Age of money drop?
Can someone explain why my Age of Money would drop from 225 to 160 days in a month? I’ve made no large expenditures or anything in the last month.
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I don't know if this is your particular issue, but I used to see drops like that when I had substantial transfers between checking and savings. That was because I wasn't actually "transferring" it within YNAB. For example, if I transferred $100 from checking to savings, I'd see an import under both: a $100 deduction from checking and a $100 addition to savings. The both had bank-provided "PAYEE" descriptions that had the word "transfer" in them (something like "Checking Transfer"; I forget exactly what it looked like) so I thought YNAB recognized the transfer. Instead, I have to change the Payee to YNAB's transfer option. It looks like the attached image to me.
Previously, YNAB thought I was simultaneously spending the $100 from checking while earning $100 in savings. That meant the money I had was seen as "spent" and deducted from AOM. When you use the "Transfer to:" description in Payees, it doesn't count against AOM.
If that happens to be your case, you can always go back through the old transactions and fix them. Easiest thing to to is list them by Payee and they'll all be grouped together. The AOM calculation will automatically fix itself.
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dhooper said:
Previously, YNAB thought I was simultaneously spending the $100 from checking while earning $100 in savings.dhooper When you import your transactions, YNAB doesn't know that two offsetting transactions in different accounts are really a transfer between accounts. So you need to either manually fix it or enter the transfers in manually before importing.
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The fact that it was a nearly linear increase until the drop tells me it was probably feeding off your starting balance right up to the drop. So now it's starting to map your spending to income events that happened after you started YNAB. So you'll begin to see the ups and downs of how AOM actually behaves.
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I think it must have been the transfer between an on-budget account and an off-budget account. I transferred a large sum from my on-budget checking to my off-budget investment account this month. I’m not quite sure what you mean by feeding off my starting balance? I started New YNAB back in August 2019 - does that mean I’ve lived off the money I’ve had since August 2019? I’m not sure what the ups and downs would be - why would my age of money drop at all?
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Blue Major Yes, a transfer to an off-budget account is money leaving your budget, which is what YNAB uses as the criteria for calculating AOM.
AOM is a calculation that tells you how long ago the income came into your budget that was spent by the last 10 of your transactions where money left the budget* as an average.When you started YNAB, you added all of your accounts on that day so relative to your ongoing income, it was an extremely large income event on the day you started, so any spending since that point would map back to the money added on the first day. Once all of that money was "consumed" by the outflows from your budget, it starts mapping back to later income events.
What i mean by regular ups and downs is that now that it doesn't map back to all the money at the beginning, it starts mapping back to your income. So it'll jump around as your outflows jump from income event to income event. Additionally it's dependent on the interaction and timing of all your outflows. Therefore, it tends to have an up and down fluctuation.
* AOM uses money leaving the budget. Not spending. So that means if you use a credit card, it's based on the credit card payment date and not the date of the credit card purchase.
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Blue Major This is your answer and exactly why it dropped. A large sum of funds left your budget. Even though it’s probably the right financial move, to the budget it is a large expense (funds leaving the budget). This is a great example of one of the top issues with the AOM metric. It can be ignored. Watch your Net Worth instead.
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Blue Major said:
does that mean I’ve lived off the money I’ve had since August 2019?Probably. Look at your net worth (on-budget, cash-based accounts only) as of Aug. 2019. Divide that by your average monthly expenses. That's about how long that money would have lasted before transactions started pulling from newer income events.
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The purpose of Age of Money is to escape the paycheck to paycheck cycle. If you are not in that process, the number becomes less meaningful.
Jumping from 225 to 160 means you went from spending money you entered into the budget 225 days ago to spending money you entered into the budget 160 days ago. So you could have had an income spike around half a year ago? At any rate, with numbers like that, Age of Money isn't particularly useful. Net worth becomes a better metric to focus on.
You can find the nitty gritty details of how Age of Money works in this article.
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Wessel
Wessel said:
The purpose of Age of Money is to escape the paycheck to paycheck cycle. If you are not in that process, the number becomes less meaningful.Sadly, AOM doesn't really do that. The number is never meaningful.
What actually allows you to escape the paycheck to payecheck cycle is good budgeting and spending habits, but AOM can't tell you when you're doing good behaviors or bad behaviors, and in fact can react similarly in both cases.
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