Why Is My Age of Money Going Down?
In mid March 2020 I started aggressively cutting my expenses and saving money. With the pandemic upon us I was worried about my losing my job, a coming financial recession (or realistically a depression), and not having the ability to pay for my studies at school. By the end of that month I lost my job but I vowed I would not stop going to school but rather decided to continue my studies full time now that I am unemployed. So I cut my spending down to the bone. I moved in with my girlfriend and quarantine is actually helping me save. I don't go out, I don't do anything, and my girlfriend is sharing my living expenses such as food, rent, utilities, etc. I have actually put together more money than I have ever had at one time. My savings has doubled since March.
So how come my Age of Money has gone from 35 days to 23 days? I would think my money would age. if not doubled at this point. I'd like my age of money to be accurate so I can estimate when the unemployment runs out how much time after will I have before being completely broke. The only thing I can think of is when money is not used in one category (ie: I spent less of food), I move those funds to my savings. Does moving money out of one category into another category affect AoM? I also move all that extra cash into my savings account from my checking account to earn interest - does that affect AoM? I can't make heads or tails out of it.
Savings Up. Spending Down. Age of Money Down?
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Nope, moving money among categories or accounts has no effect on your AOM. Frankly, I don't recommend using the AOM metric, as it doesn't mean what people think it means. It's just the length of time (first in, first out) between when you earned a specific dollar and when you spent it, evened out by averaging the last 10 cash transactions' values.
If you use the Toolkit's Days of Buffering metric, that will likely give you a number relating to what you're looking for. It looks at your historical spending, then calculates how many days you could maintain that spending with the money currently in your accounts. Still, large transactions can skew that a bit.
Your best bet is to look at your actual budget. It tells you what you have money for.
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Ape44 said:
I'd like my age of money to be accurate so I can estimate when the unemployment runs out how much time after will I have before being completely broke.Age of Money has absolutely zero to do with how long you can last without new income. At present, it has decreased temporarily due to the averaging. (Averages always cause a lag.) Pretty soon, your AoM will increase and continue to do so until you have spent your last dollar. You will likely reach your "high score" when you are flat broke. Game over. Ignore AoM.
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Ape44 said:
My savings has doubled since March.What does this mean? Everything in YNAB is savings -- every single category.
- Do you mean you have an Income Replacement or Emergency Fund category? If so, then divide that balance by your monthly burn rate.
- Do you mean you've budgeted toward categories in future months? You can obviously last until you've stopped budgeting (assuming TBB is $0).
- Do you mean you've got a pile of cash that's not part of the budget? Divide that by your monthly burn rate. Oh, and put that on-budget so it's easier to use (and rebuild when you start getting money again).
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Ape44 said:
I also move all that extra cash into my savings account from my checking account to earn interest - does that affect AoM?If the savings account is on budget, it doesn't affect AoM. The ONLY thing that affects AoM is cash leaving the budget (i.e., spending).
Whether AoM goes up or down at that point depends on whether the age of your last transaction is larger or smaller than that of the 11th previous transaction you made. (The average window is 10 transactions long, and #11 just fell out of consideration.)
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Because Age of Money is a meaningless metric. It goes up when you are spending money, it goes down when you are saving money, and it goes up when you are saving money and down when you are spending money.
In fact, one of the best ways to have a high AoM is to charge a bunch of money to a credit card and make minimum payments, which is possibly the worst personal finance practice you could have.
As @dakinemaui points out, you are especially vulnerable because you are in one of the cases in which AOM definitively means the opposite of something good--you have no income. AOM tells you how old the grain is you're pulling out of the bottom of the silo, but it doesn't tell you if there's more grain on top. Your AOM will go up as long as you have no new income events, but you will be steadily depleting your on hand cash the entire time.
Rely on the budget, not AOM, to tell you how long your money will last.
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WordTenor I actually do have income technically - unemployment. And because of the federal stimulus payments in addition to the state unemployment, my income is actually higher too at the moment.
I am starting to think it's a meaningless metric. Because I am so on top of my budget, I know exactly how much I need to survive on a weekly basis. If I simply divide total savings by weekly expenses my actual AoM is over six months. It's just a bummer this feature isn't accurate on YNAB. I like getting high scores. -
Ape44
Ape44 said:
If I simply divide total savings by weekly expenses my actual AoM is over six months. It's just a bummer this feature isn't accurate on YNAB.That's not what AOM means, so that isn't your "actual" AOM. What you are calculating is what the YNAB Toolkit's Days of Buffering calculation does, more or less.
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Forget AOM! Just follow the three rules and your situation will continue to improve.
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Sigh.... this is why I continue to rail against the AOM myth.
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nolesrule You were the first and strongest opponent. I give you props!
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Ape44 said:
I also move all that extra cash into my savings account from my checking account to earn interest - does that affect AoM?If your savings account is off budget, moving money from checking account to savings account counts as spending money in your YNAB budget and will impact AOM. Could be up or down. I was unemployed for 6 months and not receiving unemployment (I chose not to file because I didn't want to be pressured to take a job I didn't want). Because my income events were getting farther and farther away in time, my AOM climbed the entire time.
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jenmas The savings account is on my YNAB budget. The savings have their own separate categories in the budget too (ie: emergency savings, tuition, travel, etc). It doesn't make sense.
That's weird your AoM climbed while you did not have income but maybe that's the answer. I have been putting more new monies into the budget and that's probably disrupting the AoM. The new income is bringing down the overall average since there is more now than before March.
I think you just helped me figure it out. I think you also made me decide I do not like the AoM metric. -
Ape44
Ape44 said:
That's weird your AoM climbed while you did not have income but maybe that's the answer.Nothing weird about it. If your last income event keeps getting farther and farther away as you move through time, the delta between when you received the money and when you spent it keeps getting larger.
Ape44 said:
I have been putting more new monies into the budget and that's probably disrupting the AoM.New income by itself doesn't bring down the AOM number. It's when your recent expenses shift from older to newer income event that AOM goes down.
Ape44 said:
I think you also made me decide I do not like the AoM metric.Best part of your entire post. 👍
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Ape44 said:
I like getting high scores.Most people do, which is why AoM is a genius marketing gimmick. It often goes up, whether you just started, are sinking deeper into CC debt, or have zero income about to run out of money. It increases for "good" reasons, too: staying even with True Expense contributions or getting ahead by budgeting further into the future or growing financial cushion).
You'll find Net Worth to be a far more intuitive and useful metric. Convert dollars to days by dividing by average spending.
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dakinemaui
dakinemaui said:
You'll find Net Worth to be a far more intuitive and useful metric. Convert dollars to days by dividing by average spending.That's what Days of Buffering does, yet it has its own flaws.
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nolesrule No doubt you mean what is used for "average spending". I would recommend a yearly average so seasonally variable things don't skew the results. However, one-off events (e.g., buying a house, paying for a wedding, etc.) in the window will certainly skew it -- though fortunately in the conservative direction.
Honestly, I think it's easiest and arguably most accurate to add up the budget entries one would put in a minimalistic budget (including known True Expenses) and just divide into cash on-hand. If one does have some income, subtract that off the expenses considered since the cash only has to cover the rest.
However, even that's not realistic when things are/become tight, as I suspect most people would hoard cash for the cash-only purchases (e.g., Rent/Mortgage) and run up CC debt for other purchases. I know I would. Yes, that has a cost as well, but IMHO it beats losing your house.
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dakinemaui said:
However, one-off events (e.g., buying a house, paying for a wedding, etc.) in the window will certainly skew it -- though fortunately in the conservative direction.I abslutely agree with the entire content of your previous post, but i just want to state the following....
It's not just the one off events. it's any large and infrequent spending. Like buying a car. it's not one off. You need to start planning for the next one the moment you get a new one.I recently demonstrated on reddit how a $20k car purchase can have a variance of $110 in the way it can affect your average daily spending depending on lookback period length used to calculate averages and whether or not the purchase even falls in the lookback period. $110 per day is a variance of $3300/month.
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One possibility is that you're not actually transferring it properly, by YNAB's rules. I had this exact problem for months because checking/savings transfers weren't registered correctly in YNAB, even though both accounts are in my budget. Be sure that it has the little transfer symbol in the "Payee" column as shown in this screencap. The reason I screwed this up is because the "Payee" was listed as "USAA Funds Transfer Cr". It had the word "transfer" *right in the description* so I thought YNAB was recognizing it as a transfer.
You have to make sure that it's a YNAB-marked transfer for it to get appropriately handled in AoM.
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dhooper Sometimes mine says transfer, like yours. Sometimes my payee says To/From: Account. I haven't figured out when or why that changes.
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Move Light Sound Life I don't know either, but I've seen that same thing too. I learned the hard way to be really careful about it because it's very easy to think YNAB recognizes it as a transfer when it really doesn't.
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dhooper There was a time back in my early days of YNABing when I didn't understand transfers and I just had separate transactions on both sides.
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Move Light Sound Life It varies on the account type. Between cash-based/asset accounts, it's "Transfer: Account Name" (you're moving money between accounts). And "Payment : Account Name" for credit cards, loan, etc. It's a payment to the credit card or liability account.
dhooper It sounds like that USAA transaction imported originally? Even with "Transfer" in the name, YNAB doesn't know it's a transfer between two accounts in your budget until that's updated with the Payee dropdown—but it will create a renaming rule to remember you made that distinction.
For both, I think we have room for improvement! -
Nicole This is what I see:
I have accounts for each store I get gift cards from. Their names are GC: StoreName. The "To/From:" looks exactly the same in my checking/savings/CC higher up in the list.
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Nicole Yeah, it was imported. Because it had "Transfer" in the name of the import, I thought it was being treated as a transfer in YNAB when it wasn't. It looked a lot like my credit card payments, which were being linked correctly, so I didn't think anything was wrong. I did get it fixed, but it was the reason my AoM was always underestimated - and egregiously so when I had large transfers. It's just a really easy thing to get wrong when first starting, even if you think you're doing it correctly.
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Move Light Sound Life When you're adding a new transaction, To/From will display. It doesn't know yet if it's an inflow/outflow, or what account you're moving money to yet—so it's general. Try putting an amount in outflow/inflow first to see that in action!
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dhooper I agree! And you make a really good point about brand new YNABers. I went ahead and passed that along to our team as feedback! If you have any thoughts on a feature that would help new folks in a similar situation with transfers—that would be a good one for a Feature Request.
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Nicole It never occurred to me to work right to left when I input a transaction.
I prefer to use the keyboard and click around as little as possible...
For that matter, it's supremely annoying that I have to use my mouse and click the split category. I can even type "split" and have it be highlighted properly, but then when I tab, there's just the word "split" in the category cell, no actual split. Anyways, that's a tangent. Circle back around...
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Nicole IIRC, there were a set of tutorial emails that came through shortly after signing up. Maybe having one specifically for handling transfers would be helpful, I suppose. The hard part is that it only matters for AoM. If you don't link the transfers, the budget itself still balances out perfectly, so you don't see that there's anything funny going on. I don't really know what kind of Feature to Request since it's already perfectly functional. It's just an awareness issue, and IMO an issue that's best mentioned after somebody's used the thing for a few days and they're past the setup phase.
Happy to help, though!
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Move Light Sound Life said:
I can even type "split" and have it be highlighted properly, but then when I tab, there's just the word "split" in the category cell, no actual split.Oh yes. Trying to use the keyboard-only with split transactions is frustratingly impossible.
