Am I two months ahead?

As of October 1st, all of October and November are funded. The income I make during October will be placed into the INM category for December. Come November 1st, I'll be able to fund all of December.

Does this mean I am two months ahead? Should I allocate this money for other uses?

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  • It does mean you're 2 months ahead.  Often, the suggestion is that if you're going to have an INM category, just have it be for the next month.  If you have more that you're able to put away for the future, that can go into a new category called "Income Replacement."  And the IR category can be added to as you have extra income.  It's easy to see how many months ahead you are by dividing your monthly budgeted amount by the amount in the IR fund.  (And adding in the INM, because that's already a month)

    There are several reasons people don't recommend you go further out than one month  in your budgeting.  One is a bug in the software called Stealing From the Future, where months further out can get some funds siphoned out to cover over spending on the current month.  Another reason is if priorities change (as they certainly will) you only have your current month to worry about, and don't have to make changes in budgets 2 or 3 months ahead.  I'm sure there are other reasons, but those are the reasons that came to the top of my head at the moment.  

    Congrats on being ahead, and using the INM.  Of course the main reason for having that INM category is just being able to with the press of a couple buttons, budget your month with the use of "Quick Budget".

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    • Bruce Thanks - just as I suspected. I already have an income replacement/emergency fund set up, so I think I'll use this money for other goals.

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  • If December will be funded entirely with October income, then yes you are two months ahead. The question is, do you need to be 2 months ahead?

    I never fund more than 1 month ahead - ie all of my October income will be used to fund November. Once I get my 2nd Oct paycheck and budget my standard amount to my categories, I will then have a few hundred left over which I will then allocate to longer term categories - Loss of Income (could currently could cover 6-8 months, but I continue to add to it to keep up with inflation and so forth), New Light Fixtures, extra to categories like Giving, Kitchen Remodel, Taxable Investing, New Car 2030, etc. Then at the end of the month, I have certain categories that I sweep down to 0 (Groceries, Eating Out) and categories that I sweep down to a pre-determined amount (Utilities, Entertainment, Admin). I then have a formula to divide that amount up between Giving, Taxable Investing, Sister's Wedding (I may stop with this because the wedding was supposed to be in August and was delayed until next July due to Covid), IRA (I fully fund this by the end of the year, I'm trying to inch to having it fully funded at the beginning of the year), Kitchen Remodel, Income Replacement, and #1 Saving Priority (this changes; currently it is a new sofa bed. It'll be funded when it's funded, but I'm not in a particular hurry as witnessed by the fact that on more than one occasion I've taken funds out of this category).

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    • jenmas Thank you for the reply... I think I'll use this money for some savings we're trying to accomplish. Hope your Sister's Wedding can happen soon - I'm going through the same thing with my Brother's Wedding (planned for April 2021, moved up to Halloween 2020 due to a cancer scare, pushed to Halloween 2021 due to COVID and cancer-free diagnosis).

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  • Orchid Device said:
    Does this mean I am two months ahead? Should I allocate this money for other uses?

    Probably.

    Unless you want to become 3 months ahead. And then 4 months ahead. And then... (does it ever end???)

    The YNAB guidance of endlessly budgeting further and further into the future doesn't make a lot of sense as your finances improve. It's clumsy and impractical. What happens if your priorities change, and you need to making cascading budget changes across all of those months? Ugh.

    Long-time experienced users will recommend that you only budget a single month ahead. Beyond that, it's best to pour excess money into a category, such as "Emergency Fund" (for unknown expenses) or "Income Replacement" (for unexpected loss of income).

    If/when those categories get sufficiently large (for your personal risk tolerance), and you still have excess money, it's time to start sending it toward off-budget investments.

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    • bret Thanks so much - that's what I'm thinking. We have a large Emergency Fund/Income Replacement, so we're all set there. This month's money will go to some other savings we're doing.

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  • Bruce said:
    If you have more that you're able to put away for the future, that can go into a new category called "Income Replacement." 

     I think it's better to be more general. If you have more to put away for the future, attribute it to your savings goals according to your priorities.

    Orchid Device The idea of being 1 month ahead is simply because it is easier to budget for the month in 1 chunk than be several small chunks. Budgeting more and more months in advance ties up more money for living expenses and get you to progress on your savings goals slower. 

    Also breaking the paycheck to paycheck cycle gives you some security in case your paycheck is late for some reason. The INM category is part of this safety net but also an Income Replacement category.  Budgeting more and more in the future gives you a safety net as well for this case, but it is less flexible. For example, if your paycheck is late because you are made redundant, you will want to review your monthly budget. This is easy to do if the pot of money is quietly waiting in an Income Replacement category while it is a pain if you have to revisit several months of budgeting.

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    • Ceeses Thank you for the reply! I've already looked at our budget to ensure that we'll be taken care of in case of income loss. Luckily, our emergency fund is hefty enough that we should be safe for quite a while. I'm not going to budget ahead at this point (further than 1 month). 

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  • Getting ahead enough to budget in month-sized chunks simplifies the budgeting process. That's the point of the INM category -- fund next month.

    After that, greater financial security can come from an emergency fund. Eventually, you will have various emergency-like categories: car repair, medical deductible, auto deductible, etc., AND Income Replacement. This gives insight into your ability to handle near-simultaneous events.

    Murphy doesn't care that you just broke your arm when he takes out your water heater.

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    • dakinemaui Thank you for the insight! I've got those emergency-like categories already covered AND Income Replacement. I think we're set, for now, so I'll just start putting this month's money into some savings categories we're working on. The good thing about YNAB - if our priorities change, the money will move!

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