Make Credit Card categories reflect reality
I made the leap from Classic to the new YNAB in January and I don't think I handled the credit card purchases / category correctly.
My desire is to have the credit cards I carry debt on show that I am carrying debt, if it went up or down and and not show that I have a bunch of money to transfer to the cards when I don't.
In other words, at the end of January every transaction that I had used a credit card had automatically moved into the budget category for CC payment.
How can I a) make the starting month reflect actual debt and b) move forward so that when I do make a purchase on a CC that I will not pay in full show that. I want to see the Orange / Red budget amounts when they are indeed true.
I am certain that I used YNAB Classic incorrectly as I invented my own methods with Classic, and am willing to use the new version the way it is designed but need some clarity so that I can prevent YNAB from assuming I am going to pay every CC purchase each month.
I've only been using YNAB for two months, and don't know what Classic looked like. But, the way that YNAB handles credit cards is one of my favorite things, and part of the reason I was willing to pay after the trial period. The whole thing is designed to keep you from adding to debt (or at least alert you if you are doing so).
If you want to add debt, but still have the number be green because you planned it that way, you can budget for it in the credit card category. Do a transaction for 100, then put -100 as the budgeted amount for that card. You're accounting for the fact that you intended to go backward on the card. That money will go back to "to be budgeted", you'll be green, and you won't be making payments you don't have money for.
But then, more I think about it, how do you budget money into categories if you don't have money to send to the card? It seems like you must be budgeting money you don't have?
Why would you not want budgeted money to be reserved for paying back the card? You incur interest for everything you buy that you don't pay back right away, so if you've budgeted money for the thing you bought, the best use of those budgeted funds is to pay the card. Especially since if you are continuing to use a card that has carried debt, he interest has begun to accrue from the moment you charged the item.
If you really feel like you need those dollars elsewhere after considering that, you can do one of two things--move the dollars from the CC payment category to where you want them, or reduce the budget in the category you spent from. Any credit overspending automatically creates debt. Similarly, reducing the amount you are able to pay means that more debt will accrue.
In the inspector, you'll see the carried debt on the card expressed as the amount which will remain on the card after you send all the money in the category. It reads "If you pay [category balance] your account balance will be $X.XX and you will have reduced your debt by $Y.YY. " The account balance is the remaining debt you will carry if you make the payment you've set aside. Adjust that payment to your hearts content.
Thanks for the replies. I decided to go back to the beginning and look for information in the training videos. The closest I have found to teaching me what I need to know has been this one: https://www.youtube.com/watch?v=tACY3ge6VdA Budgeting when you're broke.
Most of the training I have found tries to reinforce the idea that you are either paying off your balance entirely or paying off this months transactions as is best practice, but doesn't show you the "what if you don't" scenario. When I accrue new debt, I want to see it in YNAB and the way it works seems to obfuscate it.
This has helped me realize what I have been doing wrong (all these years with YNAB classic) and clarify my current question.
First what I have been doing wrong:
1) I have been using YNAB to forecast and filling my entire budget out before the money is actually there.
2) At the end of each month I would change the budgeted amount in every category to the exact amount I'd spent in each category
This worked fairly well in that it kept me paying attention and shows me what I did, and helped me make progress financially in the past, but misunderstanding they way CC transactions are handled in the new YNAB, I ended up with a huge "Available to budget" amount in each CC category even though there is no actual money avaiblle and all the budgeted amounts are zeroed out.
Now that I know how YNAB wants me to use it, the questions are:
How do I go back to those categories (only two months) and remove the available to budget amount so I can start clean this month?
How can I make YNAB show me that when I pay for something on a CC and go over my budgeted payment amount, I accrued more debt and not add money to the CC payment category?
Greetings and thanks for your reply.
I have elected to do a Fresh Start and resist the temptation to fix it in order to fully understand.
I would, however like some help clarifying the results of some test transactions I am playing with.
I put in $50 in groceries from a checking account and $50 in groceries on a CC.
When I have nothing in the groceries category, the available shows overspending of $100 and nothing on the CC.
If I put $50 in the groceries category, the available shows -$50, but still nothing on the CC.
As soon as I put $100 in groceries, the $50 shows up in CC activity and shows i have $50 set aside to pay the CC.
I can't get my brain around the fact that the card doesn't show any activity until I budget in the category I spent in.
Thanks in advance,