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.
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! :)
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 :)
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! :)
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.
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.
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.
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.