Woah, things got confusing when adding a credit card! How do I figure this out?

Does YNAB offer one-on-one coaching, because I do not see how this can be explained how how I can understand.  But here it goes.

So we decided to start paying all our bills and shopping with our credit card to take advantage of cash back rewards.  

For easy math, let's just say we already owe $900 on the credit card and it has a $1,000 credit limit. 

I calculated and budgeted for $800 of bills to come out using the credit card.  So I make an $800 payment to cover the future expenses coming out this month.

I decide to start from scratch and create a new budget in YNAB.

So far I've added

My Family Checking Account

My Family Savings Account

My Credit Card

I start going to all our bills to switch over the payment method to be for the credit card, except, now I've found that our auto loan payment will not accept credit card as a payment.  It has to come out of our checking account, but we don't have money to cover it, as it's now in our credit card account.

So to fix this, I add to YNAB

My Business Checking Account

and transfer $300 to our Family Checking Account.

I've assigned all the budgets and setup all the schedule payments and for what accounts they're coming from, I've also recorded the $800 transfer to our Family Checking to our Credit Card and recorded the $300 to our Family Checking to cover the auto loan.

Looking at the budget amounts, everything is so confusing!

In the budget tab, my credit card shows a negative -$670.53

And my "Ready to Assign" Shows a positive $379.98, which doesn't make sense.  We should only have $79.98 available after all the budgeted amounts.  And I already have $300 budgeted for the car payment.  

I also had to create new categories, since when I added my business checking, it showed way more available than what we have to spend for our Checking Account.

This is a nightmare, I've spent hours trying to figure this out.  How do I fix this mess so it makes sense?

I've used YNAB for years, but only for my Family Checking.  Adding all these other components I feel like maybe YNAB isn't built to handle multiple accounts?

Any help is appreciated!

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  • Alright, I'm going to come back in a bit with the way you handle the CC float in YNAB. 

    For right now, though, you've gotta get your other accounts giving you more information.

    1. Turn on the running balance in your account register. (View, by filter)

    2. Are you getting paid only once before your rent is leaving your possession? 

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  • I'll be saving $500 each week for rent.  We get paid every Wednesday, the amount of $989, and are also receiving an extra payment from the IRS once a month.  By the time rent is due on the 5th, I'll have $2,000 to pay it.  

    Move Light Sound Life said:
    1. Turn on the running balance in your account register. (View, by filter)

     Never knew that was there.

    I turned it on.  Here's a screen shot if you need to see it.  I also noticed I forgot to add an upcoming deposit of $500, so I updated that as well.

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    • Forest Green Violin Oh, good.

      I really recommend having 4 scheduled transactions for your paycheck, offset by a week, and repeating every 4 weeks. That way, your running balance can give you useful insights.

      Like
  • The paycheck on 8/18 is set to be weekly recurring.  But for some reason it's not showing as a weekly recurring income.  

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    • Forest Green Violin It only shows the next iteration, which is why I would do 4 separate transactions. It's gaming the system (sort of), but it will show you the upcoming month that way. 

      That's helpful for cash-flow decisions.

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    • Move Light Sound Life So.... you're saying I need to manually put in the recurring paycheck each time to see it in the register?

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    • Forest Green Violin YNAB only shows the next single iteration of repeating transactions. So if you have a weekly transaction on Monday, YNAB would show the one for 8/16 as scheduled, but would not show the one on 8/23.

      To correct that, schedule 4 separate repeating transactions: one for 8/16, one for 8/23, one for 8/30, and one for 9/6. Have each of those transactions repeat every 4 weeks.

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    • Fuzzball Meows OK, I think I got it.  Thanks.

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    • Forest Green Violin No. Just take a minute right now and set up a transaction for 8/18, recurring every 4 weeks. 

      Then another on 8/25, recurring every 4 weeks, then another on 9/1, recurring every 4 weeks, and the last on 9/8, same thing. ... Or whatever the dates are...

      Import will simply match those transactions to the bank ones. 

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    • Move Light Sound Life There you go, using the correct dates and everything! :)

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  • I'll delete it and readd it.  

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  • OK, I got it.

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    • Forest Green Violin 

      Woohoo!

      Ok. Now, you get to deal with the negatives in your budget. 

      Are these facts correct?

      Your CC working balance is $226.24.

      Your CC payment category is $0?

      You have $300 set aside to pay your car loan.

      You are planning to put $500/paycheck into rent (cash not in hand, but will be).

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    • Forest Green Violin 

      Awesome. 

      The easy answer for you is to not spend money between now and your next paycheck. If you can do that, {ETA: on your next paycheck} you'll assign $500 to rent, cover the overspending in their respective categories to the tune of 226.24 (plus the $80 for Banfield and YT, so really you'll see $306.24 of credit overspending), and watch YNAB be smart and put that money in the credit card payment category.

      $989-306-500 is about $100 left that paycheck, so you'd assign it to any needed cash spending, then any CC transactions scheduled before the following paycheck.

      If you'll need to spend money this week (more than the $66+30 already assigned), let me know, and I'll show you how to set it up so YNAB reflects that. I guess I'm talking groceries here, really. Something variable that you'll have to use credit on. 

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  • OK, I'll need a little time to process and understand this.  And I do appreciate your help in trying to solve this problem.

    But my initial thought is this:

    If we want to continue to use the credit card in this way, when I'm budgeting in YNAB I'll always be seeing negative balances in some categories because YNAB is saying, hey, you just paid off some of your balance with your credit card and you have no more money to spend!

    From using YNAB so long, those negative balances makes me think that I need to assign money to cover them, but if we use the credit card in this way, I will never be able to until we receive future income.  

    So in YNAB's eyes, we're spending money we don't have.

    The way I thought it would work is that there would be some way to make a payment to the credit card, and I'd be able to use the available balance of the credit card as money that was available to budget in YNAB.

    If I could do it this way, then I wouldn't be seeing all these negative categories.

    If I'm having to do it a certain way that I'll always be seeing negative balances in these categories in YNAB, I'm afraid that it will just continue to add to my confusion, and give me the feeling we aren't able to pay some bills.

    If that's the case, I'm not sure I like that setup, unless I'm understanding incorrectly.

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    • Forest Green Violin I agree, and I would not like that set up, either. Let me describe how the CC works in my budget. Then I'll show you how to get there.

      In my budget, I started out with (much more than you) debt on the card. However, I hadn't spent all my cash making the payment before I really could! 😋 

      Anyways, when you get to be Paid In Full on your credit card, you'll have the $ sitting in the payment category to pay off the full working balance. Plus, you'll budget *ahead* for whatever purchases you're going to use it for. 

      For example, if I have $75 in my Groceries category, and I buy $65 worth of groceries on the card, YNAB will move $65 (cash) from groceries to the CC Payment category automatically, because you'll have to pay that debt off soon. Then there will be $10 left in groceries.

      A credit card with a $1000 limit doesn't mean you own $1000 more than you did - it means you can delay payment up to that amount for a certain time (3 weeks or so). You still have to have that money for real elsewhere.

      I agree, it will take some processing, and that's ok. 

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    • Forest Green Violin Now, in your exact situation, this is what I'd do:

      1. Cover all current overspending from your credit card payment category. Doing this represents creating debt, which you did already by charging stuff you didn't have cash to back.

      This will be mind-blowing, because the CC Payment available will stay at $0. This is because you don't have any more money than you did, and any *funded* CC purchase will automatically flow money back to the card payment category. In your case now, that's a net-zero effect.

      2. Then, negative-assign from the CC payment category the $80 for the two credit transactions coming up before next Wednesday. Assign it to Banfield and YT. If you need groceries within the next week, do the same. 

      This gets your categories grey, but will result in a $306 deficit in your CC Payment category.

      3. On your next paycheck, you'll want to assign cash to the credit card payment category ($306 or whatever is needed for the absolute value of working balance) to make up for it. That should put you back in PIF status. However, if it takes you another paycheck or two to get there, that's ok. 

      This method is not recommended by a lot of people here or at YNAB, likely because it *can* encourage people to create debt and not be ready to pay it back, especially if they don't understand YNAB. 

      You're so close to PIF status, though. I really think you'll be debt free by September.

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  • Here are some good, general things to understand about credit cards in YNAB. 

    1. If your CC Payment category is not the positive equivalent of your negative CC working balance, you have debt. When your CC Payment category matches (positively) your (negative) working balance, you're PIF and good to go!

    2. In order to get the benefits of credit cards without running the risk of paying interest, you want to treat it like cash. 

    3. Always look at category balances to inform spending. This means you have to assign money to them before spending. 

    4. If you ever float debt (spending not backed by cash) or carry debt (meaning you paid interest on it because you didn't pay the statement balance in time), you budget to pay that back by assigning directly to the CC Payment category.

    I hope this gets you on the right footing. As I said, you're so close.

    Also, try taking YNAB's credit card class. 

    ETA: #4

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  • OK, I'll go over all this again tomorrow.  If I have any other questions I'll let you know.  Thank you so much for your help!  I know that was a lot and I will try my best to process the information.

    Thank you!

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    • Forest Green Violin 

      https://youtu.be/TtURRDUT6iw

      This seems to be a good tutorial for how credit cards can work for you in YNAB. 

      Meaty info starts at 4:30.

      Good luck! Process well!

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  • So, just to round things out a bit, because I obviously skipped some things you said - Sorry!

    Forest Green Violin said:
    Also, my plan was to round up each budget category, so for example, if my Electric bill was $125, I instead pay $130 to both, cover that expense and pay down the credit card a little at a time.

     Ah, so it's clear here that you understood you have debt. The thing is, with such a low limit, that rate of paying the "bills" (it's really the card) back will likely max out your card in just a few months, putting you back in negative categories because you'll have to make payments instead of assigning for upcoming bills. 

    If that's all you can feasibly do, then you're going to have to expect some negatives in your budget. And maybe some interest, too.

     

    Forest Green Violin said:
    The way I thought it would work is that there would be some way to make a payment to the credit card, and I'd be able to use the available balance of the credit card as money that was available to budget in YNAB.
    If I could do it this way, then I wouldn't be seeing all these negative categories.

     YNAB only allows (well, encourages) you to budget with cash you have, not credit you have been extended. 

    To represent the fact that you are using/have used credit not backed by your own cash to pay for things, 

     

    Move Light Sound Life said:
    1. Cover all current overspending from your credit card payment category. Doing this represents creating debt, which you did already by charging stuff you didn't have cash to back.
    This will be mind-blowing, because the CC Payment available will stay at $0. This is because you don't have any more money than you did, and any *funded* CC purchase will automatically flow money back to the card payment category. In your case now, that's a net-zero effect.

     Then, you can use your categories to inform your spending.

    *CAUTION! Don't do this long-term, as YNAB doesn't know your statement balance and cannot prevent you from using your credit card limit in a way that causes you to pay interest.

    This is a temporary solution that you will need to rectify by assigning money directly to the card to reserve cash that's ready to pay off the debt before interest is occurred.

    PIF is the way to use credit cards safely. If you're PIF, YNAB will protect you from paying interest to the CC company. It's really a wonderful thing. 

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  • Move Light Sound Life said:
    PIF is the way to use credit cards safely. If you're PIF, YNAB will protect you from paying interest to the CC company. It's really a wonderful thing. 

     OK, so if my goal is to PIF (this means to pay the credit card off in full each month correct?)  What is the best approach to set this method up in YNAB.  

    I assume the beginning of the month you start with a zero balance on your credit card.  You assign your available cash to the budget categories and when you use the credit card for those categories, does YNAB assign how much you'll pay to cover all those expenses at the end of the month?

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  • Forest Green Violin said:
    OK, so if my goal is to PIF (this means to pay the credit card off in full each month correct?)

     Actually, it means to always have enough reserved in your budget to pay off the balance at any time. 

    Most of us only pay the statement balance when it's due and keep the rest in an account that earns a bit of interest. Even if it's just keeping your money in a non-interest earning account, like checking, that's fine. 

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  • Forest Green Violin said:
    What is the best approach to set this method up in YNAB.  

     Either leave the overspent categories as a reminder to fill them up ASAP as you can with money.

    Or, negative budget/assign from your credit card payment category to clear up the other category negatives, then fill up the CC payment category ASAP.

    Either way requires waiting on some more money at the moment.

    I'd go with the second option because it provides more category guidance.

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  • Forest Green Violin said:
    I assume the beginning of the month you start with a zero balance on your credit card. 

     Nope. 

    I doubt your credit card statement runs from the 1st-end of the month. 

    Here's how credit cards work:

    Actually, I typed this up already and I'm going to go find it.

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    • So the way credit cards work is as follows:

      1. You buy a thing on credit. Let's pretend it was Aug 10th for $50. Then on Aug 20th, you buy another thing for another $50. You are currently in debt for $100.  

      2. On Sept 6th, the bank sends you a statement saying owe them $100, and it's due on Sept 28th (I'm totally making these dates up - you'll need to find out your own statement cycle).

      They also say you don't have to pay the whole $100 - you could just pay a minimum of $25 and they'll keep you in good standing... You'll just have to pay interest on the other $75. That's how people get in trouble with credit cards.

      3. On Sept 12th, you spend $30 on credit. Now, your total debt is $130, but only $100 is due on the 28th of Sept. That other $30 will be due on the 28th of October, because it will appear on the Sept statement.

      4. You can use YNAB to have the whole $130 set aside to pay the card, but on Sept 28th, you'd only make a payment of $100. That's fine. It's available. No overspending, woohoo.

      Rinse and repeat.

       

      Does that make sense?

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  • Forest Green Violin said:
    You assign your available cash to the budget categories and when you use the credit card for those categories, does YNAB assign how much you'll pay to cover all those expenses

     Yes. It does so immediately, and the money is ready in the CC payment category (look before you send the payment) anytime after the purchase.

    Watch the video I linked. It will really make the mechanics clear.

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  • I realize there are now 75 replies here all two person but OP the core of your problem is that you’re paying the card first and then spending on it. That’s not how credit cards are supposed to work and that will wreak havoc on YNAB. 

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    • WordTenor Eh, I kinda think this whole credit card experience is so new to the OP that they didn't quite understand the implications of the difference between credit/cash available, much less how to use it for the benefits without getting overextended. Lucky for them they already used YNAB and were able to ask questions before things went too far. Good thing YNAB displays the whole picture, right?

      Otherwise, it would be a win for the marketing rhetoric of the CC company.

      Thanks for the eyebrow raise, though.

      Forest Green Violin , my afternoon appointment cancelled yesterday, so I was able to do back and forth. However, that's not normally the way things are done on the forum. I'm booked for a while again, so I'm sure someone else can answer any further questions you may have.

      You might want to to make a fresh post, now that you're in a different place than you were yesterday in terms of YNAB set up, though. I doubt most people would read the whole progress on here before responding (some do).

      Like
      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 3 mths ago
      • 2
      • Reported - view

      Move Light Sound Life I mean, I get their confusion is on a number of levels. But you sailed right over the part where this happened: 

      Forest Green Violin said:
      When we receive income, I determine how much we've budgeted for bills for the week (we get paid weekly), then I make one payment to the credit card to cover all those expenses, and just use the credit card from that point.

       This is basically exactly backward of how a credit card works and how YNAB is expecting it to work and that's the point I would've thrown a flag on the play. This is going to cause YNAB to go crazy, and the OP needs to understand that credit cards are intended to be "use first, pay later." Everything else is secondary to that.

      Like 2
      • MXMOM
      • MXMOM
      • 3 mths ago
      • Reported - view

      WordTenor yes, if that is how it is being handled, it is skipping the part where YNAB parks the money to pay the credit card.  If  Forest Green Violin wants to do this, then it would be best to set up the credit card account as a chequing account instead.  It could also be that they are using a prepaid credit card which by default requires the money be on the card. 

      Like

    • Forest Green Violin It looks like Move Light Sound Life got your questions squared away, but if you would like our Support Team to take a look at your budget, you can enable Support Access and let us know! 

      Like 1
    • Marisa Sure it would, but the payment had already been made. 

      OP was conflating opening up the credit limit on the card with having money available to budget.

      There are only two ways to represent that kind of float in the budget. 

      1) keep categories negative and fill as possible. This is YNAB's preferred method.

      2) move the negative to the cc category to represent the debt and use categories for spending. YNAB has not historically supported this in advice given in the past.

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    • WordTenor I guess you didn't read all my responses. The order they happened in real time is a little different than the way they display now.

      Of course, I'd love to talk pedagogy if that's what you're after. 

      Like
    • Move Light Sound Life Ah yes - I see what you're saying. You clarified this early on, and I got lost in the convo further down. I'm going to edit my post to avoid further confusion. 

      Like 1
  • Forest Green Violin Oh, and a good tip with credit cards is to set up a recurring scheduled transaction for your card payment on/a little before it's due. Every time you get the statement, update the amount so you can see the effect in your running balance.

    You can write the last month you updated it in the memo, so when it fires, you can see whether the future transaction is exactly correct or not (if it's September, and you have "Due Aug 20" in the memo, you know you need to go check your statement balance).

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  • I did not read all the answers but my experience has been to have one "operating" credit card (the one I am using every day to pay for stuff) and a separate credit card with a balance owing.  If the operating card has a balance from days gone by, I recommend doing a balance transfer to a separate card.

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