Figuring Out What's Available for Savings/ Sinking Funds

I need help wrapping my brain around something. We are currently working on saving 3-6 months of expenses, but just starting YNAB (again) to have clarification on where the money is going and if there is extra each paycheck. If I budget each paycheck down to $0, at what point do I consider money to be excess and available to go into savings or sinking funds, esp. with it rolling over to the next month? I feel like it will all click when I get there, but is there anything that will help me "get it" now?

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  • Try budgeting for everything in equal increments out of every paycheck. At that point, what goes unused becomes extremely obvious to you.

    For example, if you are paid twice a month, budget 1/2 of everything with each paycheck. This includes any required monthly amounts for your True Expenses (those pesky non-monthly recurring expenses that people usually forget to plan for).

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  • 1. Budget what needs to be paid before the next paycheck (do you need more in groceries or gas for the rest of the month, bills that are due, etc)

    2. What other upcoming true expenses do you have? (Monthly bills due later this month, saving for annual bills, savings for known expenses like auto/home maintenance, savings goals like Christmas or Vacation, a little personal fun money)

    3. If you have anything left, you can use that to start getting a month ahead if you are not already, either by budgeting in next month, or (my preferred method) saving it in a category called Income for Next Month. That will get you a little further ahead each month. Once you can budget an entire month with last month's income  and are budgeting an even amount each month  into annual or less frequent categories, I have found it is easier to tell how much extra I really have each month.

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    • adriana01 I like # 3 where you have a category called "Income for Next Month". I assume that if there are any funds in there at the end of the month, you take that and move it to other categories that need funding? Can you kindly explain how you work that category because I may just do the same thing?

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      • Bruce
      • Software Engineer
      • Bruce
      • 8 days ago
      • Reported - view

      TheFutureIsBright I think what is typically done is that category gets moved into the To Be Budgeted category, and  you're  able to do your budget from there, as though you had just received a paycheck that covered the entire month. 

       edit: I haven't gotten there yet, but will be accumulating excess funds into a similar account, and plan to put my third paycheck into there on the months i have 3 (I'm paid every other week )

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      • adriana01
      • adriana01
      • 8 days ago
      • Reported - view

      TheFutureIsBright I budget the paychecks I get this month into that category (moving money from TBB to the category because reports are different if I budget directly), and then move the funds out at the end of the month when I budget for the next month.

      If I was still building that amount up, I would put as much as I could in each month (incl any 3rd paychecks since I am paid fortnightly) and use that at the beginning of each month to get a little further ahead until I was putting all my monthly paychecks there.

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  • I mostly save extra paychecks, tax returns, PFDs, etc. But, I also have some sinking Funds that I occasionally clean out. For example, I put $600 every month into our heating fuel fund. In May, I fill up for the last time in the winter, and move the extra into my 6 month expenses category. Then June/July and August, I put $1800 back into the fund before I start topping off the tank in September again. If oil is high, it won't have much in there, but when it's low, it's a nice chunk. 

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  • Rule 1 means there is NO excess. Make various savings goal & sinking fund categories. Fund your categories on a priority basis (most important to least important), keeping in mind the scope and desired timeline of non-monthly bills & savings goals. 

    If you partially fund everything on a per-check basis, it's obvious what you can and cannot afford. The "big picture" mirrors the "per-check" picture. Tip: put the per-check contribution in the category name or notes for reference. Budget amounts are trivial, as it's simply the remaining amount needed divided by the remaining checks you'll budget.

    In contrast, many people will fully fund a check-specific subset of categories with each check. (E.g., first check funds categories A, B, E, and F. Second check funds categories C, D, and G.) Consider the union of both checks for the bigger picture. If you use Goals, the "Underfunded" at the beginning of each month will give you the total. Or use a spreadsheet.

    I think most people use the second approach because it's similar to what they've always done, and they don't consider there may be a better way. YNAB also recommends this approach, though I feel that's merely because new users will better identify with it. It is a bit of a faff to identify the category subsets that will "fit" each check, but once you've done that, it's pretty seamless. That it, until priorities change and you have to faff about to figure out new check-specific subsets.

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