Starting out with savings
Hi everyone! Long-time paper budgeter (errr tracker?) here. I'm starting YNAB with my partner, and both of us have more than our monthly expenses in our accounts thanks to tax returns, stimulus checks and general good savings habits. But I don't want to use this money! Both of us have had our hours cut recently, and I want our budget moving forward to reflect the lower inflow—i.e, spend less than we're earning each month. It feels weird having the TBB tab show way more money than we actually want to be using right now, and I want to get it to zero so I can accurately plan for the coming months.
My question: Does it make more sense to use the money in the To Be Budgeted category to fund out our expenses for the coming months, or should I put it into savings categories? If there comes a time this year that we need to dip into our savings to cover living expenses (knock on wood!), is there a way to take from a fund in August that was created in June?
Yes, any money you put into a category now will roll over, unless you move it out or spend in that category.
I would do this in your situation:
1. Fund all of June at the lower income level. Include True Expenses*.
2. Put the rest of your savings in categories. Here are some ideas: Loss of Income (3-6 months expenses), Medical Deductible, Home Maintenance, Car Maintenance, Technology Replacement, Veterinary, Unexpected Emergency (also called Stuff I Forgot to Budget For).
3. As you schedule your transactions, categorize any Inflow (that's not a return, reimbursement, or refund) as "Income for Next Month (INM)"
4. At the beginning of July, go to All Accounts and search for the INM category. Select all those June income events.
5. Recategorize to Inflow: TBB and budget your now *normal, lowered monthly amounts for July.
*Since you're just starting, it could be that you're 5 months into a 6 month billing cycle (like for insurance or something, or any other True Expense), so you can choose to seed that category with 5/6 of the bill in June. Since you have the money and want to have a normalized budget going forward, that is probably easiest.
Just remember that YNAB is a tad different from other budgeting methodologies - if you are starting in the hot summer months when electric is high, you'll need to budget to cover the bills now, not spread a deficit over the next 12 months.
YNAB really makes you face the current situation and examine priorities as you plan and spend your money, which is why it is such a powerful tool.
Good luck! If you have any further questions, feel free to reach out on the forum! There are people on here who have figured out the most efficient workflows to produce the best information in this app. And they keep sharing (the INM trick is a good example)!
Forest Green Cyborg said:
Starting out with savings
You're in luck as that happens to be the best way to start! Yes, put it in savings categories, preferably detailed ones. What are the savings for? And yes, you can use them whenever you need them as you just move funds out of your savings category into another category or back to TBB and distribute from there. And you're inclination to budget to $0 is correct.
The replies above are spot on. Only thing I'd add, is the reason you want to break out your extra savings into specific categories is so you don't overspend things in your mind. If you have an extra $10,000, say after your minimal budget has been funded, then you COULD stick it in an Emergency Fund category, and say, "Now I'm ready for any emergency." My Car could Break Down, I could replace my roof, my HVAC system could be replaced, I could lose my job, or whatever. However, if you've only put it into an emergency fund, things may not go as far as you hoped. You just see one lump sum, but not broken out into "I have $X for car repair, $Y for house repair, and $Z for income replacement." Now you've got a better picture of what you can actually do with that money, and aren't going to spend it (in your mind) thinking it'll cover this, but then forgetting you also need that.
But you're on the right track, and if you're not able to completely cover all of your spending categories with the amount you want right now, that's OK. Just get started, and create a goal for reaching your target number by a target date, and soon you'll have what you want.