newbie: Extra money at end of month. Confused what to do with it
This is my first month with YNAB.
Within the first couple days of using it, I funded most of my categories for the month (all bills that would have to be paid soon, plus some (but not all) my savings categories). I'd entered my first few transactions, reconciled, and My "To be budgeted" was $0.
Now, my next paycheck arrives. I fund the few savings categories for this month that couldn't get funded from my initial YNAB budgeting, and now I have a good sum of "surplus" money "left", and I'm not quite sure what to do with it.
The videos I've watched say: start funding categories for the upcoming month, but I don't know how to approach that. Which categories should I fund first? I don't have enough to fund all next month's categories.. Do I need to make a spreadsheet to forecast how much money will be needed by certain bills by certain dates, in order to do a good job at figuring out where to best put that surplus now? That seems against the purpose of YNAB, but it also seems sort of arbitrary to just fund some categories and then "adjust as needed" as things get rolling for next month (Or is that what I should be doing?)
I guess I'm used to thinking about budgeting as having "just enough" to cover my monthly bills and to not have to allocate beyond that. (Before YNAB I had seeded my checking account years ago with enough money to cover any/all bills that would come up the first month without having to factor in remaining paychecks for that month. That meant I never really had to think about funding individual bills-- there was always magically enough money to pay them -- and this means I also had a surplus balance in the checking that sort of drifted across the months).
Hope I'm not rambling. Switching to the YNAB way of "allocating every dollar" is so different in comparison to my previous approach of "just keep a surplus in your checking and don't worry about the details"...
Any advice would be appreciated!
Much as you allocated this month, what is due soonest?
Read up on Rule 2 / True Expenses so you don't have to resort to extra work outside YNAB. Just set a Goal based on amount and date needed (either possibly estimated) and make progress on the months leading up to those non-monthly expenses.
Always fund the more important and/or sooner-occurring things first.
The way a lot of us handle this is by using a category called Income for Next Month (INM). I will describe how I do it below.
1) Created a category called INM and placed it at the top of my category list to facilitate easy transfers between INM and TBB. I initially funded this category with enough to cover one months expenses (used savings to do that).
2) As new income is received I categorize it as TBB and then immediately transfer it to INM. By the end of the month I should have enough in INM to cover next months expenses.
3) When next month rolls, I fund all categories which leaves TBB negative by the same amount as my categories, I then cover the negative TBB with the funds in INM.
4) Just repeat this every month.
This is a lot less work in the long run and as you stated, you are already used to the concept of seeding one months worth of expenses.
(Before YNAB I had seeded my checking account years ago with enough money to cover any/all bills that would come up the first month without having to factor in remaining paychecks for that month. That meant I never really had to think about funding individual bills-- there was always magically enough money to pay them -- and this means I also had a surplus balance in the checking that sort of drifted across the months).
Yes, first get a month ahead as described by ynaber2613 where all your paychecks this month fund next month. Then, any extra funds can go wherever you need it. Maybe Rule 2 true expense categories or savings categories (do you have a fully funded emergency fund?). Once all categories are fully funded, you could send some off for investments via an investment category. The choice is yours!