Should a Credit Account working Balance = Available Balance in Budget?

I think I have been doing several things wrong in YNAB for a while, and after having the epiphany, I am working on reconciling all this stuff.  Here is a little background:

  1. I always pay off my entire monthly statement balance for all my credit cards (automatically).
  2. I have had a couple of occurrences where when I paid off my balance, I didn't have enough Available in my "credit card Payment" budget.  No big deal - I covered it and went about my business.
  3. Several months ago, I realized that negative budget balances did not carry over to the next month - like a positive balance did.  I made several corrections and assumed that contributed to #2 above.
  4. At the end of the month, I will often shift positive balances to savings or some other budget.  Just this AM, I realized that if (for example) on 9/1 balance all the budget items, shift positive balances around, etc. for August (so that everything is positive or $0), but then on 9/2 I get a new transaction that came in I did not manually enter into YNAB for August) it will post to August, creating a negative balance in August.  This is an issue because as of 9/1 - I never go back and look at a prior month, because I'm just looking forward.
  5. In the past month, I had a large discrepancy (over $1000) in my monthly payment for 1 Credit card and what I had in my available budget.  I scratched my head, but assumed maybe I did something goofy when I set up the starting balance and it just took a while to catch up.  I covered the amount and went about my business.

So, now I think I see what happened.  I think the situation occurred where #4 above hit for a large purchase right at the end/beginning of the month.  Now I am trying to figure out how to avoid this situation in the future.  

Questions:

  1. Can anyone confirm that I am interpreting item #4 above correctly?  Is that the way it is supposed to be working?
  2. Should the working balance for my credit card accounts always equal the available balance I have in my budgeted "available balance" for a credit card?  I am assuming yes, but none of them do right now...  Should this be part of my regular reconciliation process/check?
  3. I often make a mistake inputting a transaction.  Meaning, I input a transaction as Credit Card A, but it really is for Credit Card B.  When I notice it, I simply edit the transaction and move it to the right account (select transaction, edit -> Move to Account -> Select proper account).  Will doing that move the budgeted balance to the appropriate budget also?

Thanks for your help!

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  • On a Paid in Full card, yes.  Working balance should always equal the dollars available for that card's category. Fixing the transactions should help resolve this.

    Simple way to deal with this is to manually enter EVERY transaction as they happen. No transaction should be imported that isnt already in YNAB. I look at YNAB as my sole source of truth for my money. The better and more accurate the data in YNAB, the better info I have for decisions.  The only exception I have to my input rule is Interest. It hits when it hits. On my cards I'm paying off, that interest is budgeted for. On my savings account, its found money (that then gets budged to a emergency category).

    Also don't zero out your category for your credit card at the end of the month.

    First, keep in mind YNAB is an envelope based budgeting systems. Put your credit cards off to the side for moments. Now imagine taking your checking and savings accounts, plus any cash on hand... shaking them out on to the table and making a pile of money. That pile of money is what you have to budget. Now your categories like rent/gas/etc are envelopes. You put what its for and stuff some cash in there until the amount you need for that job is in the envelope. Keep filling envelopes until you run out of money. 

    So lets say you have 50 bucks in your gas envelope. you spend 30 bucks to fill up the tank. $30 goes to Gas-Co and $20 is in the envelope. Next month rolls around. The $20 bucks is still there. Instead of stuffing $50 bucks in, you stuff $30 in to get back to $50, and put the other $20 in a savings envelope. I will let things like bills roll over, but groceries I will take my positive balance and apply it to the next month's goal

    Credit cards front the cash for you. So when you put the $30 bucks on your visa, the money doesn't leave the envelope. In YNAB, you have empty envelopes for each card, and moves the money from the gas envelope to the visa envelope. when it comes time to pay the visa bill, you just pay it out of the via envelope.

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      • Frank K
      • Mrkoop
      • 3 mths ago
      • Reported - view

      Dave  Thanks!  Entering transactions manually is a common discussion with my wife, but there are always a few that slip through.  In fact, the reason that we use YNAB is because not all of us are as diligent with staying on top of these financials.  A shared app (of which we have found YNAB to be the best) has been our best solution.  But, I agree - that is definitely the intent and the best way to handle it.

      When I say I zero out the envelopes - I did not mean the account balances.  I never touch those.  What I was referring to was the  - I have $25 left over in Gas, I'm going to move that to my savings envelope for an upcoming trip, etc.  In fact, I never really looked at the CC envelopes at all, even as part of reconciliation.  Going forward, I think I will add a step to verify that each CC envelope balance matches the working balance on the CC as part of my weekly reconciliation process.

      Thanks again!

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  • if I understand correct, then yes you have #4 correct, but it's only an issue if you charged it to cc. If it was a cash purchase, then the category goes negative, but then just deducts from your TBB for the following month. If its a cc then I personally would go allocate that amount to the cc for a payment in the present month.

    Yes when you move the transaction it should also move the budgeted amount to the relevant cc.

    Like
      • Frank K
      • Mrkoop
      • 3 mths ago
      • 1
      • Reported - view

      Ivory Storm   Hmmm....   So, I generally never carry a balance in my TBB for next month...   When I get paid, I budget every dollar.  I set up envelopes/budgets for upcoming expenditures (purchases, trips, projects, etc.) and allocate every dollar to those or to general savings.  I think the fix for me is:

      1. Verify the CC balance and the working balance of each card match when I reconcile
      2. Be especially careful at the end/beginning of the month to ensure transactions post as expected.  Now that I understand what is happening, moving cash around to account for it is pretty straight forward.
      Like 1
  • 1. Yes, that frequently happens. I suggest you revisit last month's budget on the 3rd or so, after the dust has settled.

    2. Yes for a card you consider to have paid-in-full status. (Meaning, you could pay the entire account, in full, at any time. Whether you actually pay the account to $0 or just send them what they've requested (the statement balance) is up to you. (Most users just pay the statement balance, with the rest of the funds in the category available to send the following month.

    3. Yes, that's the correct way to move transactions, and the two CC Payment categories will adjust accordingly.

    My suspicion is you have been off from the beginning. Failing to budget funds to pay off the starting balance is very common. The other big reason the CC Payment category is short is failing to cover credit-based/yellow overspending. (A late-posting imported transaction is very often overlooked after moving on.)

    Like 1
  • Once you get your CC Payment categories sorted out for paid-in-full status, you'll know whether you can really afford them to be PIF cards (and not leave yourself short in other spending categories) or you need to ride the CC float (not quite PIF, but not incurring interest either).

    If you can afford to be PIF, then you might switch to representing that PIF card with a checking account. This removes the Payment category and implicitly reserves enough to pay the entire account at all times. Any missed overspending will be taken out of the following month's To Be Budgeted along with a nonzero "Overspending" value in the header.

    To switch, just make a transfer from a new checking account for the balance, ensure the CC Payment category is empty, and close the old account. If you ever need to finance something, you can re-open that actual credit account and transfer back temporarily until PIF status is restored.

    Like
      • Frank K
      • Mrkoop
      • 3 mths ago
      • Reported - view

      dakinemaui Thanks!  Paying off the card is not the issue (I have the cash)  - so I don't think I want to shift the type of account or to shift to paying out of my checking account.  I don't carry a balance, so I never pay interest.  In fact, the reason I leverage credit cards is for reward points - which can be substantial and contribute heavily to funding vacations 👍

      I have just paid the entire statement balance at the end of the month, not the full balance.  A question:  Do you (or others) pay off the entire balance, as opposed to the statement balance?  I'm curious as to the pros/cons that folks see in that...

      Thanks!

      Like
      • dakinemaui
      • dakinemaui
      • 3 mths ago
      • 1
      • Reported - view

      Frank K Just having the cash is not the issue. If there's not enough in the Payment category but you send it anyway, some of what you sent was earmarked for *something else*. By sending it to the CC, you then cannot use it for that something else. 

      Most PIF users pay the statement balance, but they have enough reserved to pay the entire account balance if they wanted.

      In a pinch, they could reallocate the amount of their payment funds in excess of the statement balance (ride the CC float) interest free. Compare to someone who only has the statement balance reserved, in a pinch will start incurring interest (or else will have to restructure their plan since categories are no longer backed by cash).

      Like 1
      • dakinemaui
      • dakinemaui
      • 3 mths ago
      • Reported - view

      Frank K FWIW, paying the account to $0 is more likely to cause issues in the budget. Lots of people have been confused when a subsequent return results in a credit balance. YNAB's handling of this, while mathematically correct, is not what most people expect. Usually their payment category is short when the dust settles.

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    • Frank K We have just made changes to our budget. One of the things that we were able to do is set up my husband's salary (self employed) to arrive at the same time as mine (employee). It gives us much better flexibility. We realize it is lucky we can do that but made a huge difference to be able to review the budget in a logical manner (set paydays). Anyway, with that, when we do the review, we look at our PIF credit cards, confirm that everything is good in them as we do the budget check, and then we pay the amount that is available at that time. So, we are making payment every two weeks. It helps in a few ways:
       

      1. We never have to worry about missing a payment because we are paying twice a month even if it is not the full amount at the time.

      2. We don't have to worry about the statement amount. If the account is reconciled to the bank online, then we know we owe that amount. We are always verifying but since we are reconciling live, the statement is an extra checkpoint.

      3. We don't have that money to cover other expenses so we are forced to make the hard decisions in the two weeks to either wait or use money from another category. Or, if we are willing to go into debt for that particular expense even if it is temporary.

      4. No interest!

      Like
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