Is there a better way to do this?
I am trying to reconsider how I think about money. The way YNAB is set up to work, at least the way it works for me, encourages me to spend most or all of the money in a particular category. For the foreseeable future, I'd like to do something different -- I'd like to put a layer of deep mindfulness between me and any negotiable expense.
I have been a YNAB user for more than a decade, and it revolutionized my finances. I have funded categories every month and it has worked brilliantly for me. But I find myself thinking: The month is almost over and I STILL HAVE MONEY LEFT IN BUDGET X! Do I want to carry it over, or buy something with it? (...starts trolling on Amazon...)
Instead of: Am I budgeted for this? SPEND! I am aiming for a mindset of: Do I need this? Do I want this? Have I investigated all my options? What is the least I can spend without compromising my quality of life?
Yep, I've set myself a mindful spending challenge for the coming year, and I'm excited!
I should also say that I am newly retired (thank you, YNAB!). My income is partly funded by investments, so at the beginning of the year I will be taking money out of investments to fund the difference between my income and my outgo.
I plan to have a category in my budget called "cash on hand" where all income and money on hand will be deposited. As I spend money I plan to move money from my "living" fund into the proper category, ala "WAM."
For instance, while my rent and certain annual insurance premiums remain static, and will be funded as such, categories such as food and entertainment are flexible in that I have some control over how much I spend. So I'm funding rent and insurance, but not the more flexible categories until I actually spend money in those categories. I'll play WAM to fund these categories from that "cash on hand" category.
It is my hope that this will motivate me to be much more mindful about how I spend my resources and what I bring into my life. I am positive that this mindset will become automatic at some point, but until then I need some extra motivation to keep me focused. I can tell you that watching that "cash on hand" category go down over the course of the year will be very motivating!
So, what do you think? Is my way of doing this the best way? Are there better ways to set this up to track my (hopefully) mindful spending?
Obviously financial goals are a very individualistic thing. I think all we can offer is our own personal mindset. The only feedback I have on your specific proposal is that it sounds much more likely to have the opposite effect on reducing mindless, discretionary spending. If anything, seeing $50 left over in the Dining Out category and spending it just because you know you have it, is much more mindful than WAMming from a slush fund all year.
From my own personal YNAB use for 11 years, my financial situation and cash flow has changed more times than I can count. If I didn't have YNAB, in any of its iterations, I'd be dead in the water by now. But how I choose to progress is I make up my own little "challenges" for myself. I might do one a year, one a month, or three times in one sitting because a certain situation presents itself. They are often more arbitrary than researched, but sometimes they are based on financial wisdom I've learned here and elsewhere. Here are some examples:
As my cash flow increased in the last couple of years, I chose a few discretionary categories to budget the "average" for every month. That is not a built-in YNAB goal, but I use an emoji symbol to remind me that's how I chose to budget that category. My reasoning behind this, was these are historically categories I underfund, and then regret it later because I don't have the money when I need it. However, my goal is definitely not to spend it all as quickly as possible. Sometimes I check my own progress by looking at previous months and comparing the average budgeted to the average spent. Two years ago they were almost always the same, indicating that I was often zeroing out the category (probably by wamming). For the past year I've seen that gap grow larger and larger each month, signifying I'm saving more now than in the past. It also helps me relax a bit when making decisions like, spring for the more comfortable rental car on vacation, park closer to the airport, buy a ticket to that special event, etc.
I set annual spending goals for myself on other expenses, and "ride the wave" as I go, trying or hoping to keep the month's outflow in line with what is available. If it is not possible, then so be it, YNAB will help me get back on track going forward.
After one of my two dogs died, and I adopted a new one a few months later, I set up a new plan to self-insure for vet expenses for both of them so that in their senior years I'm not faced with a huge financial/ethical hit again. I made up my own formula of a base amount funded per dog per year, plus an addition each year based on the dog's age. I have no idea how this will support their healthcare expenses going forward, but I'm giving it a try.
I'm trying to escalate payments of a car loan by increasing my payment by 10% each month. Again, no clue how long I can sustain this, but it's a personal challenge I'm trying.
I could go on and on. I don't need YNAB to always tell me what I should be saving or spending in a category. Sometimes their tools really help, and sometimes I come up with my own, and often they complement each other. You should do some mindfulness exercises on setting your own goals and challenging yourself to meet them, and forgiving yourself along the way if you don't, and adjusting as necessary. THAT'S the power of YNAB, but the rest is up to you :). Good luck in the new year! We all need it...
Powder Blue Trumpet said:
The way YNAB is set up to work, at least the way it works for me, encourages me to spend most or all of the money in a particular category.
I love having money left over in a category. My overarching goal is to save. To grow my net worth. I can then decide to spend extravagantly in that category or to use those funds elsewhere in a higher priority category. More likely, I'm going to move them to a savings category. Don't you dare blame YNAB for your motivations. It is just a tool to optimize your funds the way you see fit.
The mindfulness part of the spending comes when I choose how much goes in that category, and then again when I choose to limit myself to this last $25 and not, say, to pull from "Income Replacement" to have one extra night out this month.
Perfect. That is it in a nutshell and I believe gets to the core of what the OP is asking.
There are a ton of ways of achieving goals such as mindful spending as demonstrated by the posts here. I think it would be far too easy to start overspending in one category and pulling it out of the big pile and then when something really important to you pops up unexpectedly at the end of the month, you have nothing left.
One thought I had on how to use YNAB is to use other parts of the software to help. What if you colour coded the categories using the flags to denote which ones you can spend to zero with no implications? Others can be ones that you intend for longer term use that should have 10% left at the end of the month to help ensure you have enough available later on.
When it comes to mindfulness, i think in the same terms as WordTenor , which is that it starts ahead of time. If I evaluate each purchase independently, how can I compare it to other priorities I have for my spending? Mindfulness to me is making sure that what I purchase is in line with my goals, intentions and desires for how I live my life. The pile of money gives me no sense of what my goals are because there is no definition to it.
Powder Blue Trumpet said:
Having a zero limit, and having to value each purchase against my "Income Replacement" feels... I don't know, thoughtful rather than destitution.
What makes the Income Replacement category better than the individual category it is in? What would you need to do to make the category have this same thoughtfulness feel to it?
Powder Blue Trumpet said:
having to value each purchase against my "Income Replacement" feels... I don't know, thoughtful rather than destitution
You should evaluate each purchase first against its relevant category. If there insufficient funds there, then evaluate against the LEAST important thing with funds in the budget. If that is less important than the original category, then you SHOULD take those funds.
Leaving funds in the least important category while something more important to you goes unfunded (and therefore unpurchased) is the opposite of meaningful, "priority-based" spending.
Navy Blue Pegasus said:
What if you colour coded the categories using the flags to denote which ones you can spend to zero with no implications?
Hey, that's a good point. A while back, when I started using some emojis, I put a 🔒next to a bunch of categories. These were to remind me these are NOT wammable categories. This is a plan I am committed to, or a category balance that needs to be what it is. Thankfully, I don't WAM a ton as of late, but they're still there to remind me!