How to prevent a negative balance with cash categories?

I'm feeling a little stupid right now, but I'm doing something wrong in my categorizing and I can't figure out how to prevent a negative balance from happening. Can you help me figure out what's wrong with my system?

So, first off, I have several piles of cash in my life. Most notably the cash in my wallet and some emergency cash I keep in my house. I considered creating different cash accounts for these but that seemed too unwieldy, so I have one main cash account and then categories for Cash in Wallet, etc.  If I have $40 in my wallet, I assign $40 to my Cash in Wallet category. If I then buy ice cream for $2 using cash, I put the expenditure under Eating Out but then transfer $2 from Cash in Wallet to Eating Out.

All that works fine.

But last night Friend A gave me $20 cash to give to Friend B. I was running low on cash in my wallet so decided to keep the $20 bill and pay Friend B with an online pay service, which is linked to my checking account.  So, I recorded the following series of transactions:

+$20 from Friend A to me, Account: Cash, Category: Reimbursement: Friends and Family
- $20 from me to Friend B, Account: Checking, Category: Reimbursement: Friends and Family.
Add $20 to budgeted amount for Cash in Wallet (because I now have an extra $20 in my wallet.)

But, oops! This has put me $20 in the negative on budgeting. I understand that this is because the $20 I paid out to Friend B got double-counted as reimbursement to friends and also as cash in wallet. But I can't figure out how to prevent that from happening. What am I doing wrong here? How do I fix it?

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  • If both transactions were categorized to a spending category, then there was never any money in To Be Budgeted to add to your budget.

    Like 1
    • nolesrule So, how can I avoid this problem? In real life there's no problem. I accepted $20 from Friend A, kept it as cash in my wallet because I need cash and paid Friend B out of my checking account. It's just that I apparently don't know how to reflect this reality in YNAB without creating a shortage.

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      • Reported - view

      Green Nomad There is no problem. As long as you categorize both the inflow and the outflow to the reimbursement category, no money is added to your TBB, and as a result there is no money to budget anywhere.

      Your mistake apparently was that you inflowed the money to the category and also Budgeted it. You should not have budgeted it because there was nothing to budget.

      Like 2
    • nolesrule What you're forgetting is that I budget the money in my wallet to a category called Cash in Wallet. That's how I keep track of how much cash is in my wallet! If I don't budget the $20 I was given under Cash in Wallet then then that category will show an inaccurate balance (i.e. "Cash in Wallet" will show $20 less than is actually in my wallet).

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      Green Nomad Money can't be in two categories at once. It can't be populating a category to tell you how much you have in your wallet while also being in a reimbursement category.

      Categories are the purpose of the money, while Accounts are the location of your money, even if they aren't actual physical bank accounts. We have 3 cash accounts in our budget (my wallet, Mrs. nolesrule's wallet, and a cash stash). I suggest you separate the concepts and stop using a category to track the balance of an account.

      Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
      • 4
      • Reported - view

      Green Nomad If you use a category for the money in your wallet, then you are telling your budget that the purpose of the cash in your wallet is to be in your wallet. That's not a job. Don't do that.

      Like 4
    • nolesrule The purpose of the cash in my wallet kind of IS to be the cash in my wallet. I keep it there for when I need cash. If I ever use cash for a transaction, I enter the transaction under the category it belongs under (e.g. groceries) and then move money from the cash in wallet category to the groceries.  If I can't use categories for my piles of cash then I'm forced to create multiple cash accounts -- cash in wallet, cash in house, cash in car, etc. That seems too unwieldy.

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    • nolesrule But if you think I'm doing it wrong, can you make a suggestion for how I can do it better?

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      • Tobias
      • Toviathan
      • 7 mths ago
      • 2
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      Green Nomad Just categorize your cash spending normally. If you spend $20 in cash at the grocery store, enter the transaction on your wallet account as groceries. You're adding unnecessary steps. Your cash is already budgeted by being in an on-budget account and being spread out to your categories.

      Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      Green Nomad 

      Green Nomad said:
      If I can't use categories for my piles of cash then I'm forced to create multiple cash accounts -- cash in wallet, cash in house, cash in car, etc. That seems too unwieldy.

      How would cash accounts be more unwieldy than how you are handling cash categories? You are currently trying to use a category as a pseudo account.

      But if you don't have a cash account then where does the money in your cash category actually live according to YNAB? It can't be in one of your other accounts, because then you would be unable to reconcile your accounts. if you can't reconcile your accounts, then your budget might have the wrong amount of money in it.

      Green Nomad said:
      But if you think I'm doing it wrong, can you make a suggestion for how I can do it better?

       Yes, you need an account in YNAB to hold your cash. When you spend the cash, it's a transaction in your cash account assigned to the appropriate category.

      Like
    • nolesrule Right now I just have one cash account and then all the money in it is allocated to one of the cash-holding categories like cash in wallet, cash in house, etc.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
      • Reported - view

      Green Nomad That's more work than having separate cash accounts for each location (or even just using the single aggregate account) and just using the money that's cash in your categories. I'm not sure why you think it's less work.

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      • Habanero Salsa
      • Second generation user
      • Aquamarine_Pony.8
      • 7 mths ago
      • 2
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      Green Nomad What’s the upside for allocating money in the cash account into different cash categories, just to move it to where it was really spent? Why not just enter the Eating Out expense directly against the cash account?

      Like 2
    • Habanero Salsa Habanero Salsa When I was setting up my YNAB it seemed to me that having too many accounts gets confusing and cluttered. I still feel this way although, over time, I've added more accounts. On the other hand my cash categories are mostly tucked out of the way at the bottom of my budget.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
      • 4
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      Green Nomad by keeping the cash in categories, your other categories aren't being used for spending guidance. Instead, your logic is... "I have enough cash, I can spend it on X by just moving money to category X." Instead you should have all the money for X already in the category. Having uncategorized money, as you do with these cash categories, gives you an excuse to overspend. By keeping the money in the spending categories, you can instead create a scarcity mentality, helping you to better save or pay down debt.

      Like 4
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
      • Reported - view

      Green Nomad Additionally, I fail to see how the money gets into the cash categories to begin with. What happens when you make a ATM withdrawal, but all your money is already assigned to categories? What category do you pull the money from to move it to the cash category?

      This just seems unwieldy and confusing. You need to simplify and keep it real.

      Like
    • Habanero Salsa , nolesrule : Oh, I just remembered the most important  reason I made my cash entries into categories: I don't want them to be easily available in my budget and to wind up allocating them to something else. My emergency money stash is mostly only for emergencies. If I spend it on anything else I try to replace it immediately.  The cash in my wallet is in use more often, but I try to always keep a certain amount of it around in my wallet. I don't want to allocate that money to something else because it's all showing up in my To Be Budgeted. So, how do I handle that situation?

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      • Habanero Salsa
      • Second generation user
      • Aquamarine_Pony.8
      • 7 mths ago
      • Reported - view

      Green Nomad You said you have one main cash account. Why isn’t that account encompassing all cash and then expenditures assigned to it rather than putting money in a wallet category — which is just a pseudo-account in this usage — and moving it around from there?

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      • Habanero Salsa
      • Second generation user
      • Aquamarine_Pony.8
      • 7 mths ago
      • Reported - view

      Green Nomad If part of your cash account balance is for emergencies, budget it toward emergencies. Budgeting something to Wallet doesn’t mean much unless it’s meant just to sit in your wallet. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      • Reported - view

      Green Nomad I always try to keep a certain amount of money in my wallet too. $20. if I use it, I grab another $20 at the ATM. You need to stop trying to conflate location of money with purpose of money. Once you get that through your head, your budget will be easier to manage.

      If you are spending cash on something, and then moving the cash from the wallet category to the actual spending category, then you aren't using the spending category balance to guide your spending decisions. If you aren't using the category balances to guide your spending decisions, then you aren't using YNAB effectively.

      So just STOP using the cash categories. You say you are doing it to hide the money, but that's not what you are doing. Instead, you are using the money to be able to spend MORE than you want to... and that defeats the purpose of having a budget.

      Like 2
    • nolesrule So, you're saying the cash in my wallet should be allocated to spending categories, even though I want to keep some cash in my wallet? What about the emergency cash in my house, which I definitely DON'T want to spend on anything if I can help it, except in the case of an emergency?

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      Green Nomad 

      Green Nomad said:
      So, you're saying the cash in my wallet should be allocated to spending categories, even though I want to keep some cash in my wallet?

       Yes. if you use the cash, just get some more at an ATM. It doesn't affect the budget.

       

      Green Nomad said:
      What about the emergency cash in my house, which I definitely DON'T want to spend on anything if I can help it, except in the case of an emergency?

       If you have an emergency fund category in your budget that exceeds the pile of emergency cash, then you're good to go.

      Remember that money is fungible. it can be used for anything in your budget at any time, and it really doesn't matter where you keep it. if you want some of it in cash in a safe or under the mattress, that's just a location. If you want it reserved for emergencies, then it's just part of your budget's emergency fund.

      Like 2
  • As it seems to me, these actions you need to reflect as a transfer of $ 20 from your account to cash. In fact, you did.

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    • Tan Pilot Sorry, can you explain what you mean? I'm not following.

      Like
      • Tan Pilot
      • Tan_Pilot.8
      • 7 mths ago
      • Reported - view

      Green Nomad On cash to you money came, and from the Bank account left. It does not matter where you came from and where you went, the main thing is that you managed to transfer funds from a Bank account to cash.

      Like
    • Tan Pilot Yes but my $20 is allocated to two categories so I am $20 in the negative.

      Like
  • Green Nomad said:
    How do I fix it?

     Stop using categories as accounts and start putting your money in the categories you intend them to be spent on.

    Have your "Wallet" or "Cash on hand" or "Purple73123" cash account, which accounts for all cash you have in your possession. Or would you like to separately account for your left pocket vs. your right pocket? How about that emergency $20 you keep in your coat pocket? Nah. Just account for all cash in one account.

    When cash leaves your hands for any reason, put a transaction in the cash account and categorize it for the purpose it was used for.

    Don't make things harder than they need to be.

    Like 3
  • Hi, Green Nomad

    I also would encourage you to simplify by just using cash accounts rather than cash categories.  I personally use 3 cash accounts:  Wallet, CashStash, and LaundryCoin. 

    When I spend, I select whichever method of payment serves me best in the moment  -- gift card, cash, credit card, debit, cheque -- and record the transaction in the correct account.

    Works beautifully.

    Like 2
  • Another vote for an account per location.

    The fact you can't recognize how to record this simple scenario suggests your current setup is unnecessarily complex. In fact, it has caused you to think there is a problem when there isn't.

    I would also suggest you read the following article several times. Your desire to synchronize an account and category (e g., the emergency cash) is also causing confusion. 

    https://www.youneedabudget.com/the-relationship-between-your-budget-your-accounts-its-complicated/

    Like 4
  • Personally, I don't bother with setting up a cash account in YNAB. I spend so little cash that it's not worth the overhead.

    Instead, I simply record ATM withdrawals as outflows against an appropriate category. E.g. withdrawals at the farmers market are for "Groceries", and withdrawals at a festival are "Entertainment." If I don't have any clear purpose for the withdrawal (rare), it goes into a catch-all "Miscellaneous" category.

    From the perspective of the budget, the money is spent the moment it's withdrawn. I need to budget for those withdrawals just like any other expense. I don't track what happens to the cash beyond that point. If I end up pocketing my farmer's market money and spending it on something else, then my budget is going to be inaccurate. In practice, I spend so little cash that it's a non-issue. YMMV.

    Like
      • dakinemaui
      • dakinemaui
      • 7 mths ago
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      bret I spend so little cash that recording the occasional transaction is hardly a burden. 😆 It does, however, greatly simplify reimbursements.

      Like 2
      • jenmas
      • jenmas
      • 7 mths ago
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      dakinemaui that's where I'm at. I have 2 cash accounts. The emergency stash: It has never had a single transaction in it other than the starting balance. Wallet: About once a quarter I get cash from the ATM (on 9/22 I took out $200, I still have $115.17). And I spend it on any number of things. I mean, usually my Friday bagel at the deli because of the credit card minimum. But there's other stuff. And since I only get cash once every few months, I can't predict where that money is going to go.

      Like 1
      • dakinemaui
      • dakinemaui
      • 7 mths ago
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      jenmas I haven't gone to the atm machine in years. Cash inflows for reimbursements provide way more cash than I can/want to spend.

      I hate spending cash, because that's money on which I don't earn CC purchase rewards.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      dakinemaui I used to get half a year of cash needs from collecting money for girl scout cookies.

      I'd say 90% of our cash needs are the kids allowances, and that gets more expensive as they get older. I can't wait till Oldest is old enough for her own checking account.

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      • jenmas
      • jenmas
      • 7 mths ago
      • Reported - view

      nolesrule Capital One has an account for teens that has no fees, no minimums, a debit card, mobile deposit, a piddly amount of interest, and can send the parents a text with alerts on all transactions.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      jenmas yeah. That's probably the direction I'd go. She's not quite a teen just yet. 

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      • jenmas
      • jenmas
      • 7 mths ago
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      nolesrule I believe the requirement is 8+. Whether child is ready for it is a different kettle of fish.

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      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 7 mths ago
      • Reported - view

      nolesrule All 3 of my kids (age range 9-15) have Capital One Money cards.  Total lifesaver!!  My Capital One login screen is a little nuts with each of their cards and corresponding Kids savings accounts, my savings account, my checking acct, and what I used to manage for my mom, but it is so convenient overall.  Once in a while it gets hairy when they want to split a purchase between them, one uses the card, the other gives me a handful of quarters, and the 3rd is paying the other back for the charge, and then they all come to me to settle this up.  I blow my stack, tell them I'll do this once a month, and then it's back to normal :).

      But seriously, look into it.  If only the 9 year old would stop losing his card... grrr.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
      • Reported - view

      Annieland I signed up Oldest. Of course, I had to jump through hoops and call customer service. She already had the savings account, so I signed her up for the Money account. It had a very old address. So I went to change it. It apparently didn't save the change, but created the account anyway. Also, the money transfer didn't happen either, and a manual transfer didn't work. So I called, and after being on hold awhile, they fixed the issues for me.

      I don't think my Youngest is ready for it yet.She practically gives away her money. I need her to be a bit more mindful before she gets a card to swipe.

       

      I do have a question though. What do the kids do when they need to make a payment for something that is neither cash nor debit card? They apparently don't get a bill pay/check writing service.

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      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 7 mths ago
      • Reported - view

      nolesrule Hmm I can't say I've encountered that yet.  There is a routing and account number though, so maybe e-check or ACH works.  I have my youngest's card linked to my PayPal account so I can help him buy things on eBay.  But any other P2P payments I haven't tried.  If I encountered that situation, like let's say my daughter owed her friend money for something, I'd pay it and then transfer the amount to my account with a swipe.  It's not perfect, as in the type of situation I outlined above, but it works for the most part.

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      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 7 mths ago
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      nolesrule You may be overrstimating the frequency one needs to send checks when one doesn’t have children. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 7 mths ago
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      WordTenor but she would be paying for things that I would have been writing checks for if she did not have her own account. 

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  • To fix your problem based on your current way of budgeting, you need to transfer $20 from one of your budget categories into your ‘Cash in Wallet’ category.

    Based on your budgeting method, in reality you have $20 more in Cash then you did yesterday, but you also have $20 less in your Savings accounts than you did yesterday (and hence right now you have too much money currently sitting in other categories which you dont have Savings to support).

     

    This is a fix for your current method of budgeting. A lot of people are suggesting alternative ways of budgeting from your current method altogether, many of which I agree with but don’t directly answer the issue you are asking about.

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  • nolesrule said:
    What do the kids do when they need to make a payment for something that is neither cash nor debit card?

    Ours has grasped the concept of reimbursement. We also run allowance and Amazon gift cards though there, so it resolves itself in short order. TBH, we typically owe the kid. 😋

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