Tracking Credit Card Spending with non-traditional payment cycles
Hello all!
I use a credit card for the majority of my everyday purchases to earn valuable rewards. I never carry a balance, and make sure I pay off my statement balance every month.
Currently I have my credit card account as an "off-budget" account. Every so often I track all of the purchases on the credit card, aggregate them into their respective categories, and then pay out of my on-budget checking account to the credit card in one lump payment that is broken out by category. As the month progresses I update the pending payments to get an idea of how much I'm spending in each category, as a result transactions I make in late February will be due for payment in April. While this approach works, it's less than ideal.
I read in another post that others use their credit card as an on-budge account and track transactions normally in the ledger to that account, then when time comes to pay the bill they transfer between a checking account to the credit card category-free.
While this works at the onset there is a major problem I'm running into - which is the timetable for payment. Transactions that I make after my closing date of February 17th will be due for payment in April - that's the month where I want all my spending to deduct from since that is when the money is due and where I want to make sure I'm not overextending.
The only solution I could think of is to post-date the purchase days so they correspond the correct month but this seems wonky. Was wondering if anyone had a better way to handle this or found a better practice.
Using YNAB 4 btw.
Thanks!
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Maroon Clarinet said:
Currently I have my credit card account as an "off-budget" account.There's your problem right there. The CC is merely another method of payment, so treat it as such. You need to come to grips with the fact you're spending when you swipe the card, not when you transfer money to the CC.
There is no issue with payment timing because purchases should be budgeted. Money then sits behind the scenes (in YNAB4) just waiting until you get around to paying the bill, typically 4-8 weeks after whatever charges you made.
At all times, the amount you have implicitly reserved for your payment -- the maximum amount you can send -- is the difference between account balance and Pre-YNAB Debt category balance. If the latter is $0, then you can send the entire account balance should you wish -- i.e., paid-in-full status.
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I see what you are saying - I'm trying to move away from having the CC as off-budget to make tracking more efficient and less of a hassle.
So if I'm understanding correctly it would go something like this,
I've budgeted $500 for groceries for the month of March. As I purchase groceries the balance on my CC account begins to fall into the negative, while at the same time my Grocery category eventually falls to $0. At this point I either curtail spending or move money around, whatever. That $500 I've spent in March is going to basically sit in my checking account until I pay the bill in May, where I transfer it from 1 YNAB budget to another - keeping everything in check?
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Maroon Clarinet
Maroon Clarinet said:
where I transfer it from 1 YNAB budget to anotherYou'll transfer between accounts, but yes, that money will sit in the CC Payment category until you send it off to the CC company.
A subtle point, but if you also have a savings account, the notion about where the money in a category "lives" is a fluid thing. It could be in checking or savings -- the budget doesn't care because money is interchangeable (technically, "fungible"). As such, you can change a category's "location" by changing your mind about where you think it is (assuming sufficient account balance). When you have multiple cash-based accounts, just make sure there's a sufficient balance to support whatever outflow you're about to incur. (Feel free to transfer when needed.)
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Great - that's how I've been treating the cash accounts - doesn't matter where the actual funds are sitting, as long as there is enough to cover the purchases out of the account and the budget is in check it's all good.
You mentioned that the maximum amount I can send is the different between account balance and the Pre-YNAB Deb category balance. I noticed when running through some test situations that as I input charges out of the credit account, they are debiting from the category that I assign them - but the Pre-YNAB Debt balance for the card is not incrementing - is that expected behavior?
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Maroon Clarinet Yes. In YNAB4, the Pre-YNAB debt category represents the debt you intend to carry on the card. That's why the payment amount is the difference between the PYD category and account balance. If your plan is to pay some of that off, then you must budget money toward the category to bring it closer to zero.
And since the payment amount is the difference between the two numbers, you can see that when you make a budgeted purchase, the cash is reserved, because the PYD stays the same but the account balance gets bigger by the amount of the purchase.
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nolesrule
the pre-ynab debt values only increment If you specifically assign transactions to pre-ynab debt. If you assign the transaction to groceries, it decrements the grocery category while leaving the pre YNAB debt category as is. The balance on that credit account drops negative. I’m assuming what you are saying is if you don’t pay all of that off, and carry a balance you need to account for the remaining balance by assigning it as pre-YNAB debt for your next month.
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Maroon Clarinet No, you don't adjust Pre-YNAB debt at all between months. It doesn't change because it is carried over month-to-month by default unless you change its default behavior (and you shouldn't).
If you begin with a card with -$1000, PYD will be -$1000. Spend $100 budgeted money on groceries and PYD stays -$1000, but now the card balance will be $1100. Your payment reserved by the budget is the difference, or $100. Budget $200 to PYD in order to pay the card down by $200, and PYD will be -$800. Payment to be made = -800 - (-$1100) = $300. Note that the $300 is the $200 you budgeted to pay down the card plus the $100 budgeted grocery spending.
When you roll into the next month, the PYD category balance will be whatever it was at the end of the previous month, and you go on spending, budgeting, and making payments until it is $0, at which time you can hide the category because you are fully current on the card. -
WordTenor
WordTenor said:
and making payments until it is $0, at which time you can hide the category because you are fully current on the card.Ahh - that's what I was looking for. Based on the various responses it sounded like YNAB should be tracking the pre-YNAB debt along with the balance on the card. I don't carry a balance on the card, it is always paid off in full (the whole point of running the budget to begin with) and knowing this value should not change is what I was getting at. Thanks!
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Maroon Clarinet Notice that the math still works: the amount the budget has set aside for you to pay the card is the card balance minus pre-YNAB debt. If PYD = 0, then this equation is: Card Balance - 0 = Card balance.
You still have to budget so that PYD is $0, otherwise, the budget does not have the money set aside.
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