Questions to Fix My Budget

After using YNAB for a couple of years I felt like I had a reasonably good handle on my budget, but I felt like I was missing the final 10%. After going over the four YNAB rules a few times, watching videos, and listening to a bunch of podcast episodes I sat down to try and figure out what I was missing. I approached this by working out new questions that a well though out budget could answer, but I found my budget wasn’t answering as well as I wanted. Now that these are implemented I fell like my budget is solid and severing me very well. I though I’d share these in case they can help anyone else out. 

How much money can we spend?
For a few categories my answer felt shaky. I realized that this was because I had combined true expenses with fun spending. The fix turned out to be easy, those categories needed to be slip up. 

For example: Home Maintenance and Improvements got split up into Home Maintenance (a true expense) and Home Improvements (fun spending)

When the two were combined I was never sure how much we could spend on improvements (wants) because it was mixed in maintenance (needs). Now the improvement category can be spent down to $0 without having any effect on the maintenance sinking fund. 

How much of my budget is fixed and how much is flexible?
For a long time I had my category groups set as Car, Housing, Personal, Savings, etc. 

Each group had a mix of categories. For example housing had: fun (home improvements), defined obligations (mortgage, electricity), variable obligations (home maintenance, water and sewer). Personal had: fun (discretionary spending for my wife and I), defined obligations (life insurance), and variable obligation (gifts). 

After answering the question above, and having added three new categories, I already had the right amount of categories so that I could rearrange them all under these new category groups:

  • Defined Obligations
  • Variable Obligations (true expenses/sinking funds)
  • Long term savings
  • Big projects/wish list
  • Fun

Now I can easily see that about 60% of our income fall under obligations (defined and variable), which is more important to me than knowing that we spend X% on housing or Y% on our car. Reporting now easily gives me the numbers I want for my new groups. I can also manually select categories like: housing, car, personal, etc. if want to see how much I spend on my old categories. 

I like the new groups because we can easily see that if we want to maintain our current life style X% of our money has a predefined job. The obligations aren’t set in stone, while selling our house would be a very big change, changing a monthly subscription is easy. Spending on these categories will happen (mortgage, subscriptions), or should happen (saving for maintenance), unless we make changes. 

We are going to be replacing our car in the next few years and while the maintenance of our, currently paid off, car is included in our budget, the purchase of our next car isn’t (mostly because we are paying off debt). I want to see if we spend: $30k every 10 years, or $20k every 7 years, or $10k every x year how that will impact our budget in terms of moving cash from long term savings or fun to fixed or variable obligations. Getting a nice car isn’t that important to us; getting a car that can transport the family, with our skis and bikes, on camping trips while leaving us enough money to do those fun trips is important. The new groups give me a better way to think about the trade-offs in between different large purchases, subscriptions, etc. 

Can I Simplify Anything?
After spending time re-arranging a few categories and setting new groups I’m pretty happy with the amount of categories I have (50). That amount certainly isn’t minimalist, but I find it’s the right balance between easy to manage, what I can hold in my head, and reporting insights. 

I did, however, realize that a lot of my scheduled transactions are bi-weekly. I did this years ago because my wife and I are paid bi-weekly. Because we are more than a month ahead, it isn’t necessary to have 26 bi-weekly transactions when 12 monthly transactions will do. I have five different transfers that are paid this way, which means I can go from 130 bi-weekly transactions a year to 60 monthly transactions. 

These payments are going to debt payments and investment accounts, so to make sure I don’t short change myself I don’t just double the bi-weekly payment, the new monthly payment is 1/12 of the total yearly payments.

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    • WordTenor
    • Can we agree that goals are dumb and immature? Sure.
    • WordTenor
    • 13 days ago
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    These are all really great observations and I hope noobs listen. I want to point out one thing: 

    • Defined Obligations
    • Variable Obligations (true expenses/sinking funds)
    • Long term savings
    • Big projects/wish list
    • Fun

    this is almost exactly the default category structure that comes out of the box. A lot of people these days are watching Nick True or getting on Facebook or Reddit and as a result, making the first thing they do rearranging renaming emoji-ing all their categories. This feels warm and fuzzy because it makes YNAB feel just like the other budgeting systems they may have seen in the past. But as you discovered, the most important part of YNAB is being able to rapidly make good decisions about your money, not determine which things are paid weekly and which  are paid monthly. The default category structure is designed to do that, and it shouldn’t be the very first thing new users look to tweak. 

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