Trying Out the YNAB Buffer
- Money that allows you to separate the timing of your budgetary actions from the event of your paycheck while following the YNAB method of making decisions with dollars in hand.
How does it work? You have enough saved up to live on so that all the money earned in one month can then be budgeted in the following month.
Life with the Buffer:
- User can utilize YNAB method and software while easily making decisions about employing dollars each month.
- With the recategorization method, no dollars get lost. While losing the abstraction of dollars is not as bad as losing real dollars, often times the former causes the latter.
- The budget meeting can happen at the convenience of the decision-makers (at any point after the last income of the month is received, and preferably before/around the start of the new month).
Life without the Buffer:
- Incomplete information, disorganization, and lack of perspective lends to overwhelming panic while deciding where to put dollars in the budget. Is that statement too dramatic? Perhaps.
- Less than optimal or flat out wrong categories may get funded, leading to spending decisions that indirectly cause unnecessary WAMing (at best), negative progress on goals (not great), or insufficient funds (at worst). Put this together with SFTF, and the way YNAB the Software works can seriously hurt the unsuspecting user's tenacious finances.
Life in the middle:
Before I learned of the YNAB Buffer, I realized that there needed to be some system to augment the decision making interface YNAB provides. Using the principles of the YNAB method (give every dollar a job, including true expenses), I would write out all income I could expect, then all the categories that needed to be funded with that money, at which income event. This allowed me to fiddle with numbers until they fit together well while ensuring that priorities were balanced (ie, later events were not forgotten). Each paycheck, we would go down the paper and type the appropriate amounts in YNAB. This saved countless hours and concern. When our budget started to normalize, a spreadsheet made sense so we could easily copy/paste between months.
To Buffer or Not?
It used to be YNAB's Rule #1. Then it was Rule #4. Now it's officially invisible.
Some people place this financial goal before all else, because it provides clarity of decision-making.
When I learned of the buffer, I prioritized a bit of savings and complete debt paydown first, because I knew the interest impact waiting 2-3 months for a debt focus would have had for me, and I was not OK with that cost. Besides, I had a workable system, if not native within YNAB, that provided me with clarity when budgeting.
Others don't use this Buffer, preferring to budget endlessly into the future if they have money beyond this month's needs. From where I see it, this has a few drawbacks, namely Stealing From The Future, poor perspective in weighing priorities across months, and most of all, the increase of busywork required when things change.
Another reason people don't use the Buffer is that it can take time to save enough to make it a reality. If it is not presented as an important part of YNAB (it's not, anymore), then new users have little impetus to choose this financial goal.
Gaining the Buffer
I went ahead and mapped out my budgets for the next year, showing how we were going to approach our savings goals, and the Buffer was one of the first goals. I projected that we would be able to use March's money for April, and then we'd focus on the next most timely savings goal (then the next, and next, reverse snowballing until we reach a more steady state - surely there's a better name than unrolling?).
WordTenor contends that the only people who say the Buffer is not a priority are people who have never experienced YNAB with the Buffer. I like challenges. 😃 Also, I'm impatient.
So, I decided to reallocate from a longer-term savings category to January's budget. All of January's income is/will be in my INM category, waiting to be released on Feb 1st. I am buffered. Further, I can check to make sure I'm not losing (abstract or real) money because I have two benchmarks - the original amount of that savings category as well as my original calculations on the spreadsheet through March. If I am in the same place with those metrics on April 1st, I will consider my Buffer Acquisition successful.
If truth be told, I seriously doubt the buffer will change much of our decision-making or provide clarity we don't get in the spreadsheet. Clarity is important. We already have it. But, we shall see. I do think it will save us time interacting with the budget. About 5 minutes a month.
Hanging on to a Crutch?
dakinemaui thinks I'll stop using the spreadsheet after a while. We shall see. 🤔
At this time, I fully intend to maintain our spreadsheet. It has so much valuable information to us. Not only can I easily compare budgeted amounts across months, but I have a worksheet with our savings snowball/rollout all figured out (and it feeds into the worksheet with the budget, now...). While I can calculate in my head (probably not as fast as someone who practices every day), if the relevant information is not presented FRONT AND CENTER (or at least with an obvious indication), I simply won't remember what the plan was next. I would then get caught up in the moment and think, "yes, I can budget $100 of "extra" money on manipulatives that will get torn up in the classroom" (or some other thing that shouldn't be a priority but could seem to be). I could make a list, but what if that list had good ideas that weren't quite feasible?
I really enjoy the confidence that dry runs of scenarios give me. It allows me to check for any mistakes or holes in the plan and fix them before implementation. And yes, having a buffer did save me time creating those other budget months in the spreadsheet - I only needed one column per month, not three. When we sit down each month to do the budget, we'll likely save about 5 minutes by only having one column to take into account. Also, the single column will leave less need for error detection. Wins!
While it's impossible to make a true comparison of two separate realities in the same time frame, I intend to come back here and record my impressions. I doubt I'll remove the buffer, but I don't think it's astronomically better than my spreadsheet operations. If I do stop using the spreadsheet, I'll consider the Buffer more impressive than I do now.
I also intend to comment below with the workflows used to catch and release income or anything else useful. That way, new users may be properly informed of both the philosophy and implementation. It's nice to not have to comb the forum for info.
Also, dealing with paycheck deductions is a bit of a hassle. I know nolesrule includes some deductions with your paycheck, though my understanding is that that would be even more complicated with YNAB4 (I've never used it). I'm curious about your workflow/set up for that.
If anyone else has anything to add about using the buffer or its benefits, feel free to add your tips!
Disclaimer: Everything I know about the YNAB Buffer has been learned from this forum (actually, there was one old Whiteboard Wednesday that mentioned the concept without the name, too. Jesse had a nice visual, there). I've most commonly seen the following workflows and terminology explained by dakinemaui , so all credit to where it goes. I'm just trying to consolidate advice to make it easier for newbies to find. I want to be able to send them here, where all issues are explained, rather than writing it out again. Or at least make it easier to copy/paste. Or maybe I won't feel the need to write out all possible scenarios and solutions and can just respond to the specific post. What a concept. Brevity.
Using an Income for Next Month (INM) Category
Note: All workflows below speak of "this" month as being the month to receive income and "next" month as the month to budget income.
Category Approach for Catch/Release
1. Create transaction for paycheck (scheduled, if you can - it saves work and prevents errors). Categorize to INM.
2. As money comes in, do nothing outside of regular reconciling.
3. When it's time to budget for the next month (after all paychecks for this month are in, typically),
A) Go to All Accounts view.
B) Search for your INM.
C) Select all instances (use the checkboxes and shift key).
D) Click the "Edit" menu.
E) Change category to TBB.
4. Go to the next month's budget. Budget.
Budget Manipulation Approach for Catch/Release
1. Create transaction for paycheck (scheduled, if you can - it saves work and prevents errors). Categorize to TBB.
2. As money comes in, budget the entirety of your check amount (excluding returns/refunds/other thing that should go elsewhere) to your INM category.
3. When it's time to budget for the next month (after all paychecks for this month are in, typically),
A) Go to this month's budget screen.
B) Move money (by clicking on the available bubble, typing in the budgeted column, or using the Quick Budget "Set available amount to 0" button) from INM to TBB.
C) Click to next month's budget screen.
4. Go to next month's budget. Budget.
Important! Do not mix the approaches! It won't work. :)
Comparing Each Approach
The Category Approach is more hands off, results in a cleaner budget, and is less error prone because it automatically sequesters money until you are ready to budget it. Because you recategorize via clicking, there is no opportunity for typos or mixing unwanted transactions into your money pool. There are more systematic checks to ensure accuracy with this approach.
The Budget Manipulation Approach is easier to use if you are working to attain the buffer or think you might have to pull from it this month. However, you have to be ready to actively put those dollars into the INM, and typing allows for the possibility of typos. Further, money that should not have gone into the INM (but was in TBB) can get accidentally missed, depending on the timing of inflow transactions.
If you have more to add, please do!
Gaining the Buffer
As I see it, there are a few ways to get the buffer.
Make it a savings category with high priority.
Decide that you will set aside X amount until the category balance is high enough to budget your regular month's budget. Each time you budget your paycheck, pay attention to category balances and move extra money to the Buffer category. For example, if you don't need to fund groceries/fun as much because you were good at being frugal, put the amount that was left into the Buffer. When it's time to use it, rename to INM and move the category to the top of your budget (if it's not there already).
Use the INM as a rolling "Budget Manipulation" category that gradually increases.
This works well if you already have expenses at the beginning of each month that need to be funded and you don't like rolling them over, like groceries or other variable expenses. Calculate what you need (let's say $417.31 for groceries, gas, household, and fun) until the first paycheck of the month hits. Budget that amount in the INM every month, and when the month rolls over, move it to the appropriate categories. That will make the available = 0 and the budgeted -417.31. If you can put enough money in the category to make the budgeted >0, then you'll know you're progressing. For example, the next month could have 562.51 available at the end, and the budgeted line will show that you contributed $145.2 more towards this goal. You can then turn over the month, empty the INM category, and start filling up categories.
This way easily morphs into fully using a buffer, because as you approach being buffered, it will be really easy to say, "Hey, I have $2000 in this INM category at the start of the month. I think I can get away with not touching this month's paychecks and skipping some of the things we normally fund. It's the home stretch!"
Forego all non-necessities!
This may be extreme if you have a lot to save and need multiple months, but if you're close to being buffered, try only funding what you absolutely spend on (and probably true expenses - they're on a timeline, too) and making your money stretch across the next month without touching paychecks. I know some people would do this and not even contribute to an emergency fund, because they know Efund contributions will pick up again soon. Besides, people can make the case that the Buffer itself is also an Efund of sorts.
Reallocate from an existing savings category.
If you have enough money saved in an emergency fund, down payment fund, or other savings fund that doesn't have a pressing timeline (don't reallocate from car insurance, right?), move enough money to fill out necessary categories on the 1st of the month. Then don't touch the paychecks until next month.
Use a windfall.
Really, this is like the first way. Instead of putting a bonus, tax refund, gift, extra paycheck, personal stuff sale proceeds, etc. to fun things, put it towards the buffer first. If it's the highest priority, it's the highest priority.
Does anyone else have suggestions?
The Complication of Paycheck Deductions
Now, if you only put your net income in YNAB, you don't need to worry about this. I started putting deductions in because when the time came to decide on health insurance, I wanted numbers. YNAB had been giving me lots of good numbers, so it seemed a logical way to look at my numbers in comparison to the plans' numbers. Around this time, I came upon Superbone talking about how he tracks investments, too, so I started playing with options. This was easy to do when I budgeted the income as I received it.
Pushing income into the budgetary future really only works for the regular budget, though, not deductions. I have my deductions as transactions split on the paycheck, and that money needs to be budgeted to cover those transactions when they happen. There's no point to funding them before the paycheck hits, if that were even feasible.
Current Set Up
Split #1: what hits my account (inflow, no category)
Line 2: gross - total deductions (inflow, INM)
Line 3: total deductions (inflow, TBB)
Line 4-rest: each deduction (outflows, appropriate category in Ded. group)
In this month's budget, select Deduction category group and "Set available to 0."
Continue with category approach to buffer and budgeting.
When a deduction change needs to be made, there are four lines to change (for each scheduled paycheck, too). Let's say something decreases. For an increase, flip all prefixes:
1. Actual deduction amount (line 4ish).
2. Increase to Net in checking (line 1).
3. Increase to line 2.
4. Decrease to line 3.
Is this the most efficient way? nolesrule , what do you think? I don't know how much of this translates from YNAB4, but I know you track deductions as well as use the Buffer.
I put the following process on someone else's thread about using YNAB. The reason I think the buffer is not as much of a game-changer for us is because I created another system to deal with many of the issues that the YNAB Buffer takes care of. Over the next several months (think May/June, it's a long swim from here to there before I get to come up for air again), I might try simulating the decision making within YNAB, but this is how our spreadsheet started.
Physically writing out and calculating on paper how we were going to make the month work was absolutely imperative when we started. Every month for the first several months followed this pattern:
1. How much money will we have to work with? Write at top left, with paycheck breakdowns.
2. What categories do we need to fund and how much? Make a list with numbers. We did this with YNAB open, because I had category balances, goals and scheduled transactions to tell us important numbers.
3. Add up category numbers. Wait, that's more than we make this month. Where can we cut? Re-evaluate step 2 and repeat step 3 until budget $ = inflow $. With the spreadsheet, I enjoy that the calculations take care of everything here. I just look at my cell for "TBB."
4. Figure out which paycheck needed to fund which categories. Mark them. Our symbol was an arrow. If we had 3 separate income days, I'd make 3 lengths of arrows and put the number through the long line. After a while, I would just write categories in their appropriate columns, and that's how the spreadsheet works now.
5. Add up categories for each arrow and ensure they equal the designated paycheck. If not, fix step 4 again. With the spreadsheet, the calculations take care of everything here, too.
6. If a category needs to be partially funded with two paychecks, mark those amounts.
7. Eventually I got tired of splitting category funding across paychecks, so if $14.78 (it's never a nice number) was left from the first paycheck, I put it in a holding category called Budgeting Logistics (or End of the Month or Funds for Next Paycheck's Budget Session), and then moved it back into TBB when the next paycheck came in. I don't recommend this until you're comfortable with the other calculations, but it does get you ready to start building a buffer with the same mechanics. Spreadsheet mechanics ended up with a holding category that I automatically included in the pertinent paycheck's TBB formula.
8. When paychecks come in, get YNAB ready! A) reconcile accounts (if they're not), B) cover overspending if you are not increasing debt, C) go down your list and input all values for that paycheck. Type +xx in budget cells, because there is likely already a number in it, and you want to add your budgeted number.
9. Double check that nothing is overspent or overbudgeted and that real life hasn't changed what you previously decided your priorities were for that paycheck.
10. Smile. It will get better. Or grin and bear it, whatever your personality is. :)
This process really helped us, because we could see all categories and responsibilities at once on the paper, ensuring that nothing got forgotten. Also, we were starting with a blank slate on the paper - no funny numbers from WAMing in the budget column to confuse us or cause a typo. If we needed to erase while putting the puzzle together, we knew we weren't messing something up with the real budget (that happened more times than I can count. I hate losing abstractions of money! A lot of frustrations and time were involved trying to error detect whatever numbers we were playing with on YNAB. That alone made the paper worth it for us).
No month was the same. Especially because, at the beginning, there were overspent categories. So, we'd count those as required amounts and figure out where to cut to make those possible. It took a few months (and specific willpower before spending) for us to stop "floating" those overspent categories in the budget, which made the planning part much nicer when we got there.
This, and this alone, is something I figured out - out of screaming (actually, we were very quietly overwhelmed and frustrated - sometimes that's worse) necessity, long before I ever went to the forum. I include this because it's the main reason I think the Buffer will only have a slight change for us, and that's something I'd like to keep tabs on with this post. I also think that it could possibly help other people who can't get the Buffer quite yet.
Regarding the Budget Manipulation approach, it's easiest to just delete the budget entry at the end of the month (to release).
Also as a recommendation, I favor the Budget Manipulation approach while you're partially buffered (splitting income between months), but then switching to the Categorization approach after you can push all income into next month. It's easier to put a variable amount into the category with a budget entry, as well as pull some out if you get a little too optimistic about your needs. In contrast, the categorization is harder to pull money back, which is exactly what you want when fully buffered. You should strive very hard to keep each month standalone.
It's like a tiny Fresh Start every month. Reset and face the coming month with eyes open and fire in your belly. 😉
Move Light Sound Life I just wanted to thank you for taking the time to write all of this up. I've read every word and recommended it to all of my colleagues.
One thing you said really stuck with me: "Another reason people don't use the Buffer is that it can take time to save enough to make it a reality."
That's true, and it's a real concern.
But we already officially recommend something almost totally analogous: getting off the credit card float. There's almost no difference between the process for getting off the float and getting a month ahead. Getting off the float means going from being a month behind to "on-month," for lack of a better term, and becoming fully buffered means going from "on-month" to a month ahead.
Both goals require injecting a lot of additional money into the budget, from any and all of those sources you recommend. That can be daunting, of course, and may take a long time if you're in a tough spot when you come to YNAB. But one of the most important things I've learned since starting my own YNAB journey is that a healthy budget has to include a lot of money sitting around doing nothing. There's just no way around it!
What a well-written synopsis! I came to share my despair at having lost my buffer so others can be reminded to protect theirs or be inspired to create one.
100% agree with WordTenor . I’d had a buffer for over a year. Didn’t need to time or even pay attention to when paydays were. Bills got paid immediately. On the 1st of the month (joy!) INM was waiting to fund all of my categories for the new month. Rinse and repeat.
Then I neglected the budget for about 6+ weeks while travelling during the holidays. My buffer went up in smoke. (On the plus side, without a buffer that same spending could have become debt, talk about despair!)
Now payday feels soooo far away. It’s just a few dollars shifted by just a few weeks, but it’s the difference between feeling rich and like I’ve got my sh** together, and feeling poor and behind, scrabbling to catch up. (Choosing to live lean for 2 months rather than pull emergency funds as being lazy and wasteful is not an emergency)
Take away: Use YNAB! I was following the YNAB rules but using Excel instead of the app. It was difficult to keep up with while travelling and it was impossible to coordinate well with my husband. I’m 2 weeks into the free trial and I’ve already subscribed; it’s awesome!
Recommendation: You say you rely on your spreadsheet partly b/c “if the relevant information is not presented FRONT AND CENTER (or at least with an obvious indication), I simply won't remember what the plan was next.” GOALS provide the plan for what’s next. You don’t mention them; give them a try if you haven’t yet. Definitely interested in your analysis!
I found it incredibly hard to put money into a buffer category ready for the start of the new month. When I experimentally moved to budgeting into the new month instead it was a game changer for me.
I had to give myself the rule that I NEVER used the money coming in for this month's stuff. This month all had to come from wamming between categories. So ALL money that came in was budgeted next month.
My categories are ordered by priority, so as money comes in I budget down the list.
This is working for me because (a) any overspending has to be assessed against my current budget amounts, which can be painful and a good learning experience, and keeps my spending in check. And (b) seeing the money go into the categories and seeing the categories next month which don't yet have any money allocated removes the temptation to steal some for this month. I get a real sense of satisfaction as each of next month's categories fills up, and a sense of perspective with the ones that aren't filled. (Not all my budget categories can be filled every month, so I get that reminder that I need to keep a tight rein.)
My income is very limited, so a tight rein is required to keep things under control. It would be different I think if there was more padding, and it was easy to shuffle some money for one big or distant pot to this month's needs.
I lost my buffer twice, by filching from it for this month's needs, and found I had a constant sense of anxiety about whether it would get big enough before the end of the month. By shifting to budgeting next month I lost a whole heap of anxiety I hadn't been aware I was carrying, until was gone.
I'm certain you do this without question elsewhere in your life. Planned a picnic, but it's raining then and there? Are you really going to eat in the rain?
Doggedly sticking to the plan when circumstances demand you adapt will never be as effective.
Whoa, budgeting as metaphor for life. No, IRL I'm terrible at rolling with the punches. Being disciplined with my lists and calendar etc. is usually an advantage but a small hiccup often derails things. I can try to be more flexible, uncomfortable WAMing included. I don't want to derail my financial goals.