Beware the savings account type
Hello fellow YNABers,
Having had a very tumultuous couple of years changing jobs, I am now in a stable job and I am ready to save up for my first home! Exciting times!
I looked to my budget and saw that I had £4.5K in a Savings Account which I sent around £200 to each month for a few years already. I also had another 6K in a budget category labelled "Deposit" in my budget.
I thought great...I have £10.5K for my deposit already saved up and so, like the good budgeter that we all are, I decided to make a forecast and a plan based on that number.
It was only later that I realised that the Savings Account didn't have any categories, and I thought, hang on...where are those "dollars" accounted for in my budget?
While I was indeed Saving that money each month, that money was already accounted for in my Budget, AKA my £6k "Deposit" category.
Naturally, I was very disappointed to realise that I am about £4k short in my brand new saving plan (gasp) since the money in my savings account was already being budgeted in my "Deposit" category.
I double counted the savings I have, which leads me to the title of this conversation: beware the savings account...If the money is not in your BUDGET, then it's not budgeted for...
I guess my plans to buy a house will be postponed for a few months, but I am happy that I spotted this early on.
All the best
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It's unfortunate to learn this lesson the hard way. It's an important lesson, however.
Your budget, not your accounts, tells you the money's purpose. If there is not $10,000 set aside for a house purchase in the budget, there is not $10,000 set aside for a house purchase. Same with anything else--if there *is* $10,000 in checking but not $10 in dining out, there's no money for a burger after work, either.
Sending thoughts of fortitude as you build that savings back up. Press for more than $200/mo and see how fast you can get there.
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Thanks WordTenor - appreciate the thought!
I've started saving at least £1200 now (£1000 + £200 that goes into the savings accounts, which is a specialised first time buyer savings account, with bonuses etc).
Very important lesson I just learned, indeed, but also I am massively relieved that I only need to track one number - the one from my budget - to know how far off I am from my goal. -
Some background reading material to drive home the point that accounts hold dollars, not categories.
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dakinemaui Yay now I don't have to search for the link. I just finally gave my 16 yr old son his first YNAB lesson (1st paycheck as a poll worker and cashed out the bitcoin he's been mining in the basement for 5 years) and had to explain the category vs. account concept 5 times in 40 minutes. Exciting!
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Annieland Whoa! I'm curious how much bitcoin he was able to mine in 5 years.
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dakinemaui When I'm on iOS I can type "itsc" and get a text expansion to the link. :) I answered this on my desktop in between grading papers. Thank you!
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WordTenor Interesting! I'll have to look into such expansions on my phone. That's where I find such lookups awkward.
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Superbone Not enough to offset my electric bill 😕
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Annieland That's not surprising.
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Annieland Not worth the effort, eh? Although your son made out. 🙂 I'm sure he didn't help with the electric bill. It's a good teaching moment though to show him that Income - Expenses = Profit.
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