(Kind Of) New to YNAB - Best Way to Budget When Paid 2x a Month?
I tried YNAB a couple of years ago and eventually gave up because it didn't do what I thought I wanted at the time, which was budgeting future money I didn't actually have yet. I don't think I really understood the YNAB method back then, but now that I do I'm using it all day every day, all the time, and I love it so far.
However, I want to make sure I'm doing it correctly when budget my salary when I get paid twice per month. I *think* I'm doing it correctly, but please tell me if I'm wrong so I can correct it.
Right now, I go in and set up my budget after my paycheck imports to YNAB, and I budget *only* the money I currently have from that check - NO future budgeting at all. So, even if I have an item that I pay part of with my first check and part of with my second check, I only enter the amount from my first check when my first check hits, and then raise that budget with the amount from my second check when that check hits on the 15th. I don't add any budget whatsoever to things I know I don't pay until the 15th, until my 15th paycheck hits the bank and is imported into YNAB, such as my car payment. It just sits at zero budget until the money is there and then I add it to the budget, even tho I'm literally making the payment that same day my 15th paycheck hits hah.
Is this correct? Sometimes it's really hard to wrap my head around not planning for my next check before I even have it lol, I guess old habits really do die hard!
I assume once I get to where I'm a full month ahead, I'll be able to just go in and budget everything for the month with last month's money, right? That's the whole point, I know. But for now I just want to make sure how I'm doing this is correct.
I'm rather new to YNAB also, but that's what I do. I just got paid today, so I'm going to budget that money for all the bills that are due before the next paycheck. Then the next paycheck I will budget the rest of the bills. I do have goals set up for things like groceries and bills that I take a little from each check for. I am looking forward to the day when I'm a month ahead and can just budget everything at once.
Spring Green Horn said:
I don't add any budget whatsoever to things I know I don't pay until the 15th, until my 15th paycheck hits the bank
Everything you said is aligned with the methodology. However, you will never get "ahead" this way, specifically because of the part I quoted.
In order to get ahead, you need to put part of your first check toward things you would ordinarily budget with your second check. Or you need to put part of your second check toward things you would ordinarily budget with your first check. Or both.
If you have $100 from your first check that isn't "consumed" by first-check categories, you can put that toward a second-check category to get a head start. When check 2 arrives -- even if it would normally be entirely consumed by check 2 categories -- you will have at least $100 left over after all check 2 categories are filled that you can put toward the next set of first-check categories.
When you get your next first check, it is $100 more than the categories it normally would cover PLUS those categories already have a $100 headstart. Thus, can put $200 toward check 2 categories and then $200 toward the following month's check 1 categories. . Category by category, you get ahead.
TBH, I dislike the gradually budget anead approach I described earlier because budget amounts from a given check will change from month to month. You're far more likely to make a mistake with an inconsistent process.
Instead, I think the old-school approach that used to be taught is still the superior method. In order to get ahead, you need to save. You're used to saving. You do it all the time. Just put money in a category and it's saved.
So that $100 extra from your first check (example in previous post)? Put it in a category called Transition to Monthly. Budget check 1 categories as you already do (and none of that money to check 2 categories). (If you're intentionally splitting a large expense over both checks, that's still fine.) Next month, put another $100 into the category. Easy and your plan is laid out on a single screen (no flipping between months). You do the same thing with your checks each month.
At some point, you have enough in the transition category. To transition to monthly operation, you move all that money to TBB and budget the rest of the month (the things your first and second checks would normally cover).
How much is "enough"? Take your normal income and subtract off any outflows incurred between the beginning of the month and when you receive your first check. That's enough. Income of $5k, with $3k mortgage and $500 miscellaneous expenses in the first part of the month before your check arriving on the 15th? You need 5000 - 3500 = $1500.
If getting off this piecemeal/paycheck-to-paycheck budgeting style is important to you, then make this transition a priority. Pick a date, set a goal, and work toward it just like any other category in your budget.
Notice when you released the transition category, it covered the rest of the month. This means you don't need your checks this month at all. Rename that Transition category to Income Next Month and stash check 1 in there. When check 2 arrives, stash it in there. When your interest, etc. posts, stash it in there. At the end of the month, you empty that category containing an entire month's worth of money, change to the new month's area and budget it all at once. Using Goals, you can do this in a couple clicks.
Incidentally, this last part (Income Next Month) works even if you get to this month ahead point by budgeting increasingly to the future.