"Emergency fund" versus budgeting ahead? Buffer category?

I have been reading the YNAB book from Jesse Meacham to try to get my focus on my budget back, my spending has been crazy and I am determined to get a handle on YNAB. 

I currently have 600 dollars in my "Rainy Day" category and I think I want to try to continue saving 1000 dollars in that category. The YNAB book seems to suggest there may not be a need to an emergency fund when discussing Rule 2. It says you can just assign the dollars to future jobs. Like if I were to lose my job I would have 8 months of expenses. 

Do others keep a rainy day category with ~ 1000 dollars or some amount? 

Also, I apparently did something and paid my rent early one month before. So now when the 1st of the month happens, YNAB assumes my goal hasn't been reached because I spent twice in rent last month.

I have read people have a buffer category for next months expenses, and I wondered if I should do that? Just create a category for next month's expenses instead of just selecting next month and budgeting there. That makes some more sense to me, and keeps the budgeted in future correct. 

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  • I keep $1000 of savings earmarked as "Emergency Fund" and keep a couple of hundred in the "Stuff I Forgot to Budget For" category. I use it as a bit of a slush fund to coverage overages in other categories. May not be "by the book" but it works for me.  馃檪

    Having savings versus assigning to future jobs is something I am struggling with as well, especially how the "Age of Money" report fits in. I think it comes down to if you have your saving on-budget or as a tracking account. I will probably post a detailed question about it shortly.

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  • I think the point Jesse was making in the book, and that long time YNAB users make here on the forums, is that once you've figured out accounting for all possible true expenses, things that happen are no longer "emergencies" or "rainy days" - they're things you planned for and can handle. 

    Until you know what those are, and/or until you can save up for each thing individually, an emergency/rainy day fund makes a lot of sense. 

    Regarding the Next Month Income, there's a not-bug in the new YNAB such that you can spend funds you budgeted for the future without realizing it. The buffer prevents that from happening. 

    There also is apparently something magical that happens when you can figure out the entire month's budget at one time, but I've not encountered that myself. Then again, I didn't start out in YNAB living paycheck to paycheck, so that may have something to do with it. Budgeting paycheck to paycheck limits one's ability to look at the larger picture, because taking care of the now is so much more important. 

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  • Moe Hawke said:
    Having savings versus assigning to future jobs is something I am struggling with as well, especially how the "Age of Money" report fits in.

     Age of Money only reflects money that is already spent, so how you allocate dollars that haven't been spent yet is immaterial to AOM. 

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  • Slate Blue Pilot (2903ac015cdb) said:
    The YNAB book seems to suggest there may not be a need to an emergency fund when discussing Rule 2. It says you can just assign the dollars to future jobs. Like if I were to lose my job I would have 8 months of expenses. 

     Yes and no. Budgeting money in future months 8 months in advance is a bad idea because it's messy and the future months would not resemeble your budget in case of a real emergency. Furthermore when you need to make micro changes to your budget, that's a lot of months you =have to change all at once, and it's a royal pain in the rear.

    On the other hand, saving monthly for true expenses helps keep you even so you aren't scrambling to play catch up when something unexpected happens.

    Lastly, because your True Expenses are covered, you don't need an emergency fund, but you do need an income replacement fund, because the one thing that saving for True Expenses cannot account for is loss of income. You do this in a single category, not by budgeting ahead, because as I mentioned initially, that budget where you budget ahead won't resemble your budget in case of income loss.

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      • Budget Conquistador
      • Ready for the next big adventure
      • Khaki_Screwdiver.8
      • 2 wk ago
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      nolesrule That's a good point!  I was saving and planning to start building months ahead also, but you're right, to keep the budget alive you always have to tweek it, and that would be a lot of future tweeking.  I'm going to create an Emergency Fund, create a goal of 3 months budget, and use it to budget future months.   So I guess when paychecks come in, they go to the Emergency Fund, and then use the Emergency Fund to fund next month's budget at the end of the month? 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      Budget Conquistador Most of us have an EF or Loss of Income fund AND an Income for Next Month category that holds all paychecks this month to budget for next month:

      Live on Last Month鈥檚 Income 

      1. Create a savings category called Income for Next Month
      2. Schedule all future paychecks and categorize them as Income for Next Month
      3. When you're ready to budget next month, release those funds back to To be Budgeted. (Easy way to do that is to go to All Accounts view and filter by Income for Next Month and bulk re-categorize as TBB.)
      4. Budget the entire next month
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    • Budget Conquistador For further reading on the difference between the Efund and a Next Month workflow, scroll down a bit in this thread: 

      https://support.youneedabudget.com/t/m1hqyb3/trying-out-the-ynab-buffer

      They're similar, complimentary, easily switched between at need, but different in functionality. 

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      • Budget Conquistador
      • Ready for the next big adventure
      • Khaki_Screwdiver.8
      • 2 wk ago
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      Move Light Sound Life thanks! Great discussion in the linked thread!  I also have spreadsheets for simulating long term goals...  paying off the house, and I have one with gross and net income with % we pay in state and fed taxes to keep that on track, and I have a life sheet that have annual numbers speculating how my monthly budget, 401k account, SS, and other annuities will work together with growth and inflation estimates over my lifetime.

      Also thank you Superbone for explaining that two catagories are needed.  

      Like 2
    • Superbone How long have you been doing this method? I am pretty sure i have been riding the credit card float and I am determined to get rid of that, but I am calculating it will take longer than I would like. This method seems like it would help. 

      My goals currently exceed my income and I am wondering if this could help with that? Other than the obvious -- need more money from somwhere. 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      Slate Blue Pilot (2903ac015cdb) I鈥檝e been living on last month鈥檚 income for about 8 years now. But it took me quite a while to get a month ahead before I could start.

      Slate Blue Pilot (2903ac015cdb) said:
      I am pretty sure i have been riding the credit card float and I am determined to get rid of that

      It鈥檚 easy to know with YNAB. If your CC Payment balance  isn鈥檛 equal and opposite to your CC working balance at all times, then you鈥檙e on the CC float.

      Slate Blue Pilot (2903ac015cdb) said:
      My goals currently exceed my income and I am wondering if this could help with that?

      Unfortunately, that鈥檚 not sustainable. You鈥檒l have to figure out how to make your monthly budget equal to or less than your income. Or like you said, figure out how to bring in more income. What living on last month鈥檚 income does for you is firstly, it gives you some breathing room as you鈥檙e no longer living paycheck to paycheck, and secondly, it allows you to budget an entire month at once instead of piecemeal as your paychecks come in.

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      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 2 wk ago
      • 7
      • Reported - view

      Slate Blue Pilot (2903ac015cdb) 

      Slate Blue Pilot (2903ac015cdb) said:
      My goals currently exceed my income

       I recommend strongly that new users ignore all the materials which suggest you should have goals first. Use the budget for at least a few months with no goals. This will make clear what you can and cannot do with your money, and will allow you to observe your own spending habits and priorities. 

      Like 7
    • WordTenor Helpful suggestion! 

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