A series of method questions ...
i have a list of questions about method and wanted to throw them all out here in one shot.
1. Starting out and having a Jan 1 start date, I initially have $14000 in my checking with a $10000 budget (which includes money going to investment accounts each month, money for rainy day fund, vacation fund, etc). But this leaves me with a surplus of $4000. What do I do with this? Leave it as a surplus? Add a category called surplus (which seems to defeat the purpose of YNAB). Transfer this $4000 to another account to “hide” it?
2. Starting out I have a few budget items that are quarterly or bimonthly that are now over. My quarterly bill is $333 so I have $111 per month in budget, but in Jan I pay $333 so I am $222 over budget. So I will be in the hole most months on the budget even though technically I am on budget. I guess I can increase my Jan budget on these items but then I am not meeting my monthly goal per se?
3. It’s early Jan and the app is already tweaking me about these over budget items with alerts. I can guess right now where to move money from. Or wait until 1/31 and see where to move it from. I assume doing it now makes me see less in another area now to stop me from spending. What’s your approach?
4. My wife isn’t using YNAB yet. I just started and manage our finances. Ideally I would love her to be able to be notified when certain categories are getting to $x or when she hits $x without me doing it manually. I could just give her the login but she isn’t as into websites or budgeting or finances as I am and may (a) break stuff or (b) not understand it. Any suggestions for those who can relate?
5. Does extra money in a category just roll over each month to that category so that for a quarterly bill it would pile up?
Welcome! Other people might have different ideas but just some thoughts...
1. The idea here would be to have a specific for every single dollar, so that surplus $4,000 needs a purpose beyond just being surplus. Is it an emergency fund or income replacement fund? those are jobs you could assign it. Some people get super specific and have multiple emergency funds like car emergency, medical emergency, etc. and some people just have a general "something bad will happen one day and this money is for that'" kind of fund. I think it depends on the kind of person you are! For me, it helps to break it down into smaller categories, but big buckets work for other people.
2. So your quarterly bill was due this month, correct? if so, go ahead and budget the full $333 to your category in January, so there's no overspending in your budget. Think of January as a catch-up month. You paid the bill in full, so budget for it in full. Going forward is when you'll use the funding targets. Starting in February, you'll only need to put aside $111 per month so you can set your monthly funding goal to that. The amount will roll over every month, slowly accumulating until April when the $333 is due and it's waiting right there for you.
3. It's strongly recommended to take care of your overspending ASAP with your budget. If you have overspending in one category, that means your other categories are no longer accurate. it really is up to you how often to go in and adjust the amounts. I do it every evening or if I know in advance that a transaction will put me over, I even do the adjustment on the spot with my app. This is often referred to as "WAM" or "whack-a-mole" around the forum, if you ever see that acronym!
4. I don't think the app has that functionality yet, but it would be a cool feature request for the Toolkit maybe!
5. Yes, positive balances will roll over to the next month so the amount accumulates in each category. Negative spending amounts will act differently. If you used credit to cover overspending, it will be added to your credit card balance, but if you used cash, I think it shows as negative in your To Be Budgeted amount and deducts from your next income inflow.
Budget monthly for all your non-monthly expenses so that your monthly budget amounts are the same every month and the money is there in full at the point you need it in the future. Since you are just getting started, that may mean funding more than the monthly amount for non-monthly spending because you don't have as many months to save for it as you would if the bill had just hit last month and you are in monthly replenish mode.
For example, if you have a bill every six months and it's 3 months away, you should have it 50% budgeted for at this point and you can budget the rest monthly.
If a category is overspent, you need to cover it from another category (or if you still have money to be budgeted, use that).
You might want to think about breaking out the rainy day fund into more components. When you leave something as a single lump sum, you mentally give it more jobs than it is capable of handling.
If your money is truly a surplus, then you should be investing it. No point in keeping it around. if it's not truly a surplus, just think about what it's really for and budget it to those categories (or create new categories.