What's the best way to use YNAB when you run out of money before running out of month?

So I'm pretty new to YNAB, (perhaps 4th month), and I'm using it but its just super hard to make sense of how it'll ever work when I'm running out of money before running out of month. I posted in the forum a while ago and the thread https://support.youneedabudget.com/t/639r82/if-ynab-only-had-a-purposeful-way-to-help-broke-people-get-a-grip-on-managing-money exploded so I figured I'd try to isolate what I think I've identified as the culprit in what makes YNAB so hard for a broke person to use, and see if anyone's figured out a workaround. There's a ton of people who've used it to successfully get out of debt and beyond, but how?

Just this morning I was at a bankruptcy attorney's office for consultation, because I'm really not sure whether I need to do a BK, DMP or just avoid those altogether and try to get out of debt myself. After 4 months of using YNAB, I can absolutely see how useful it could be to somebody flush with cash, but it escapes me how it can help someone who's short of covering a months expenses plus $50k in consumer debts.

To clarify... So my wife and I net about $5500 per month. That's decent money, about $90k per year gross. But that's really only enough to use YNAB as designed with the 4 rules, (or 5 including rule 0 as Jessie would say). The rule for dealing with overwhelming consumer debt is missing. There's no good way to budget in $2500 in credit payments!

Here's what I mean and I'm wondering what ynabers have done to accomplish getting caught up and even ahead with their income to debt situations... Rule 1,2,3,4 work fine as long as you're not in the negative. The credit card feature in YNAB is brilliant, provided you're not over extended and can pay the credit card (s) off each month. But there's a need for at least another rule or two, to figure out what to do when you've funded wisely, but have consumer debt or balances that we no longer have funds to allocate to.

Is it best to just simply not put money in those buckets and ignore the late payments? There's the obvious plummeting FICO, delinquent account phone calls, etc. However the primary function of YNAB could be fulfilled and we'd be on our way to being well funded for next month as well as aging money and funding goals. But the thing that makes it messy is how YNAB tries to help by showing overspent credit card buckets and needing to roll with the punches and knockout the interest and fees category by prompting to fund it.

I recall from a Dave Ramsey FPU class, at some point he was talking about drawing a line across his budget and anyone above the line got paid and anyone below it didn't. If a creditor called he'd tell them they didn't make it above the line that month. It seems like I'm at that point logically, but I'm emotionally torn between paying a credit card, or funding a true expense.

I've thought about having two budgets within YNAB, the primary budget for rules 1 through 4 (which would function as if we had no debt and had excess each month stripped if all credit card accounts), and the secondary budget for strictly consumer debt pay down. That way, we could use YNAB properly for our primary budget and have any excess go into a bucket for debt. Then flip over to the debt budget with the credit card accounts as loans and use that sort of like an imaginary account for a DIY DMP, (possibly linked to a real separate bank account to pay from). In theory that should allow us to use YNAB correctly. The credit score would tank and the creditor communications would increase, but at least the main budget would function as programmed with rules 1 through 4 followed.

Any ideas are appreciated because I'm totally at my wit's end trying to use YNAB when all those credit cards, (current and past due), and a couple of loans are all intertwined with regular monthly stuff that needs to be paid along with things that SHOULD get funded to avoid future problems, (true expenses, savings goals, etc).


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  • Can you or your wife pick up side jobs??  You have an income problem, not a YNAB problem. 

    Just run one budget. Don’t over complicate things. If you can’t afford to pay all the credit cards, then don’t budget anything to them that month....

    Like 3
  • YNAB is just one part of your big financial picture - the budget. The budget is your plan for how you will use your money and, conversely, how you will take care of spending responsibilities. 

    If outflows exceed inflows, YNAB will make this clear to you so that you can work on addressing it. There are two possible solutions - either decrease outflows or increase inflows. 

    Decreasing lifestyle spending is a daily occurrence, and sometimes changes here take time. Don't beat yourself up about not optimizing every penny, just try again tomorrow.  

    Decreasing debt spending may require an agreement with your creditors. This can come in many forms (and I'm no expert - talk to a professional about your specific situation), such as simply calling to freeze payments, lower payments, consolidate debt, BK, and other solutions. I don't think anyone on here can tell you what is best for you. Others may share their experiences so you can know what to look out for, but ultimately, it will be your call.

    Increasing income can come in various forms. Selling stuff you own, a side job (this can vary greatly), windfalls (but usually those can't be expected), etc. Can all bring you more money. 

    You don't have to try the above solutions in a vacuum - in fact, one approach by itself will likely not be enough, and that's reality. We're all just doing our best here. YNAB will help you maximize the money you have. 

    I know when we started YNAB, somehow we didn't have enough to cover all of the categories. Some things went unfunded. Some things got funded, and then we had to move money to cover something else, meaning we simply couldn't use it for the originally planned category.  I liked how flexible YNAB was in allowing us to respond to our needs and evaluate priories, both in planning and real time spending. If you prioritize only spending what is funded (you may have to work up to it), YNAB as a tool will help you make better spending and planning decisions. It doesn't tell you what to do with your data. It shows you all the pieces so you can make an informed decision. 

    I'm not sure what about the budget part is upsetting you, but I think it would be a bad idea to separate budgets. If and only if you can NOT use your debt accounts for further spending, you can put those as tracking accounts with a category in the budget for debt payments. 

    Then, the budget will have your normal spending/saving. Any debt payment will be budgeted for and categorized in the debt category, which has the advantage of showing up in your reports. 

    The difficulty here is if you need to add to your debt with a spending transaction, whatever account you used really needs to be on budget. It might be realistic to keep one CC or LOC on budget, and prioritize minimizing that debt acquisition. 

    Once you get the monthly spending/income ratio under 1, you'll know how you want to use that "extra" money. That's the true power of YNAB. 

    Like 3
    • One last thing - if you're unhappy seeing a lot of orange in your budget, you can try putting the needed figures in the category title (date due, monthly budget amount) instead of a a goal. You'll have to go down the list and type what you need/can contribute, but that only takes a minute or two if you're copying.

      If you like the quick clicking goals provide, you can use the Toolkit setting to make underfunded goals blue. This is handy, since most of the time, our available bubbles would have shown orange, which makes seeing credit overspending difficult. 

      And I will be the lone voice for this, but 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 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 $.

      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 a number through the long line. 

      5. Add up categories for each arrow and ensure they equal the designated paycheck. If not, fix step 4 again.

      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.

      8. When paychecks come in, A) reconcile accounts, 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.

      There is hope. Keep at it!

      Like 1
  • YNAB is just a tool to best manage the finances you have. If your income is less than your expenses, then you have a problem that YNAB can't fix on its own. You really only have two choices. Reduce your expenses and/or increase your income. Otherwise, you will go further and further into debt. 

    I would study what Ramsey says and do that while you figure out your options. Get a second opinion on BK vs. DMP vs. trying to dig yourself out. I'm sorry you and your wife are dealing with this and I can't imagine how stressful it is. I think your first step is to figure out your plan on the best way to move forward and then to just dig in and work it best you can. Best of luck and I hope to read of your success story in the future!

    Like 3
  • This situation sucks, and I'm sorry you find yourself in it. No question, YNAB alone can't solve it... but I still think it can help.

    The main way YNAB helps people get on top of their finances is by making money feel as scarce as it is: if I'm checking my Groceries category instead of my bank balance, and moving money before spending, I'm more likely to make intentional spending decisions that are in line with my priorities.

    In your situation, however, there's no shortage of that feeling of scarcity. I'm sure you're feeling it all the time.

    That doesn't mean you can't YNAB. It just means you need to take a step outside of the budget, as other posters have suggested, and decide on a plan. A big part of that plan will involve how much of your income will be devoted to debt management, and on what schedule. That's going to ease one your biggest sources of stress: Having to interrogate every single dollar and say, "Is this for groceries or debt paydown—and which debt?"

    Your plan will give you enough information to build a budget. It's still going to be hard, but the budget is going to make the "reduce your expenses" side of the equation easier than it would be without a budget. Best of luck, and please keep us posted.

    Like 5
  • Move Light Sound Life said:
    If outflows exceed inflows, YNAB will make this clear to you so that you can work on addressing it. There are two possible solutions - either decrease outflows or increase inflows. 

    Actually, a third option is increase debt. While obviously not a long-term strategy, it may be necessary as you start to climb out of the hole.

    Typically when starting with YNAB, you will have to pay catch-up on various True Expenses. A $600 yearly expense due 2 months after starting will suck up $300 out of each month's income. After you pay it, though, you can spread it out over 12 months -- only $50/month.

    It's not uncommon to try to be too aggressive with debt reduction. Try to get off the roller coaster first, by funding true expenses. Yes, that may cost a little more interest. Think if that as the price of peace of mind to have a viable plan for the cash you do get and not feel like your drowning.

    As those TE contributions decrease, that opens the door to more aggressive debt reduction. Knowing everything else is on track gives you insight into how much extra there really is.

    Make a plan (i.e., allocate money into categories). Try to stick to that plan, and REALLOCATE if you cannot (or decide not to). Giving up X for Y is fine when Y is more important. What is not good (leads to debt increase) is doing both X and Y when you only have cash for one of them.

    Basically, you need to stop digging yourself deeper first. Plan for the minimum debt payments for now until you get a handle on things. Absolutely fix overspent categories immediately.

    No overspending means you are holding ground. Walk before you run.

    After you can do that and TEs require less, then increase what you budget toward debt. Start to jog.

    You'll see areas to cut. More TEs will decrease. Start to run.

    You didn't get in this situation overnight. You won't get out overnight either. You can, however, slow the downward slide, then stop the slide, then put one for in front of the other to climb out.

    Like 12
  • Are you trying to set up your budget with the YNAB categories default? I found those didn’t work for me.
    I would suggest taking a pad of paper (as DR suggests) and write the actual amount of money you have in the bank at the top and then go down the list in order of priority and allocate that money to the expense. 4 walls first (food shelter clothing transportation). The difference between YNAB and DR is that DR uses expected money and YNAB  only lets you plan with actual money.
    Then set up your budget in YNAB with the same layout as that pad of paper. True expenses are important because you don’t want to get caught short in the future but right now it sounds like those have to wait. Yes it is great having Christmas fully funded and pay cash but not if you don’t have money for groceries.

    I think the pad of paper will help you decide whether bankruptcy is right for you. If you can’t pay the creditors because you don’t have the money right now that is one thing. But if you don’t have the money for the creditors AND you don’t have enough to pay your living expenses, bankruptcy won’t save you. You’ll just be right back in the same place 3 to 5 years from now.

    The pad of paper will help you see where the breaking point is.  

    Able to pay all the day to day but nothing left over for the creditors? Then bankruptcy may give you the fresh start you need.

    Able to pay all you day to day and still have a bit left over? Maybe you can get out of this without bankruptcy. Work some extra jobs to get the debts paid off. 

    Can’t cover the day to day? Bankruptcy will not solve this problem. Either income has to go up or expenses need to go down. There is no magic answer. 

    And just a word about bring able to use YNAB when you have no money - I have evolved my YNAB categories and setup over time as my financial circumstances changed. Don’t try to make everything perfect from the get go  Work with how your life is right now and then as things change, you can change your YNAB setup  

    Like 2
  • Thanks and these are all good suggestions. I'll touch back as things progress or unravel.

    Like 3
  • I don't really have many suggestions beyond what's above, but I did want to lend my support and best wishes. I have been in that situation and it is HARD. Manipulating the numbers in YNAB won't fix the problem... unless it's budgeting less to categories where you can feasibly cut corners. In other words, find a place to cut expenses. This goes back to DR stuff. Sell a financed car and buy a beater. Deliver pizzas at night. Switch to a cheaper cell or internet plan. Cut out restaurants/fast food.

    This is going to suck, but I know it can be done! Best of luck to you.

    Like 2
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