A series of method questions ...

Hello all

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?

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  • 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. 

    • blondeambition thanks! Super helpful, and you are an excellent writer, as your wording and explanations are super clear. :)

    • Silver Dollars 

      I'm seconding your notion about blondeambition  's answer here - I couldn't have said it better myself and each answer is right on point!

      Also, consider that feature request for category balance alerts noted! ;)

  • 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.

    • nolesrule thanks (again) nolesrule. One of the habits I have to break is overspending (which is why I joined YNAB), but the other is surplusing too much of my money, instead of investing it. My risk tolerance is “I have a family to pay for and it’s all one me”, and need to get better with avoiding any risk. 

      I have my entire retirement in index funds essentially all equity because I know I can take risk there since I can’t touch it for 22-25 years. But with everything else I virtually hide it under the mattress. I think it’s PTSD from the early 2000s when we bought our first home, had our first two children,  and the economy collapsed and we were charging groceries, borrowing money from parents to pay the mortgage on time and talking to a bankruptcy lawyer. Since then I feel like a good emergency fund is $100k in a 1% CD (this is an exaggeration of course).  For the last several years we’ve had 20-50k in stagnant accounts as an emergency fund doing zip/nada for us.

      that is why in 2018, I am putting $1k per month into a taxable investment account. Now let’s watch as the market tanks on me a la 2008 :)

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

      Silver Dollars As the sole provider, you should make sure you have an Emergency Fund of 3-6 months expenses in cash, or something cash-like. You can get 11-month CDs with no EWP at Ally Bank for 1.75% on a minimum $25k. I'd add them in $25k chunks.

      If interest rates rise on the no penalty CD you can always break it (for free) and get a new CD at the higher rate.

      Also, online savings accounts are 1.2% and higher these days, and regular CDs with EWP get even higher. I Bonds, while they have a 1-yr can't touch and 3-month EWP during the first 5 years are currently at 2.58% and federal tax-free.


      Your cash needs should stay cash, CDs or I Bonds. If all of that is covered, that's when you invest.


      BTW, are you the same poster who asked on Bogleheads about investing in 401k vs. paying off a HELOC? The usernames are similar. If so, you're asking lots of individual questions in isolation when all of them are inter-related and the answers to all the questions could differ when taking in the entire picture.

    • nolesrule yes, that’s me. I have a lot of options and permutations I could go with . Nothing really seems clear. To make matters worse, my wife and I have been dreaming of a kitchen redesign for over a decade and this was the year we were going to make it happen, as our kitchen is literally falling apart (microwave broken, counters leaking into 30 year old water damaged cabinets, hardwood floors at the breaking point due to needing refinishing or replacement. We don’t allow guests over because we are ashamed of it. But each year we put it off.

      i go back and forth on many things - one of them is this kitchen/living/dining open floor plan room. The family spends 80 percent of our time in it, and we despise it every day. Bad combo. 

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