How to handle going into the red

So, I know I don't have enough this week to cover expenses. I am going to go into the red and I know it. In the past, I shut down YNAB and didn't look at it again until I got paid again. I want to stay mindful (and stressed out). So, should I knowingly overspend my categories?

For example, I know that my car insurance is going to come out before I get paid. That's bad. Right now I have nothing budgeted to it. Should I budget the money that will come out and have it overspend my category?

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  • To clarify: will you be going in the red in that category only, or will you be overdrafting your account?

    It's awesome that you're sticking with this even when it's scary to look at!

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  • Depending on how you're paying for these expenses (extending credit, using an overdraft capability, borrowing from a friend), there will be different answers on both how to represent those realities in YNAB as well as how to use YNAB to plan.

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  • Mama Fox said:
    For example, I know that my car insurance is going to come out before I get paid. That's bad. Right now I have nothing budgeted to it. Should I budget the money that will come out and have it overspend my category?

     Move funds from another category to cover the car insurance. Leaving a category red for a while can be ok if you don't have any cashflow problems but it sounds like your budget is quite tight? If it is, then you need to cover overspending in categories so you maintain a clear picture of what you can and can't pay for at any one time. Covering the car insurance from other categories before you pay it may reveal that there are other more important categories and it may be best to delay paying the insurance.

    That's all if you're dealing with cash in the bank. If you have a credit card then you have the option of letting a category go negative and then it becomes credit card debt when the month rolls over. Or if you get paid agin before the end of the month you can just top up the category and it will be fine. A credit card allows you to float a little even if you are technically paying in full each month.

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  • Rule three rolls with the punches. Echoing what others have said, overspending one category is one thing, but if you’re overspending multiple categories, you’ll likely need to reevaluate your budget. If it’s just your car insurance that’s going into the red, you can reallocate funds from another category. For example, let’s say your car insurance is $150/month and you set aside $400/month for groceries. Move some grocery funds over for car insurance and see where you can scale back at the market. Sticking to it even when things get tricky is the hard part. You got this.

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