Budget savings inflow to the category?

I currently keep my savings in one account. I setup direct deposit with the savings account from my paycheck. When my paycheck comes in, those funds are input as "To be budgeted".

I currently keep the available amount on my "rainy day fund" category the same as the balance in my savings account and any spare change I have. 

Does it make sense to change the transaction from paycheck to savings to the rainy day fund category? 

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  • The answer is the money should go to To Be Budgeted. And you should change your mindset. The money in the "rainy day fund" category is not the money in your savings account. It is simply X% of the money you currently have within all your accounts on budget. The fact the category available is the same as the savings account balance is just by chance (or a lot of unnecessary busy work). Please read this

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  • Also, "rainy day fund" is way too large and vague for one category on the long term. It is fine to start with but you will want to split this into more specific funds (car, home maintenance, income replacement, health etc.)

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    • Ceeses I have those funds, but the rainy day fund is also the emergency fund. I keep a separate category in true expenses for car and auto maintenance. The rainy day fund is for any excess money that hasn't been budgeted and keeping track of the % of my paycheck that automatically goes into savings . 

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    • Slate Blue Pilot (2903ac015cdb) I have a vacation and house category in addition to the rainy day fund. My imagination just isn't that big. 

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    • Ceeses

      Here is my quality of life goals with the rainy day fund. I have had some expenses come up which is why that available amount is so low, but you are saying do not do this? 

      I split my paycheck to send 100 dollars to the savings directly (so twice a month - 200 dollar goal) but sometimes I do move it around. 

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  • What I am saying is I don't have an emergency fund. I don't need any category called such since using YNAB. Since using YNAB, I give a purpose to my emergency dollars by type of emergencies: car replacement, electronics replacement, house repairs, income replacement, bikes, furniture, appliances, health related costs. Having those funds separated allows me to be sure I'll be able to deal with the loss of a car and a broken water heater at the same time for example.

    But once I have those categories funded monthly at a satisfying rate, I don't need to save more for emergencies. So if I have more funds, it is for more fun saving goals: vacations, trips to France to see my family, home renovations, glider, family time etc.

    What is more important is what is explained in the doc I linked in my first reply. If you are using YNAB, you do not save money by sending it to a separate account. You are saving money by budgeting it in some categories and not spending from those. The only reason to have a savings account with YNAB is to make free money (interests). That's why lots of people using YNAB have savings accounts, but they absolutely don't try to sync one category with the account balance. 

    I am not in the same situation because of the country I live in (Australia) and I use my accounts differently, but there are a lot of threads around were people explained what they do to maximise the amount of interests they earn. Typically, it boils down to figuring out how much you are likely to spend in a month and keep this amount plus a buffer in the checking account. Everything else goes in savings. Or some are using scheduled transactions and the running balance in YNAB to see what will be their lowest balance on their checking. They decide they don't want their checking to dip below X and move anything extra to savings.

    You might think then you will need to constantly transfer back from savings if you have money for some bills in savings, but in fact, you don't because your checking keeps receiving income. And that new income can then "become" the money to pay those bills and the savings money then "becomes" money in your savings categories. This doesn't describe a real action, there is nothing to do for this to happen as money is fungible. Or in other words, the location and the purpose of your money are 2 different unrelated ways to see your total amount of money.

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    • Ceeses Hey Ceeses, I was reading your reply and wanted to ask a clarifying question. So you don't keep an emergency fund of x dollars in your budget in a separate account (as you say - a high yield savings to get interest). 

      I decided to start fresh (to also clear up some old accounts and unnecessary categories I have had over the past two years). 

      So if I keep a category Rainy Day fund and budget the amount that is in my savings account right now, that is not the best use of YNAB? 

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      • Ceeses
      • Ceeses
      • 6 mths ago
      • 2
      • Reported - view

      Slate Blue Pilot (2903ac015cdb) You can have a Rainy Day fund if you like. If you really don't know what to do with this money, you can also call it: Funds I don't know what to do with😉. But do not try to keep it in sync with your savings account. It is a lot of busy work for nothing. Your accounts give you a view of your money by location while your categories give you a view of your money by purpose. These are 2 different views and although they contain the same money, there is no reason for the location to match the purpose and vice versa.

      The location should be chosen for other reasons than purpose: extra interest, extra safety etc. As such, you should put as much or little money in a location as needed depending on the reason you chose that location. For example, your checking account might be less safe than a savings account because there is a debit card access to your checking and not your savings. So you would want to keep your checking account lean to safeguard against theft. Or you may want to use a savings account to earn interests in which case you also want to maximise the amount of money you keep there. At the same time, you want to keep enough in checking to be able to pay for things. Determining the right amount for each type of account is what I tried to briefly explained in my post above.

      Or you may have to keep some cash on hand for laundry but you don't want to keep your full month of laundry money in quarters in your pocket at all time. So the laundry money purpose doesn't match up with the "pants pocket" money location although all the laundry money transit through the pants pockets at some time.

      Like 2
  • Unless you plan to spend that money on the next rainy day, probably not.

    Most of us keep all sorts of money in our savings account(s), just to earn some interest on it. We also have "emergency" categories we fund regularly without keeping track of which bank account that money is in - the category's Available balance tells us how much we've saved.

    What is your Rainy Day fund for? Job loss? Income Replacement category. Medical emergency? Insurance deductible category. Your cat needed to have all of her teeth pulled? (happened to me last November!) Emergency vet category, etc. 

    It's really helpful to know what you're saving for. I didn't have quite enough in my Emergency vet category in Nov. so I pulled what I needed from other categories and moved on... 

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  • I get what everyone is saying but I also don't get it.  I read the article and I understand that trying to keep balances matching is redundant.. Like someone said, you don't necessarily want all your emergency fund in the checking account but you also need to know when to move money to cover when you need to use the emergency fund and the savings account has no debit card attached so you can't use it directly from there.  So... I am still struggling with how to categorize this money and still make sure my checking account doesn't over-draw.  I suppose the problem is that I still haven't fully funded the chcking account buffer...?

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      • satcook
      • satcook
      • 4 mths ago
      • Reported - view

      Salmon Lobster I have scheduled transactions for everything known. And I also have running balance turned on.   Every couple weeks o scan to make sure there is enough in the account to cover the expenses coming out. 

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    • Salmon Lobster The combination of running balance and scheduled transactions is what you're looking for, I think.

      One caveat about that: it's not as effective if you do a lot of debit card spending, because many of those transactions won't be schedule-able. I don't use my debit card much, but if I did, I would keep a larger buffer in my checking account just in case.

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