Transfers to Savings Accounts

I need a little help understanding how to manage and budget for some of my savings. I have a bank checking account that my salary flows into. I also have some separate American Express high interest savings accounts for long term savings; one for a roof fund, one for house repainting, one for vacations, etc. Money will sit in those accounts for years before being spent. I like to keep them separate for the higher interest and to keep them off my spending radar. I just started with the new YNAB this month, Jan 1st. I budgeted the current balances in these accounts into their own budget lines, one for vacation, etc. I also budgeted my pay for this month as it came in into my various budgets,  groceries, gas, etc. Every dollar has been budgeted and has a job. I forgot that I have automatic transfers setup for every month on the 23rd to the Amex savings accounts, $20-$40 each depending on the account/goal. YNAB sees the transfer into the Amex accounts but every dollar in my checking account is budgeted to other things. Do I need to budget for these transfers each month? My checking account would now be short right?

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  • I understand the separate checking accounts for all your goals.  When you're not running a detailed budget, it's a really good way to keep finances straight and save for various goals.

    YNAB doesn't particularly care about accounts though, beyond whether they have a positive or negative balance.  If you noticed when you first set everything up, the money from all of those savings accounts all landed in TBB along with your Checking.  This is because YNAB considers every dollar in every account to simply be a dollar that needs to land in a category somewhere.

    Do you need to budget for the transfers?

    Technically no.  Transfers between accounts don't get categories attached to them, because there isn't any money entering or leaving your budget.  The money is just changing it's residence from Checking to Savings.

    However, if you want to keep your category balances matching your account balances, then yes, you need to budget money to each of those categories equal to the amount of your monthly transfers to each account.

    My checking account would now be short right?

    Another complicated answer here.  Based on the story you told, your checking account currently has some amount less in it than the sum of your categories that you don't have savings accounts for.  If your checking account doesn't go negative though, is it really short?  Another way of looking at it is that you're maximizing your interest income by having the money in the high interest savings accounts instead of the checking account, despite it not being categorized for one of your savings goals.

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  • Thank you for the detailed response. I think that my checking account could actually go negative given enough time if I don't budget for these transfers. I'll give a very simplified example:

    I have a total inflow of $1000 per month.

    My mortgage is $1000 per month paid on the 25th.

    My checking account has the $1000 inflow and all of it is budgeted to the mortgage.

    An automatic transfer of $50 to my Amex savings occurs on the 23rd.

    My checking balance is now $950 and my mortgage payment is short.

    I understand what you are saying about it possibly not going negative as there are other long-term categories in my budget that just build up month after month in my checking account but given enough time I will eventually spend that money but a portion of it has been moved away to my Amex savings. It would be simpler to just keep everything in checking account but some of these Amex savings accounts have high balances for years. For example, there is currently about $13k in these savings accounts for projects that won't mature for another 10-15 years, like the roof. I will need about $25k for a new roof (tile, big and expensive ) in about 15 years. I'd rather make 2% per year interest than .02% over those years. Does this make sense? Am I still missing something? To me it seems like transferring money into an emergency account but not budgeting for an emergency account .

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      • dakinemaui
      • dakinemaui
      • 8 mths ago
      • 1
      • Reported - view

      J Bill Again, you don't budget for transfers. Because location (i.e., the account) doesn't matter to the budget, you move things around as you wish. If you want more interest, then move money to the higher rate account. If you have an upcoming expense that is greater than your checking account balance, move money back to checking. None of this affects the budget categories, because they are concerned with spending (money leaving the budget).

      The article that nolesrule linked above will hopefully make this more clear.

      Reply Like 1
      • mamster
      • mamster
      • 8 mths ago
      • Reported - view

      J Bill It's very easy to "protect" the True Expense money in that savings account: budget the money to a category. Create a category called Roof Replacement and add $10,000 (or whatever you currently have saved for the roof) to that category. Done.

      It's true that sometimes you need to keep an eye on your checking balance when using YNAB. However, in my experience, I am much less likely to overdraw my checking account with YNAB than with my old system of multiple savings accounts, simply because I have a clearer picture of my upcoming transactions.

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      • mamster
      • mamster
      • 8 mths ago
      • 1
      • Reported - view

      mamster Also, I would turn off the automatic transfer. It's not useful or necessary when using YNAB. When you have more than you need for a month or two in checking, just manually move some over to savings. It's easy and doesn't affect your budget.

      Reply Like 1
  • Are your savings accounts on budget? If so good. You have to “budget” for these transfers insomuch as in your head you are adding $40 to the roof category each month by doing the transfer, therefore you budget should reflect that you are adding $40 to that line item each money. Does it matter if that $40 is in your checking account or savings account? As long as they are both on budget accounts, it does not. 

    Reply Like 1
  • You don’t need multiple savings accounts with YNAB to keep track of multiple long term goals because categories are what track these goals in YNAB, not accounts. In your example, you only need one savings account but three different categories, Roof, House Painting, and Vacations. As far as budgeting for them, yes, you need to budget the amount you want to add to each category each month. So again with your example, you need to budget $20/$40  for each category depending on which category you’re budgeting for.

    The way you phrased the question was wrong. You’re not budgeting for the transfers, you’re budgeting for how much you want to add to each category which happens to match how much you’re transferring to savings for each. The transfers themselves don’t have a category because you’re just moving around the funds in your budget from one budget account to another.

    Reply Like 4
  • You save money in YNAB by budgeting money to a category and then not spending it. The account the money is in doesn't matter.

    Read this over and over again till it sticks:

    The Relationship Between Your Budget & Your Accounts: It’s Complicated

    Reply Like 1
  • @jbill While I agree the advice the others are giving is sound, I think you and I are alike in the “need” to have this mostly out of site out of mind... not to mention this saving account earns high interest.  Here is my personal “hack”

    1. I would create a TRACKING account called “American Express High Interest Savings”.... Set the balance for today’s balance

    2. In the Budget, Create a CATEGORY called “Awaiting Auto Transfer”.... move the Money from TBB to this category

    4 Create a FUTURE TRANSACTION that happens on the 23rd of the month that moves the money FROM the budget  “Awaiting Auto Transfer” TO the tracking account “American Express High Interest Savings”

    5 Keep your bank auto transfer as is.  The above just helps you record it in YNAB

    Yes there are some steps here... but they are really fast.  And now you will be able to reconcile both accounts.

    Also when interest comes in, go to the Tracking Account and create a transaction payee “Interest Earned” to (Account) the Tracking account, inflow $$

    I hope this helps

    Reply Like
      • mamster
      • mamster
      • 8 mths ago
      • 4
      • Reported - view

      Ivory Elk I understand the appeal of the approach very much. Here's why you might want to interrogate it.

      Think about the biggest common money management problem that YNAB solves: making decisions based on your checking account balance. I look at my checking account. Wow, $2500! Great, I feel rich. $2500 is enough for a vacation! It's easily enough to treat my friends for drinks a couple of nights. And... wait, what? The car just broke down? And I didn't set any money aside for that? Oops. You already know how YNAB fixes this: by giving your money jobs, by forcing you to make intentional spending/saving decisions, by making you feel "YNAB poor" by giving you an accurate look at what your money can actually do.

      Now think about what it means when you keep your savings off-budget. It's saying, "I want to take these powerful insights and methods that help me save more money, spend more intentionally, stay out of debt, and sleep better, but I only want to apply them to a small proportion of my money." Why? What's the advantage of choosing to be intentional with only some of your money? If it's because you're afraid of keeping the cookie jar too close and sticking your hand into it, that's not how this works. It's much easier to stick your hand into a jar of undifferentiated cookies than into one that is nearby but says Roof Replacement on it.

      Reply Like 4
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 8 mths ago
      • 5
      • Reported - view

      Don't do what Ivory Elk recommended. it results in more work and less awareness. I'm closing in on 5 years of successfully managing dozens of accounts in YNAB so I speak from experience.

      Reply Like 5
      • Ivory Elk
      • Ivory_Elk.1
      • 8 mths ago
      • Reported - view

      mamster I hear you and it is something to consider.

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  • To throw "roof replacement" into the analogy, keeping savings off-budget is sort of like keeping your money outdoors for safety.

    Reply Like 3
  • I think you've got great advice but most of it was talking about the transfers. I want to emphasize how to save with YNAB. If you want your funds for your projects to grow by $20-$40 per month, you need  to budget $20-$40 per month to the corresponding categories. It doesn't mean you budget the transfer as it is the same whether you transfer the money to other accounts or not. It means: "I want to reserve $20-$40 per month for projects X, Y and Z". Just like what you do for your mortgage/rent, groceries etc.

    And to save the money: don't move the money out of the categories :)

    Reply Like 5
  • Thank you all for the very helpful replies.

     

    To summarize for others that find this thread in a future search:

     

    Yes, you MUST budget for increases in your savings accounts if you are continuing to increase your savings. You do NOT need to budget additional funds if you are just moving already budgeted funds from one account to another. This sounds kind of obvious when you reduce it to the fundamentals but a lot of people in this thread just get it wrong or don't seem to understand the difference between a transfer and adding money to your savings.

     

    In my specific case, I MUST budget $20 from my monthly salary to my Roof Fund AND I prefer to also transfer $20 from my checking to high interest savings.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 8 mths ago
      • Reported - view

      J Bill 

      J Bill said:
      In my specific case, I MUST budget $20 from my monthly salary to my Roof Fund AND I prefer to also transfer $20 from my checking to high interest savings.

       That's a good way to think about it, using hte word "prefer".

      Some of us just move money around based on what we need in our checking account for the near-term, and keep the rest in higher interest accounts. Depending on your ratio of non-monthly spending to monthly spending, with this method you may find that most months you are moving money into savings accounts, some months you just don't move any money around at all, and some months you pull money back from savings.

      In a typical month, we probably spend 55% of our take home pay, invest 10% with the remaining 35% building up in categories (excluding a month where Mrs. nolesrule gets a third paycheck). The fact we pay for almost everything on a credit card buys us 3 to 7 weeks of time to let the checking account balance build up from paychecks if necessary.  I think in 5 years of using YNAB, we've only had to pull money out of savings 3 times.

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  • I was wondering the same thing, happy to find this post.  When I'm saving for a goal, I like to think about that money as already spent.  I shouldn't budget money that is effectively spent.  Therefore I decided to remove my savings account as an account and to convert the transfers to the savings accounts into categorized spendings so I can budget for my particular goals.  Unfortunately,  you can't change the payee from a transfer to a saved payee under a bulk operation so I had to edit each line item separately, then delete the savings account entries along with the account.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • 3
      • Reported - view

      Slate Blue Display This is not recommended. The Budget manages your saving toward goals for you. You will find moving money around to be a pain when you start sending money out of budget accounts, but then spend it from budget accounts. You will not have accurate information.

      Reply Like 3
    • nolesrule This forces me to do mental math in my head every time I author my monthly budget.  It says I can budget this amount, but really, I have to subtract the amount in my savings account to know how much I should ACTUALLY budget.  I think this system is just really inflexible that way and so I have to hack around it.  When the savings account reaches my goal, I will categorize the transfer to checking as "Completed Goal" (not TBB).  Then I will spend all the money as "Completed Goal", everything zeros out .  What's the issue?

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

      Slate Blue Display That's not how YNAB works. You budget new money as it comes in. Once you add it to a category, it stays in that category until you spend it or move it to another category. it does not become available to budget withagain just because you start a new month. I suggest you take some of the getting started courses to learn how to use YNAB.

      Reply Like 4
    • nolesrule You're probably right.   Unfortunately, there's no rewinding to an earlier revision on YNAB so I'm going to do it for just this goal and I'm pretty sure I will emerge unscathed.   Thanks for taking the time to challenge me :) 

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    • Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • Reported - view

      Slate Blue Display 

      Slate Blue Display said:
      Thanks for taking the time to challenge me :) 

       That's what I do around here. 🍻

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