Advice for Temporary Income Increase

I am only 2 months into YNAB, but very much like it.

I have recently been offered new responsibilities (opportunities) at work which will also come with a significant 'income supplement'.  As long as I continue with this extra responsibility, I will receive the supplement.  So I am essentially being promoted and getting a raise.  However, it's possible I may hate this new role, and in a year or two ask to step back down.  Doing so would mean I lose the supplement.


My primary goal is to not 'get used' to the supplement, such that my lifestyle expands and I become dependent on it. I want to treat it as temporary and thus give myself the freedom to give up this new workload if it negatively impacts my happiness.


This possibility has been in the works for some time, and before I discovered YNAB my plan was to create a separate checking/savings account to store the supplement. This account would only be used to pay off current debts,  for major one-time purchases (like car down payments), or long-term goals (IRA investment, paying extra on the mortgage, etc)  In other words, no recurring monthly expenses or bills, including long-term expenses (sinking funds), would be paid by this account.  In my mind, this would allow me to use the income to enhance my life, but prevent me from becoming dependent on it.

The question is how to deal with this supplement in YNAB, as in YNAB I would prefer to just use a single account.  In my mind, I have a few options.

1. Allow it to go into my primary checking account and therefore into YNAB budget,  but create a budget category in YNAB called "Supplement" that holds this money, and only use this category as I described above. This approach is cleanest from a YNAB perspective, but it would be easy to raid this category...

2. Create a separate saving/checking account to hold the supplement as I originally considered but keep this account/money on budget in its own Supplement category as above.  I do not see the value here vs. #1.

3. Create a separate saving/checking account to hold the supplement as I originally considered, and then keep it off budget as a tracking account.  When I use this money, I would either transfer it into the primary checking (move it on the budget), or for 1-time purchases they would never appear on the budget.  I like this because the money is separate from my monthly budget, but its a little more complicated and I am not sure if could produce weird things long term.

2. Create a separate saving/checking account to hold the supplement and create a separate YNAB budget to manage this.  The benefit is the supplement is completely separate, but the weakness is that it's completely a different budget and might be overly complicated.


I would appreciate any advice

Thank you.

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  • I wouldn't bother opening a new account. You know how much your previous paycheck is so calculating the difference is no problem. Just take that extra income every month and allocate it to categories such as IRA, debt payoff. Don't over think it and start money in a Supplement category just to move it to the IRA category. For example, the tax cut that came with the Tax Cut and Jobs Act a few years ago is only temporary and is going to expire. I'm getting an additional $77/month with it (well that's what I was getting when it started), so every month I allocate at least $77 to my Kitchen Remodel category. Just throw the excess to your car downpayment category (or go nuts and strive to pay cash for your next car). Personally, if I had non-mortgage debt, I would just use the extra income to pay down that debt - I don't prioritize paying off my mortgage early as I believe that in my situation, my money is better spent elsewhere.

    Other things to look at: If you have access to a 401(k), I would make sure I was maximizing any employer match, then doing the maximum contribution to an IRA, then going back to maxing out the annual 401(k) limit ($19.5K in 2020 for those under 50), then maybe maxing out an HSA if I had one of those. I would also look at taxable investing if the tax advantaged investing space is maxed out.

    Like 4
  • Tomato Cobra said:
    it would be easy to raid this category...

    Do you raid your Mortgage category? Of course not, because you know exactly what it's for. "Supplement" is a vague category with no obvious consequences to "raiding" it, which is not the best of ideas. As @jenmas said, don't overthink it. Budget your normal paycheck amount first, then add to whatever high-priority categories you want to accelerate until TBB is $0.

    Like 4
  • I appreciate the comments and advice.  It is simply a fact that when I have previously had a pay increase, my lifestyle has expanded over subsequent years to match the increase, even when I did not want it to. Its not an immediate occurance, but 2 years later I realize that my lifestyle has expanded.  But that was also before I had YNAB. I am optimistic that just having YNAB will make a big difference.

    I recognize that multiple accounts/budgets complicates matters and are unnecessary with YNAB.  However, I do not want the supplement to just disappear into the budget.  I am very serious about clearly demarcating between the 'regular' income and the supplement because I want to have the freedom to give up the income in 2-3 years.

    In terms of a separate category, my intention is to create an entire category group labeled "Supplement', within which multiple individual categories are placed.  Each month an amount equal to the supplement would be budgeted to the categories in this group.  That way the supplement dollars are given a specific job, but still separated in the budget and thus in my mind. Categories would be things like: extra car payment (our first goal is to payoff 2 car notes), and then things such as next car downpayment, house renovation, IRA (or maybe extra IRA payment),  special vacation trip, etc.  The point is that funding for all of these categories/expenditures could disappear and normal life would not be immediately affected.  I also think that I could always move a subcategory to another place if I wanted to move it out of the 'supplement' and into regular income.  

    Thank you for the opinions and perspectives, especially since I am still new to YNAB.

    Like 3
    • Tomato Cobra From your description, it sounds like you are using your supplement to build a type of Wish Farm. I think it is a good idea to help with the walling of the income if you know that your tendency is to have lifestyle creep. I have a hard time with that too. Some days, despite best intentions, that extra money gets really easy to rely upon. I would highly recommend looking at the following blog post on wish farms. I think that the mechanics of what you are looking to do are the same. 

      One key area to focus on is the funding and then transferring to a regular category. For example, you could budget the extra car payments in the Supplement Wish Farm and when you are ready to pay them, transfer that amount to the regular car payment category so that you have an accurate reflection of how you paid off the car. The same would go with the house renovation, vacation etc. You could choose to fund one at a time or a portion to all.

      • Saish Dawg
      • saish_dawg
      • 2 mths ago
      • Reported - view

      Tomato Cobra You can move it off budget with a tracking account.  And remember, the budget is a reflection of you.  There are no right answers.  If you want to reprioritize, your budget is a great tool to do that.  But it will always reflect you.  :^)

  • Tomato Cobra said:
    but 2 years later I realize that my lifestyle has expanded. 

    This moment in time might not be the best gauge of what your lifestyle is going to be though. The global pandemic has impacted so many supply chains. When the meat processing plants closed down, the producers had to slaughter their herd that they couldn't sell for meat and couldn't afford to feed. A lot of the component parts of various chemicals for agriculture come from Chinese suppliers and the ability of US producers to get those inputs has been constrained which impacts what is being produced. If you're spending more money on groceries every month, it is highly likely that it is due to prices going up rather than you buying filet mignon every week.  

  • Way to know yourself and work within your own limits. That's fabulous.

    I like Option #1. It is clean, crisp, and you would know when you're raiding it, and be making a conscious decision to do so. To reduce the likelihood of it being done often, though, consider naming it something more ominous - "That which is not to be touched" or "Money I will wish I had later" or "Keep your hot little hands off this" - whatever is going to remind you that this money is for things that don't contribute to an expanded lifestyle.

    Also consider using the Notes field to provide a list of approved uses for the money, so you can look at that list when you go to move money, and see if the purpose you'd like to assign to those dollars matches up with  your expected use for them, or if it makes more sense to leave those dollars alone, and wait for a more appropriate usage.

    In any case, I applaud your self awareness! Good luck!

    Like 3
  • Hiding money from yourself -- keeping it outside your frequently accessed accounts and off your budget -- is a strong indicator that you haven't fully embraced the YNAB method.

    Sure, you've created a YNAB budget and "given every dollar a job", but when push comes to shove, it sounds like you don't trust yourself to follow that budget. Your spending decisions are still based on your account balances rather than your (budget) category balances.

    Your finances aren't going to magically improve on their own just because you have a budget. You need to put your budget into practice.

    Note that, unlike other budget systems, a YNAB budget is not a static document. You will overlook some expenses, and your priorities will change over time, sometimes on short notice! You shouldn't chain yourself to predictions/priorities you made weeks or months ago. YNAB encourages you to adjust your budget as often as you like. The exercise of reflecting on your priorities and adjusting your budget is how your finances improve - it ensures that you're spending your money mindfully and that your spending is aligned with your (ever changing) priorities.

    It's a different mindset than a lot of folks are used to, and can feel like a "leap of faith" when you're getting started. It does require a degree of self-accountability -- consulting the budget before you spend, or failing that, adjusting the budget after you overspend. But it's worth the effort -- there's a whole "YNAB Wins" forum topic where people celebrate the results of this style of budgeting. Give it a try!

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