Starting YNAB this friday. What will happen when the month rolls over?
I have been learning a lot about YNAB the last couple of days and I'm excited to start budgeting. I am confused however about some things. Hope you can help!
I am planning on starting this friday, the 23rd when I get my paycheck. I get a big bonus from work this month, so I am in a very fortunate position. I've already created my categories and set goals for both the remaining days in may and the month of june.
Lets say I get $2800, which will be my total amount to be budgeted. I can use that to budget for the remaining week of may. My rent is due the 27th ($850) and the other expenses combined will be around $150. So that leaves me with $1800 to still be budgeted. I guess I use that to budget for june, right? I've understood you always budget everything (give every dollar a job. This means I can budget the entire month of june with that remeaning $1800. I will probably still have some money left (like $200 maybe) which I can budget in my savings category.
But then what happens when the month rolls over and june starts? I am so confused about that. I might have some overspending in a few categories and some money left in others, but it can't be much since I've only started a week before. I've read all budgeted amounts are set to zero, but what does that mean? I don't get paid for another 23 days in june, so what do I budget with when the month rolls over?
Is there a massive flaw in my thinking? Am I completely missing the point? Probably. Any help would be highly appreciated.
oh and by the way. I am starting YNAB to control my spending and start saving!
Hi, welcome! At the end of the month, whatever money you haven't used in your budget will roll over into the next month and be available to use then. You will see that in the different numbers under Budgeted and Available columns. For example, if you budgeted $850 for rent in May, but say you got a discount and paid $800 instead ($800 should show under Activity column), you'll see $50 left under the Available column. When June comes around, there should be $50 still in the Available column.
When the new month comes, your Budgeted amounts in that month will be zero in every category unless you start budgeting again. So, let's say you now have $50 Available in June. You can add $800 under Budgeted, making your total available rent money $850. Or you can add the usual $850 to Budgeted, making your total available rent money $900 for June.
Have you opened a new budget in YNAB just to play around with the numbers? If you start adding and subtracting some numbers in different months, you'll see what I mean. You can always reset everything to zero once you're done playing around.
Feel free to scroll forward to next month's area right now. That's what it will look like when the month changes in the real world, assuming you don't add any new transactions.
The single exception to this rule is that Monthly Spending Goal doesn't give accurate values until the month actually arrives. Meaning, the current balance of the category is ignored.
Blue Gazelle said:
So that leaves me with $1800 to still be budgeted. I guess I use that to budget for june, right?
Yep. Most veterans do not budget past next month's area. Just put the rest in an Emergency Fund or Income Replacement fund. No one wants to flip through and edit 6+ pages when the cable bill increases or they stop doing the latest hobby. (This is looking ahead to when you have the 6+ months of reserves that is widely accepted as a good idea. It makes sense even if you're 2 months ahead.)
Most people who are in this position where they can push all income into next month's area will use a holding category to temporarily store income as it arrives. Once they have received the entire month's worth of income (usually multiple paychecks), they will release those funds back to To Be Budgeted and budget all of next month in one shot. Goals and scheduled transactions makes this pretty easy with a few clicks.
Those who do not use a holding category have to partial budget with every income event (assuming multiple checks) or risk accidentally mixing those new funds into the current month (if just left hanging out in TBB).
Blue Gazelle said:
I might have some overspending in a few categories
Ideally you won't. You should check Available amounts before spending. If you're short, then move funds from a lower priority category. If you can't find a lower priority category, it's much easier to skip that purchase.
Realistically, you will, and you should fix those ASAP within the same month by reallocating from other green categories. Strive to NOT use the income intended for next month to fix this month's overspending. Don't forget, you already have a plan for every penny of that income in next month's area even though you may not have allocated it there yet.
Blue Gazelle said:
I don't get paid for another 23 days in june, so what do I budget with when the month rolls over?
Until you get paid 23 days into June, you'll have your $1800 to budget with (which you mentioned from this Friday's paycheck).
I would strongly suggest prioritizing your most important categories now and not spending more than what you've budgeted until that next payment arrives in late June. After a few weeks or months, you should be able to get into a budgeting / cash flow rhythm that doesn't feel restrictive.
Blue Gazelle said:
Lets say I get $2800, which will be my total amount to be budgeted. I can use that to budget for the remaining week of may.
One thing to also consider is that you need to take into account the amount of money currently in your checking and / or savings, or whatever accounts you will be bringing in as part of your budget. Let's say you already had $200 in your checking when that $2,800 check gets deposited. Well, when you bring your account on to the budget, you will input as a "starting balance" $3000. Because it's your (anticipated) $2800 plus the (hypothetical) $200 balance that was already in the bank. So all of that will go into your To Be Budgeted to be assigned to categories (budgeted).
What a lot of people do is develop an end of month or first of month routine. So, you'll get paid and budget out the money as you described. Then, on the first of the month, when you open YNAB it will have moved forward to the new month. It's a good time to reconcile all of your accounts. If you do it regularly, this shouldn't take long. This will give you the opportunity to add in any transactions you may not have entered, but that haven't cleared your bank and imported. This is helpful, because if you made a credit card charge on the 30th, but it hasn't cleared your bank yet, and therefore imported into YNAB, when it does do so on, say, the 2nd, it will still be dated the 30th. So, reconcile your accounts, make sure all pending transactions have been entered, then back to the month that just ended and go through each category and check for overspending or underspending. Move money around as needed to get everything how you want it. Then you can move forward to the new month. For me (and a lot of us) this is when I would take the money I've been holding for June and put it into TBB and fund all of my categories.