Socking away budget/target money

One thing that I've been thinking about is that if you give every dollar a job your "money to assign" goes to zero. But my bank account doesn't go to zero. Now that might make sense for things that are more tangible, like if I have an upcoming car payment for $150, then leaving $150 in my account makes sense.

But if I have a pile of things for long-term goals (like money for Christmas gifts, for one example) then it seems weird to just leave it sitting there in my bank account. Especially because one ends up with a vague, amorphous blob of money. So is it best to just get another account to transfer these funds to so that it can be "out of sight, out of mind"?

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  • falekaju said:
    so that it can be "out of sight, out of mind"?

     Look at your categories to inform spending. If OOSOOM helps you, leave those saving categories collapsed or at the bottom of your budget. 

    However, many people do have a second account to maximize interest earned (ha!) or provide better security. 

    At that point, there are three things to know.

    1) Don't try to sync accounts to categories. Money is fungible, and your budget categories are an overlay over your total accounts. https://www.youneedabudget.com/the-relationship-between-your-budget-your-accounts-its-complicated/

    2) Spending money requires two steps now: Check the category first {move money or defer purchase if insufficient funds}, then check the account {transfer or use another account to pay if insufficient funds}.

    3. Use scheduled transactions and a running balance to determine how much you want to keep in each account. https://support.youneedabudget.com/t/y4hllkz/using-scheduled-transactions-for-cash-flow-projection-in-ynab

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  • I think I get what you're saying but at heart I have an intuitive notion that my bank account (accounts?) should reflect what's in YNAB and vice-versa.

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      • Emma Catherine
      • Civil engineer getting back on track
      • emmacatherine
      • 1 mth ago
      • 7
      • Reported - view

      falekaju Your account(s) do reflect what is in YNAB and vice versa. Just instead of YNAB showing that amorphous blob of money, it shows the individual jobs. I only ever look at my bank account to reconcile. So I don't see the big blob and I like it that way. The big blob creates a false sense of money to spend when in reality all those dollars are earmarked for future purchases.

       

      So I guess to get to the root of your post, I think you need to get used to the idea of money just sitting there in your bank account. That's what it's suppose to do: be there when you need it. It's about breaking the habit of looking at your account balances and instead looking at the individual breakdowns in YNAB.

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      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 1 mth ago
      • 8
      • Reported - view

      falekaju The total of your accounts absolutely should reflect in YNAB, and absolutely will. YNAB does not function any other way. 

      But the total of any given category or set of categories will not necessarily (and for most of us, will never) match the balance a specific account. The only exception here of course being your credit card payment category, which, if you are a paid in full user, should match to the penny the amount of debt currently on the card. 

      Like 8
  • falekaju this is where wrapping your head around what YNAB does and doesn't do is important.

    I almost never look at my account balances when I want to buy something - I look at YNAB. Have I set aside enough funds in the category to buy it? Do I have money in another category that I'm willing to move? Or do I need to wait all together?

    I absolutely WANT my money to be sitting in a big blob in my account - the more money in one place the higher return on the interest that I'll get. It's up to YNAB to tell me what kind of job my money is supposed to do.

    It doesn't matter that your bank account doesn't know what each individual dollar is supposed to do. It's job is to hold them. YNAB's job is to tell you what all those dollars are going to do (and sometimes that job is sit there for a really long time until they're needed, and that's great!)

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  • Would you feel better if some of your money were in a savings account, earning interest? If so, check out: How Much Should I Keep in Checking? It's important to keep in mind that the contents of any one account aren't correlated with any one category or category group in your budget.

    That said, you can keep it all in one account - be sure check your categories before spending, and the money will stay safe in your categories. 

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  • At this point in my YNAB journey, even my checking accounts are "in sight, out of mind".  The balances of the accounts play no role in the "Can I afford this?" decision making process.  Sometimes it's cool to look at the balances and muse "I could buy a car right now!", but a quick inspection of category balances confirms that all of those dollars in the checking accounts have far more important jobs.

    Like 3
  • falekaju said:
    a vague, amorphous blob of money.

     Nope, exactly the opposite. It is well defined by the categories. 

    I explain it like this. Imagine that you have a pair of pants with 2 front pockets and 2 back pockets. In each pocket there is $100 dollars. So you have $400 dollars. Your rent is $350. You know that so even though you have $400 cash, you can't spend it all because you have planned for that money to be spent on rent.  Now lets say you try to organize by the pockets, front left is rent, front right is groceries, left back is gas, and left right is fun.  Someone asks you if you want to go to a concert that costs $100. If you use your pocket to decide, you will say yes because you have $100 in your pocket. But then when the rent is due and you empty all your pockets, you only have $300.  Oops, spent the rent money. That is like using the bank account to manage the money. By using the categories, it doesn't matter which pocket the money is in, I know I only have $50 to spend. Even if its all in my right back pocket. 

    Not sure if that helps or confuses you more. 

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