Yearly budgets

Hi everyone,

This is my first month using YNAB and I'm still getting the hang of it. I really apologize if this has been asked somewhere else, maybe I just need to be directed towards a previous conversation.

My question is: if I know how much I'd like to spend in a certain category (ie, my yearly budget for clothes is $500), how do I reflect that in my budget? 

I was trying to set a "Target category balance by date" goal, but I wasn't sure if that was right. If I spend $25 on a dress, I just want to know that I still have $425 of my yearly budget left to spend. I don't want my goal to now reflect that I need to put away an extra $25 to reach the $500 by the end of the year. 

I might spend $300 of the $500 in February, if there is an event I'm going to, etc. How will that work, since it's more sporadic spending, but it's still within my yearly budget?

 

Please let me know if this makes any sense, or if I have terribly confused you all, and if you have any feedback for me.

 

Thank you!!

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  • Hi Colleen Cirocco !

    That's a great question! :)

    How you set that category up in your budget depends on how quickly you want or plan to have that money available.  Do you have the whole $500 now? If so, you can budget $500 towards Clothing and you don't need to do anything except rationally spend throughout the coming months. If not, how quickly do you want that $500 set aside? You can set a monthly funding goal of $100, so in five month's you'll have set that $500 aside - you can then cancel the goal and focus on stretching that money the rest of the year. Or, you can budget $50 a month for ten months instead, or any variance of that savings approach.

    When you have a moment, read our How To Create a Budget Template blog post or take a look at the Create a Budget Template Workshop. Both will teach you how to use scheduled transactions and goals to outline priorities and plan for those expenses! :)
     

    Reply Like 1
    • Faness  I came here to ask the same question for the same reason. I Don't want to spend over $420 a year on clothes, but I don't buy clothes every month. So I saved $35 for January and February, then took advantage of a sale in March and spent $200. So in order to figure out my monthly budget for the rest of the year, I have to do some really annoying math. ((annual budget - spent so far) / remaining number of months.) It's particularly hard because I have to go into the reports section and hide everything but my clothing budget in order to see the accurate number fo how much I've spent so far. You have a method of planning for predictable annual or bi-annual expenses, but nothing for unpredictable annual expenses. To add to the frustration, YNAB is pretending that this is not a valuable method of controlling your spending when it's actually a great way to do it. It would be nice if there were a type of goal that would adjust my monthly budget in clothes to $24.44 now that I've spent a lot of my planned yearly budget three months in. 

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    • Hi Tomato Sidewinder !

      I'll pass this along to our development team as a feature request for further consideration! :)

      For now, to save a step, after you know how much you want to spend the rest of the year, you can set a Category Balance by Date goal to help with the math. YNAB will calculate how much to budget each month between now and the date you select (such as December 2018) to stay on track for that goal. :)

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    • Faness  Oh man! That's actually a great workaround for now. Thanks for your help!

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    • Tomato Sidewinder Happy that helps! :)

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    • Faness  Sorry, I'm back, that actually doesn't work because the math will show me how much I need to save to have net $500, not $500 total budgeted for the year with my debits taken into account. 

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    • Tomato Sidewinder No need to apologize! For that goal to work, you'd still have to do the first portion of the math you laid out. So, if you wanted to spend $500 total for the year, but spent $200 on a sale, you'd have to enter $300 as the goal amount by December to fix those amounts. Also, you'd want to create the goal the following month so that the $200 in spending isn't included.

      Reply Like
  • Hi Faness!

    I was planning on gradually putting money into this category, while having the option to spend against it as well. I'm looking for some visibility on how much I'm spending on clothing (and other categories as well) throughout the year. I'm still learning how things carry over from month to month with YNAB. I will take a look at this workshops! Thanks for your help :)

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 2
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      Colleen Cirocco You can't carry over negative from month to month. You need to reframe how you think of your budget when using YNAB. It's essentially an envelope system, where you dish out all your cash and only spend what's in the envelope. If you need more than what's in the envelope, you need to take it out of one of the other envelopes... because cash in an envelope can never be negative.

      The reason it's not an annual budget is because you aren't getting paid once a year, and you can only add money to your categories when you get paid. This technique is designed to prevent you  from commiting to spend, and actually spending, money you don't have yet.

      Reply Like 2
    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 1 yr ago
    • 2
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    You could use a target balance instead of target balance by date.  Then, when you spend from the category, you can build it back up again.

    Reply Like 2
  • I agree.  YNAB seriously needs a way to account for items that you want to spend a specific amount on per year but then do a big portion of that yearly amount in random months.  The months that are over the 12 month average of course can be covered by available TBB funds or by moving money from one "Envelope" to the other...but it should still let us know what we have left to spend in that yearly budget amount for the remainder of the year (taking the spent portions into account).  PLEASE add this as an option at least for those who want/ need it! :)  

    Reply Like 1
  • I’m new to YNAB - Faness has this been sorted now? It would be an extraordinarily useful function as it just doesn’t seem to work any other way. Thanks! 

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    • Hi Powder Blue Yeti !

      We haven't released any new goal types yet, but there are a number of tools you can use to help stay on top of spending in a certain category. You can use the different goals mentioned above if you're trying to save or put aside a certain amount and you can use the Spending Report to check on how much you've spent so far. :)

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  • I would also love to see some built-in support for annual budgets, but I do have a system that works fairly well in the meantime.

    In case anyone else finds this useful, my workaround consists of creating 2 separate categories: savings and spending. In the savings category, I set a target balance by date goal equivalent to my yearly budget and with a date of January 1. When I've reached that goal, I move the entire balance into the spending category and reset the goal for the next year. Then I categorize all outgoing transactions with the spending category throughout the year while also saving for the following year.

    This obviously requires some lead time to save up for the next year, but it works.

    Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • Reported - view

      Alexander Thompson Why? There are much better uses for money than sitting around for a year unnecessarily.

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      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 3 mths ago
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      Alexander Thompson What kind of clarity does it give you to categorize all outgoing transactions as "spending"? Hopefully I'm mistaken that that's what you're doing.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      bevocat I think it's dual categories for each single category.... or at least I hope it is.

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      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 3 mths ago
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      nolesrule So it's either a ton of unnecessary busywork creating and babysitting a buffer category for each category OR no category spending guidance of any kind (and even then it only shows you how much you have to make last until the next time your annual budget ticks over-- not a good pacing strategy). And also you have to sit on everything until you have a year's worth of money to budget.

      Either way, it's not a very appealing situation.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • Reported - view

      bevocat Yeah. I'm not a fan of having more cash in the budget than is actually necessary. That money could be put to better uses.

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    • nolesrule I’m on an extremely variable income and I need to be six months ahead, so saving for future months is vital in situations like that - or do you mean that you’d categorise the money differently? 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      Powder Blue Yeti The best way to handle variable income is to have an income smoothing holding category that allows you to budget the same amount to your categories each month whether it's a high income month or a low income month. In low income months, you pull from the category and in high income months, you add to the category.

      Reply Like 3
      • Vibrant
      • May the best of your todays be the worst of your tomorrows
      • vibrant
      • 3 mths ago
      • Reported - view

      nolesrule said:
      bevocat I think it's dual categories for each single category.... or at least I hope it is.

       I don't think it applies to every category (or at least I wouldn't) - just the ones like clothing that tend to attract this sort of irregular spending pattern. Fund your 2019 clothing category TODAY with whatever your annual spending cap is, and then create a separate category for next year with a target date savings goal. It's actually a pretty clever way of working around YNAB's goal limitations, if you have the resources to fully fund the category for the first year, which it sounds like Alexander Thompson does.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      Vibrant The aim should be to fund every category the same monthly. Using the same clothing example, in 5 years of using YNAB, we've never hit our cap, and we've never spent it down to zero. You don't need to start the year with a full year's worth of money, because you'll be replenishing it as you go. For variable categories, you budget monthly the annual average spend and let it build up in months where you spend less. Your target cap doesn't need to be a full year, but only the sum of amounts spent above the average at the end of any given month (or for a start of month target, also add one month's average).

      I do this for electricity, gas, and natural gas, but it could also apply to other categories with irregular spending. It'll prevent you from holding too much money in a category needleslly that could be better used elsewhere.

      Reply Like 1
    • Vibrant That makes sense - thanks!

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    • nolesrule Yep, that’s what I’m trying to do by saving six months’ worth of expenses. It’s just a pretty major smoothing category! ;)

      Reply Like 2
  • I see the point - he’s trying to save a year’s worth of expenses as a buffer and without the benefit of the savings envelopes we were asking for. I’m not sure if this would work though for the scenario when there’s a goal for a certain amount of money to be saved/spent  over the course of a year but then bits of that are spent throughout the year, eg. clothing. Thanks for the response though Alexander Thompson , still trying to figure out how to tackle things and it’s useful to have all hints. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • Reported - view

      Powder Blue Yeti If you want a year's worth of expenses, just figure out the sum of the money you budget to each category, multiply by 12. Save extra money each month to an Emergency Fund with a goal equal to that number. Done.

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  • I didn't think my post would generate this much debate!

    To clarify, I do mean that I split each annual category into two. For example, I have a "Vacation Savings" category and a "Vacation Spending" category. It allows me to fund the "Vacation Spending" category with the entire budget at the start of the year because I have already saved for it. That way I have a perfectly clear picture of how much is left in the budget without having to check reports. Meanwhile, my spending doesn't interfere with the savings goal because it's in a separate category.

    nolesrule I don't use this for categories where I actually spend money every month consistently, just for categories where I want to set an annual cap but will likely have a few large expenditures at unpredictable times throughout the year. In these scenarios, the typical monthly budget would leave me with most months not spending anything, and a few months going way over the limit.

    Like I said, this approach only works if you can either fund the first year up front or wait a year to start spending in that category. However, you can accomplish the same thing and cut the savings time down if you do this in shorter time blocks, like 6 or even 3 months (and cut the budget size proportionally). 

    As far as doing better things with your money goes: yes, it means the money is sitting in my savings making 2ish% interest instead of some higher yield investment. 

    In any case, just a suggestion! Great to see that people are passionate about this.

    Reply Like 1
      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 3 mths ago
      • Reported - view

      Alexander Thompson No, that makes fine sense! I just wanted to make sure you weren't creating an entire shadow budget within a budget or collapsing all your categories down to just saving and spending!

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    • Alexander Thompson Ah, I get it - good idea! Thank you. 

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    • Alexander Thompson hey! I really like your idea. It makes me want to start saving for some of those expected expenses for next year now (clothes, vacation, gifts, etc). I think it would be hard for me to get ahead that much, though. 

      Do you just trust the category balances to reflect how much you've spent (as opposed to a report)? For instance, if your yearly clothing budget was $1000, once you've spent $300, would your "Clothes Spending" category just be $700 until you borrow from the category again? I feel like for me, my category balances fluctuate a lot from moving money around. Just curious how you mentally keep track of how much you've spent.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      If the plan is to spend (for example) $1200/year, just budget $100/month. If you need to seed it because you're just getting started and need more up front, so be it. It just means you hadn't been adding $100/month in previous months... whether because a new category, deciding you want to change the monthly amount or because you just started using YNAB.

      This is how you turn lumpy spending or infrequent recurring spending into monthly budgeting. It's what Rule 2 is all about. There's no need to jump through hoops with excessive funding or multiple categories. It can all be done in a single category with regular funding.

      Reply Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      Another option would be to budget for the large expenses separately, so you'll know you have the money when it comes time to spend it. Having a single category filled for your entire annual spending doesn't help you if you spend to much on the small stuff before it's time to pay for the bigger spending.

      Reply Like 1
  • Colleen Cirocco it's a little bit less effective if you steal money from the "spending" category, although that's a perfectly legitimate thing to do if you need to, because the idea is that the category balance should tell you exactly how much you have left to spend without the need to go look at the reports, see how much you've already spent for the year, and do the math.

    nolesrule I completely agree that for most categories, that is the correct approach. However, I don't think this thread would exist if the answer was that simple for all categories. 

    Take my Vacation category as an example (this is really just a derivation of the situation Tomato Sidewinder laid out above). Say for the sake of simplicity that I have an annual Vacation budget of $1200. With your approach, I would set a monthly funding goal of $100. Let's say I decide to take an $800 trip in March, at which point I will only have saved $300 in my Vacation category. I can't have a negative balance, so I need to borrow $500 from somewhere, but that's far too large an amount to borrow from normal monthly categories like Dining Out. Should I borrow from my emergency fund to cover it? I definitely don't think my vacation qualifies as an emergency. Even if I do that, now I have to do some math to figure out that my remaining budget for the year is $400 and change my monthly funding goal. Unless I do all my vacationing in December, I have to do this every time.

    The method I suggested ensures that you will have the entire yearly budget ready to spend, guilt-free, because you allocated it specifically for that category, so you're not borrowing from your emergency fund. Beyond that, it's just a simple trick to save you from having to look at reports and do some math.

    If you had a few categories of this nature so that you could borrow money back and forth between them instead of from your emergency fund, then I do think a YNAB feature to automatically adjust your monthly funding goal to (annual-budget - total-spent-ytd) / remaining-months would be great.

    Reply Like 2
      • Ceeses
      • Ceeses
      • 3 mths ago
      • Reported - view

      Alexander Thompson Using your example, I guess what you are trying to do is to limit your vacation spending to $1200 over a 12 months window (not from January to December, but over 12 months whatever the date is). So if you start YNAB in January, you have to figure out how much you spent on vacations during the 12 months previously (or make a guess). Then seed the vacation category with the left-over + $100 (monthly saving amount for January). Then when you arrive to March there are 2 cases:
         - the category doesn't contain $800: well you can't go on holidays without violating your rule/goal of not spending more than $1200 per 12 months period.

        - the category contains $800: you can go on holidays and follow your rule/goal

      I feel what you are trying to do is floating your holiday expenses: that is counting on future income to cover today's expenses. In other words, you are saying: I don't have earmarked $800 for vacations yet but I'm going to earmark $100/month going forward so I'll have more than enough to cover this before next March without spending more than my $1200 per 12 months goal. That is violating the very premise of the YNAB method, so YNAB will never help you do it.

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      • jenmas
      • jenmas
      • 3 mths ago
      • Reported - view

      Ceeses I believe he is saying that in 2019 he will fund vacation savings category such that $1200 is available on January 1, 2020 to be transferred to vacation spending category for spending in 2020. Which is fine.

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      • Ceeses
      • Ceeses
      • 3 mths ago
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      jenmas It's not what the example shows. It shows floating future income. If you don't float, then when you start YNAB you have to properly seed the category which is what nolesrule said. I understand what he wants to do and I agree YNAB doesn't help with that. But it works well without work around if you change from $1200/year to $100/month. If you properly seed the category when you start, then you won't spend more than $100/month if you never spend more than the available for that category and budget $100 every single month. Which I guess is what @nolesrule  was saying. 

      If you are budgeting $100 per month with seeding the category properly etc. , then you need to spend more than what's available in your category at some point and you think it's fine as you won't spend any more for the rest of the year so you won't spend more than your $1200 cap per year, then you are floating. 

      I guess the spending/saving categories are useful if you are dead set on not spending more than $1200 over a year. If you save in the same category you spend from, then you could have a year (or a 12 months period) where you overspend on your cap but then since you only budget $100 per month that means you will have to underspend in the following months. Which means, over the years you will still be spending on average $1200 per year, but some years you might be spending $1500 and others $900. For the holiday example, it makes sense to allow some variations from year to year on the exact spending (not on the saving/budgeting) as some trips can cost more than others.

      Reply Like 1
    • Alexander Thompson I'm afraid I still don't understand the value in a 'saving' and 'spending' category for the same expense. It just feels like double-handling?

      Also, I'm finding the 'vacation' scenario misleading as I can't shake the 'if you don't have the money, dont spend it' mentality. So let's shift the description, if you'll allow?

      .....

      I have an annual target of $1,200 for medical expenses, so I try to allocate $100 per month.

      3 months after it's been zeroed, I need to get an MRI for $500 (feel free to ask me about my country's Public Health system later, if you like). I can't decide to not have this MRI (for serious, they thought I'd had a stroke last year), so I have to find $200 from other allocated categories (or, I guess, find more income). This isn't a case of deciding if my MRI is an 'emergency' or an 'overspend', it's simply a case of deciding which category(ies) are able to cover the MRI cost.

      Then, once I've spent the money (and the MRI was all clear, yay), the category balance is back to $0, and $1,200 below my goal target. Poor Old Michael Finnegan Begin Again.

      ...

      Despite all this, I feel like I'm missing something important in your approach...Something else you're doing, or a basic premise you follow. What is it though?!

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      • jenmas
      • jenmas
      • 3 mths ago
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      The Late Heavy Bombardment my health insurance has a $2000 annual out of pocket maximum. My plan year is October 1 - September 30. Therefore I make sure that my Medical OOPM has $2000 in it on October 1. I have 2 categories - OOPM This Year and OOPM Next Year. On September 30 2018 there was $1,172.32 in the "This Year" category and $1473.23 in the "Next Year" category. So in the October budget, I used the Move Money Tool to move $827.68 into the "This Year" category, leaving $645.55 in the "Next Year" category. As I have received FSA reimbursements since October 1, I have allocated those funds to the "Next Year" category and it currently stands at $949.87. Closer to September if I think there won't be enough to have $2000 on Oct 1 for my "This Year" category, I will reallocate from some other categories, but I'm not overly worried.

      Reply Like 2
    • Alexander Thompson Makes perfect sense to me - will aim to achieve this over the next couple of years. Thanks for the good idea! 

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