Monthly expense and credit card activity questions

New user.

- I currently have fully funded savings categories listed in my brand new YNAB budget for things like "Auto Maintenance" and "Medical/Orthodontia".  This month (first month), I have a $162 medical bill to pay. I do not necessarily want to dip into my "Medical" savings to pay this bill. How should I record the transaction in YNAB?  Do I record it as a transaction in the "Medical/Orthodontia" category, then re-fund the category with $162 of dollars available to be budgeted? Or should I have a separate budget line for medical expenses that don't require a dip into the sinking   fund? Or is there a better way? Am I handling the savings thing all wrong?

-I pay off my credit cards in full each month. I started my budget with the current balances and a goal to pay in full. When I record a credit card expenditure, it adds the amount of the transaction to the Credit Card Payments category for the current month even though the bill holding that transaction won't come due for nearly two months. (Transaction in January, billing cycle closes in February, bill due in March). Is the best practice to treat credit card expenditures as amounts due in the immediate month and pay the "bill" before the close of the billing cycle (before a bill is actually generated)? Typically, I would pay in February the bill generated in February. YNAB appears to want me to pay it in January. I think I'm explaining this in a confusing way, so hopefully you get what I'm trying to say. 

Thank you. I am impressed so far with what YNAB can do, but I am struggling a little bit with changing my budgeting mindset from the spreadsheets that have served me well for years to a new way of thinking. I just need a little guidance.

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  • Isn't this exactly what the medical category is for? You can later replenish the category when you receive new income (or not, depending on your priorities). On the other hand, if this is going to be a monthly bill for the foreseeable future, you may wish to just treat it as such, separate from other medical expenses, by creating a separate category.

    As for the credit card, if you "pay in full", just pay the statement amount on or before the due date to avoid incurring interest charges. YNAB doesn't care when you pay the bill. It's only reflecting how much of the cash in your accounts is reserved to pay the charges currently on your credit card. The money gets into the category as an "under the hood" transfer when you make budgeted purchases on the credit card (the money hasn't left your account yet, right? it still needs to be reserved so you don't think you have extra money lying around)

    If you are a pay in full user, all that matters in YNAB is that the credit card payment amount is equal to the balance of your credit card (e.g. if your balance is -$1000, the CC category is a positive $1000). That means you have enough to pay off the whole balance whenever you want.

    If you take a look at next month in YNAB, you'll see the money is still in the CC payment category since you haven't made the payment yet.

    Like 2
  • Hi Hot Pink Unicorn !

    How you handle those medical expenses are completely up to you! If you want to "save" a certain amount in that category despite any spending, it may be helpful to set a Target Balance Goal . That would prompt you to keep a certain amount in that category on top of budgeting for any spending you do during the month.

    As for the credit card, nolesrule is right on target! As long as your credit card category Available balance matches your credit card account balance, you can pay that bill at any point. The Available amount will carry over from month to month, so it's there whenever the bill comes due or you decide to make that payment. :)

    Like 1
  • Thank you for your responses! 

    Credit card - I think you nailed exactly what I was missing. So the idea, then, is that my "Activity" for the current month can be my "Budgeted" for the following month, which will provide for payment in full on each statement. I think my brain wasn't fully wrapping around the idea of numbers carrying over from one month to the next on the budget... Bringing numbers in the budget from one month to the next sits fine with me; carrying a balance on the card from one month to the next does not.  The visuals of this, which is what YNAB provides, is what I need to get used to.  So, in short, I think I get it. Thanks!

    Medical - We have $8k earmarked as savings for "Medical/Orthodontia" in expectation of a few possible upcoming medical expenses over the course of the next few years - family deductible, braces for two (and eventually a third), one potential surgery, etc. The $8k is a start, with the idea that as the money is needed, we will re-fund the category to keep it around $8k for the next big expense. The $162 bill that I paid today was a one-time thing. We can afford to pay it out of monthly income, so I don't think it would make sense to dip into the fund. So I guess the answer is that it doesn't matter how I handle it. I was just curious whether or not there was a "best practice" for handling expenses like this. 

    A similar situation might come up with automobile maintenance. If I need an oil change, there's no reason to dip into "savings", even if that savings is specifically earmarked for automobile upkeep. So should I keep a separate month-to-month "Automobile" category on the budget to capture minor things that can come out of monthly income such as an oil change, new windshield wiper blades, etc.? 

    I get the impression that I might still be looking at this the wrong way. Which is okay. There's definitely a learning curve here, so I'll keep at it. I've been a lifelong budgeter, but my system was very different from YNAB's, so I'm just working on adapting to this bit by bit during my free trial with hope that I will be comfortable enough with the program in the next month to commit to the year. 

    Again, thanks! 

    Like 2
  • Hot Pink Unicorn said:
    If I need an oil change, there's no reason to dip into "savings", even if that savings is specifically earmarked for automobile upkeep.

     Actually, that's the point of the categories. For things like house maintenance/repair, medical and auto maintenance/repair, I budget money into those categories the same amount every month, taking into account the fact that I expect to spend from them.

    For cars, we budget $50/month per vehicle, and that is designed to cover all of our expenses for the life of the car. Oil changes and scheduled maintenance, new tires, wiper blades, and the unexpected repairs.

    Same goes for the home maintenance/repair. Budget the same amount every month. It covers the visit from the plumber when we have a water leak, and the repair work to the sheetrock afterwards, the HVAC guy when the heat doesn't work and it's below freezing outside, but it also covers our lawn guy, our sprinkler guy, the salt we buy to melt the ice on our driveway, etc.

    I don't put a max balance cap on these categories, because we do spend from them irregularly.

    These are not emergency funds that aren't to be touched except in an emergency, we're budgeting for known and sometimes unknown upcoming expenses that happen to be in that category.

    Like 3
  • Thanks, nolesrule . I guess it felt redundant and unnecessary to both fund and defund a savings category in the same month when the expense could be covered without involving the savings category at all. But I guess this is part of adjusting to the YNAB way of budgeting. I will work on adapting my thought process so that this way will hopefully start to feel more natural. 

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      • amp97
      • amp97
      • 2 yrs ago
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      Hot Pink Unicorn  It takes a bit to see things the YNAB way but it sounds like you'll catch on quickly. 😉

      I was just going to add that I personally pay my credit card each week. We pay it in full, but when I budget each Friday (payday!), I just go ahead since I'm already online and make a payment. I love that it keeps our total credit usage super low, giving us a really high credit score. But... that is just me. I never have to worry if I paid it on time, and I don't have to think about it carrying over to the next month.

      Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Hot Pink Unicorn The reality is there is no such thing as savings. The only difference is the timeline on when you plan to spend the money.

      Retirement investments are future income with a very long time horizon (unless you're on the verge of retirement, but it's unwieldy to budget with unrealized income), and that's why they differ from an emergency Income Replacement category, which I like to call Schroedinger's Category, because it may be used today, or it may be used never, so it has both a zero-day and infinite spending timeline all at once.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
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      amp97 said:
      I love that it keeps our total credit usage super low, giving us a really high credit score. But... that is just me.

       Credit cards only report the statement balance to the credit bureaus. So all that matters in terms of utilization is the balance on your cards on the statement date. You can accomplish the same thing by just making a single full balance payment just before the statement date.

      Like 1
  • Hot Pink Unicorn  The reality is there is no such thing as savings. The only difference is the timeline on when you plan to spend the money.

    Totally a semantic argument... but I must say I dig the Schrodinger's Cat-egory way of looking at things.

    Thanks!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Hot Pink Unicorn Yes, it is semantics, but sometimes it's the semantics that cause the hang-up. I've been using YNAb for nearly 4 years, so I've gotten used to looking at things differently. 😉

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    • MsTJ
    • YNAB has given me back my future
    • Believer_in_YNAb
    • 2 yrs ago
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    I'm seeing your situation a little differently.

    It seems you have an emergency savings account for things like medical and you want to keep this money for a possible future emergency.  Then you also have ongoing medical expenses, that are not emergencies, you can cash flow these.  A possible solution is to have separate categories, one for emergencies and one for regular expenses.  This is how I handle things like vehicle maintenance.  I break the expenses down even more.  Under annual expenses, I have a category for oil changes and another for vehicle registration, for things I know I'm going to spend money on this year.  Also have a vehicle maintenance category under true expenses, this is for things like new brakes or alternator or something like that.  Things I didn't specifically see coming but know something is.  Also thinking about starting another category, under emergency funds, for vehicle maintenance.

    Basically, you can set your budget up any way you want, whatever works for you.  This seems to be one of the many choices you can make.  Make one that works for you.  Congratulations, you are on your way to building your budget.  It starts with questions like this.  There will be many more.  I've been budgeting for a few years now and still find choices like yours that I get to make.  They have become fun for me because I have a minimum in most categories, any extra money I have to put toward maintenance, I can chose where it goes.  

    Like 4
  • Hot Pink Unicorn said:
    Do I record it as a transaction in the "Medical/Orthodontia" category, then re-fund the category with $162 of dollars available to be budgeted? Or should I have a separate budget line for medical expenses that don't require a dip into the sinking   fund? Or is there a better way? Am I handling the savings thing all wrong?

    There is no right or wrong on this one. There is only what helps you stay organized in a way that is logical to you. I actually use both methods that you describe in the quote above.

    For medical/dental, I both save in and spend from the same category. I also try to replace any funds spent (within reason, obviously) either by insurance reimbursement or with additional savings. I ended 2017 with a category balance equal to an entire month's take-home income in my medical category, and I'm slowly increasing the category with $75/month. If I spend $50 this month on OTC or uninsured expenses, I will try to move the extra $50 in by skimming it out of other categories. If that isn't possible this month, then next month I will add back that $50 in addition to the monthly $75, so $125 to the category.

    I save in but don't spend from my emergency fund category. Funds needed for an emergency are moved from emergency to the appropriate category. This is just so that the reports are cleaner. If I have a car emergency, I will move funds from e-fund to car repair, or from e-fund to medical.

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