my husband), we don't carry any debt other than the mortgage and a car note, we're working on building up our emergency funds (one for unexpected repairs or medical expenses, and one for unexpected layoff/income loss), and, for the past several months, my "Age of Money," which has been slowly increasing over the past year, has been in the mid-seventies. The thing is, despite our money being about 2 1/2 months old, that magical moment when we get a paycheck and we start plugging it into next month's expenses remains elusive--we're still budgeting paycheck-to-paycheck. When does it become possible to begin budgeting a month ahead?  

30replies Oldest first
  • Oldest first
  • Newest first
  • Active threads
  • Popular
    • MsTJ
    • YNAB has given me back my future
    • Believer_in_YNAb
    • 2 yrs ago
    • 7
    • Reported - view

    I would guess your buffer is hiding in your emergency fund. It sounds like you have the money, it's just given jobs other than being your buffer.  That is the way I work my budget so I'm guessing you do also.  In order for me to be officially "buffered" I would have to stop funding my future spending categories and fund my buffer instead.   I'm not willing to do so today.  Maybe someday I will work on that buffer but today I enjoy watching my future spending categories grow more.  

    "When does it become possible to begin budgeting a month ahead?"  Again, my guess is when you start funding a buffer category.  

    Like 7
    • HappyDance
    • YNABing consistently since 2014
    • HappyDance
    • 2 yrs ago
    • 7
    • Reported - view

    As an experiment, you could try moving your e-fund dollars to tbb and then budgeting those dollars to your categories to give you the month buffer. The totals will be the same, but the perspective of current categories versus emergency funds will shift. You could just go through this as an experiment and then reverse it immediately. If you really want to try living on the buffer, try it out for a month or two.  You can always change it back to p2p budgeting by moving chunks of funds back to your e-fund. It's a matter of perspective really.  

    I know that seeing a greatly reduced emergency fund would motivate me to focus my efforts on rebuilding the category to its previous level. That can be a good thing. Plus, the emergency fund still exists. It's camouflaged in your buffer. In a worst case scenario, you would begin releasing funds from lower priority categories and your buffer to deal with a crisis.

    Like 7
    • HappyDance and OP, 

      I've been experimenting with this exact method the last 3-4 months. Pulled from FFEF (fully funded emergency fund) to fund all of next month. Each paycheck we've received has gone back into the FFEF until it's full again, and then everything else goes to the future, or to build various savings buckets. It's all the same money, but you're looking at it differently.

      I've come to realize that when we start saving for all the stuff that needs to be saved for (HVAC & car replacement, braces, kids college expenses, etc) we'll be working "paycheck to paycheck" forever!! There is always something to throw money at in the future!

      Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • Reported - view

      Maroon Tugboat 

      Good fun isn't it, reassigning funds and looking at your budget from that different perspective?  Just to be sure, though, it didn't ...um...suddenly rain down brimstone in your area right after you did this, right? 😏

      Like
    • HappyDance I should say I'm blessed to be able to budget for things in the future. I didn't mean for that post to come across so negative. 

      Like 1
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 1
      • Reported - view

      Maroon Tugboat 

      Oh, no!  It didn't come across as negative at all.  I was making a joke about how for many of us Hell must have frozen over before we will consider even experimentally changing how we do things.  When I started implementing different (very flexible) YNAB ways of budgeting and moving funds around, I posted a note in my journal on the older forum about how it must be raining down brimstone somewhere as a result of me doing something different. 🙂

      Like 1
    • HappyDance Hahaha. I gotcha. Yeah, it takes me a while to want to do things differently as well. YNAB almost broke my brain when I first started using it because it was so different from anything I'd done before. I'd always heard the word "budget" but YNAB's version was just different enough that it made me question it. I'm so glad I did, and glad I stuck with it. It is sometimes discouraging (maybe the wrong word) to know that once you pay off all the things you owe (car, CC's, etc) there is an endless amount of future stuff waiting in line to be paid for. It's so much nicer to pay for stuff on the frond end though! So worth it.

      Like 2
  • So, if I understand you guys correctly, my money is "old" because a portion of it is being socked away in a couple of categories that I call "Emergency Savings" instead of being immediately spent. I suppose that when I finish building those buffers (which I currently fund monthly as budgeting categories) and begin allocating those funds to other categories, I'll get to the point at which I can fully fund all my other categories at the beginning of the month. 

    I'm a little old-school when it comes to saving and I think the Age of Money metric is just something that I'm not familiar with following, so I wasn't sure how the marker of being able to live off last month's rent was supposed to work for me. I think I'll stick with my old-school emergency savings categories. I know what my funding goals are for those categories, and they're easier (for me) to track by seeing the amount available in each category grow than by tracking a time horizon. I'll worry about budgeting for next month after those categories are fully funded. 

    Like 3
      • jenmas
      • jenmas
      • 2 yrs ago
      • 2
      • Reported - view

      Lavender Saxophone (4ba2ac329cb9) - Age of Money doesn't tell when you are able to live off last month's income. The way you know is when you are able to full fund "next" month with income earned "this" month.

      Like 2
    • jenmas I get that, and that's a good way for me to look at it. I just feel like being able to fully fund next month's expenses with this month's income has always been touted as something that you would be able to do once your money is "old."  The fact that I'm not there yet made me wonder if I were doing something wrong, and it made me want to check myself against other people's experiences. I think that what I've figured out is that I'm not necessarily doing something wrong, but, by focusing on my emergency fund categories to the exclusion of budgeting forward, maybe I'm  just doing something that's not quite YNAB's philosophy? 

      Like
      • jenmas
      • jenmas
      • 2 yrs ago
      • 3
      • Reported - view

      Lavender Saxophone (4ba2ac329cb9) I don't think so. YNAB's philosophy is that you get to give your money jobs based on your priorities. Anecdotally, many users have stated that they found saving to be easier once they were able to budget from last month's income, but it's going to vary from person to person.

      Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • 1
      • Reported - view

      jenmas I think this is the disconnect between what "Age your money" means and what they promote it means. This is why it was a mistake to change Rule 4. They essentially changed the Rule to make it easier but less meaningful.

      Like 1
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 9
      • Reported - view

      Lavender Saxophone (4ba2ac329cb9) 

      I would submit that not spending your entire income such that you have been saving all along and have 2-3 months worth of income in your emergency funds and true expenses is remarkable. You are definitely not doing anything wrong. If anything, your budget reflects your current priorities beautifully. Keep it up.

      Like 9
    • Heather
    • YNAB-Obsessed since 2014
    • estheticianbabe
    • 2 yrs ago
    • 4
    • Reported - view

    I budget every single paycheck and yet I have half a year's salary sitting in on-budget savings accounts for emergencies and a car replacement fund, plus we have no debt at all. 

    I just really love budgeting every paycheck, so I haven't bothered being a month ahead or "buffered".  Technically, we are buffered because our rainy day funds live in our checking and we use a rewards CC for our spending, so $3000-$5000 will sit there until we use our rainy day funds for things.  

    I get a fun thrill out of budgeting each paycheck, so I haven't bothered to change how we do things.  We really aren't paycheck to paycheck.  It's just my preferred way to budget.  :)

    Like 4
    • Heather I think we have a lot in common, and I may continue to do this as well. I don't have as much cash socked away as you do, but I do prefer actively budgeting to auto-piloting it (I also manually input all of our transactions and have never done the direct download). I feel that actively managing our cash flow helps keep me on track and it helps me to communicate our budget restrictions to my husband. 

      Like 3
      • Heather
      • YNAB-Obsessed since 2014
      • estheticianbabe
      • 2 yrs ago
      • 3
      • Reported - view

      Lavender Saxophone (4ba2ac329cb9) I always do manual input as well.  I love having that control.  I'm quite Type A and it took me ages to set up automatic payments for things like our internet and cell phone bills, but I finally caved and put them on automatic to our CC for the rewards.  (I also did it to make my husband's life easier in case I kick the bucket randomly one day -- everything will be paid and he won't have to worry about doing a thing.)

      I don't even look at my Age of Money.  It doesn't really serve a purpose for me.  I did understand the purpose of being buffered, but I just honestly love weekly (or bi-weekly) budgeting when our checks come in.  I just love being super active within our budget on a regular basis.  

      Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • Reported - view

       Heather said:
      I also did it to make my husband's life easier in case I kick the bucket randomly one day -- everything will be paid and he won't have to worry about doing a thing.)

      Just a cautionary note.  My brother did this with his bills to streamline a few things with the same thought in mind. After he died, my sister-in-law closed his credit card account on the recommendation of counsel, and a series of payments weren't made, services cut off in the middle of winter, etc.  It was a story that provided us with some comedic relief and distraction from our grief at a surprisingly premature loss.

      Like
      • Heather
      • YNAB-Obsessed since 2014
      • estheticianbabe
      • 2 yrs ago
      • 3
      • Reported - view

      Michele That's awful, I'm sorry for your loss (and your sister-in-law's loss).

      I have written instructions for my husband upon my death.  He's so smart and we discuss finances, goals, retirement and savings and all those things very regularly, but the daily details, tracking and the more nuanced pieces of the budget he's not really involved in.  So I made sure to leave him instructions -- he has access to our YNAB budget and there's a list of which bills are paid with each CC (currently only actively using 2 CCs).  So I hope it won't be so hard on him if I do end up going out before he does.  

      I even quiz him sometimes on where to find all the passwords to all our financial accounts in case something does happen.  😂

      I'm pretty Type A control-freak, so I've tried to cover all my bases to make sure nothing skips a beat for him (or myself, in case he dies).

      Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 1
      • Reported - view

      Heather 

      Thanks. That was six years ago this month.  He was so Type A and organized, dealing with accounts after his sudden passing was easy and undramatic (except for the services being cut off the following month). He even had his 40th anniversary card sitting in his desk ready to give his wife at a (presumably) big  celebratory event later that year.  I still miss his laugh.

      Like 1
  • I get paid on the 15th of the month. I then budget for my bills and categories up until the 15th of next month when I expect to get paid again. Have I broken the paycheque to paycheque cycle or not?

    Like 1
    • Hi Six Hats ! First off, it's impressive that you're able to budget your monthly paycheck so well that your money lasts until your next paycheck, which doesn't come until a month later! According to my understanding of YNAB's methodology, "breaking the paycheck-to-paycheck cycle" happens when you're spending money that you earned last month, and the money that you earn this month goes into next month's budget. So, if you get paid on Feb 15, and you are able to assign that money to expenses that you expect to pay starting March 15, then you would have completely broken the cycle.

      But as my question and the answers that I've received from others in this thread illustrates, there are those of us who budget paycheck-to-paycheck as you do, but have also built up nest-eggs within our categories, which have allowed our money to "age." We could probably be budgeting our income for upcoming months, but we're socking it away into savings categories instead. 

      Like
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 4
      • Reported - view

      Six Hats Lavender Saxophone (4ba2ac329cb9)

      A long time ago, before web YNAB got rid of Income for Next Month, I took a look at budgeting with a margin of safety and concluded that the major benefit of budgeting on last month's income was that it allowed me to budget a full month at a time, instead of budgeting piecemeal as income came in.  Consider the following two scenarios:

      Scenario 1:  I budget this month on this month's income.  My categories are funded to my satisfaction, and I am in no danger of overspending any category at any point in time.  Among other things, I have an Income Replacement category for the contingency of job loss.  The Income Replacement category has 6 months of income, and it is growing over time as I budget.

      Scenario 1:  I budget this month on last month's income, on the first of the month.  My categories are funded to the exact same level as Scenario 1, with two exceptions.  First, the categories get funded on the first of the month instead of whatever various days I get paid; and second, my Income Replacement category has only 5 months of income, but it is growing at the same rate as Scenario 1.

      Mathematically, these two scenarios are identical.  If I lose my job at the end of the month, under Scenario 1 I use a month's worth of income to budget the next month and then have 5 months left in Income Replacement as I start my second month of unemployment, assuming it takes me that long to find a new job.  In Scenario 2, I budget my first unemployed month using the income from my last employed month, and start my second month of unemployment with 5 months left in Income Replacement.

      So it really comes down to personal preference, whether I would rather see 6 months instead of 5 in Income Replacement, or hide a month of income replacement in a temporal buffer.

      For someone paid once a month, it's almost flip a coin as to which you prefer.  At the other extreme, where pay is more frequent or irregular - say, two wage earners who are paid biweekly and semi-monthly - budgeting on last month's income can strip away some clutter of when does how much income happen and let the user focus on the budget.  (It is possible to overstate the benefit of doing this.)  In any case, the financial buffer of being able to budget on last month's income is not substantially different than a financial buffer of having an income replacement category funded with at least one month's income.

      Like 4
  • When people discuss budgeting next month with this month's money are they talking about all categories or just bills? I find it strange to budget forward, let's say money for going out, because that money won't be available until next month technically. So, I check my budget this month and see my category balances but these are not a true reflection of the funds available as I have put money into next month's funds.

    Like
  • Six Hats said:
    I get paid on the 15th of the month. I then budget for my bills and categories up until the 15th of next month when I expect to get paid again. Have I broken the paycheque to paycheque cycle or not?

     Nope. That's still paycheck to paycheck. You may no longer be living paycheck to paycheck, but that's a result of your savings categories. You are still budgeting paycheck to paycheck, and I personally contend that there are some habits from living paycheck to paycheck that cannot be broken while still budgeting paycheck to paycheck.  You break the cycle when you can decouple the two.

    It doesn't even need to be as far as starting with the 15th of next month. Since YNAB works on calendar months, I would suggest that just pushing ahead so that you budget the money coming in the 15th for use from the first to last of the next month would be enough to decouple the timing.

    Like
  • Six Hats said:
    When people discuss budgeting next month with this month's money are they talking about all categories or just bills? I find it strange to budget forward, let's say money for going out, because that money won't be available until next month technically. So, I check my budget this month and see my category balances but these are not a true reflection of the funds available as I have put money into next month's funds.

     But that's one way of pacing yourself, so you're not spending money intended to be used next month in the current month. Out of sight, out of mind. If you budget next month's going out money in the current month, all you see is the sum of the two as the amount you can spend, and you might spend it all this month.

    Like 2
    • Moohouse
    • Software developer
    • Moohouse
    • 2 yrs ago
    • 5
    • Reported - view

    I do what I did back in YNAB4, basically. When I'm paid, I enter the paycheck as Inflow: To be budgeted, then I go to the next month and assign the paycheck amount to my top category (which is Groceries). When the next month rolls over, I free the funds from Groceries back into To Be Budgeted and do the month's budget.

    If I had multiple paychecks every month, this method should work just as well as it does now. I could go ahead and buffer categories for future months, but the future is just that - in the future 😉. There's too much fiddling around to reorganize future months when things change (a.k.a. life happens), so I don't budget all or specific categories of future months. I can't really see how it would be beneficial to me.

    Like 5
    • Moohouse Yes, that's what i do . I miss setting it for income for the next month, though . Much easier.  Right now I get paid on the 1st and 15th.  Both paychecks are sent to the following month.  My big goal is to send it two months in the future!

      Like
  • As far as getting ahead of the paycheck to paycheck cycle - here's how I've gotten there (I think):

    When I joined YNAB, I was leaving one job and starting another. At that time, I got an additional paycheck, and I had the opportunity to start with money with no current 'job' as YNAB says. 

    I then put money in each of the categories and got a disastrous picture of my finances. Then I got to work. I made mistakes, learned about why you don't leave anything overspent ever, and fixed all that. I've consolidated categories, and messed up my history, but I'm OK with that since now I have a VERY accurate representation of what my money is doing at this time. Onward!

    Now what I have is money in each category that will rarely, if ever, hit $0, and all next month's bills are funded. I set it up in a way where I set a deposit amount and a max per category in the name of the category - since that makes it easy for me to know how much to put there when I get paid (every other week until I hit my max). All the money rolls over, so I don't have to think or steal from next month, this month either. It's been really nice and stress-free so far, and with adjustments (constantly) I've gotten to the point where now they make sense, they're easy and don't fail (so far). When they do fail, I'll just make adjustments. 

    According to the age of money - mine's 2.5 months old - but I think there's an algorithm based on the last 10 transactions you have to make that math add up - which I don't care to fanagle with... All I know is I have enough buffer in my categories (all) to make up about 4 -5 months worth of funds if I were to get a wild hair and quit or lose my job for whatever reason. Now I'm saving up for big ticket items like home renovations next year and a new car down the road. 

    Anyhow - lots of folks had some really good points. It depends on how you look at it, but as long as you can make a decision to shift for emergencies or unexpected on a dime, then that's when I think you've hit that sweet spot. You're not worried about cc bills or monthly bills or anything else popping up without a backup plan in mind.

    Hope this helps!

    Like 1
Like3 Follow
  • 3 Likes
  • 2 yrs agoLast active
  • 30Replies
  • 3408Views
  • 13 Following