How do you manage yearly subscriptions?
I have a question on how to manage yearly subscriptions? Like for example, insurance, YNAB subscription, etc. Specifically, I wonder how you are using goals to achieve these expenses. Ideally, there would be a yearly savings goal. Similar to the savings goal by date BUT automatically renewed for the next year once paid.
Let me explain via an example. Suppose I have a yearly insurance bill of $120, to be paid in January. Currently, as I see it, I have two options:
1) Savings Goal: Monthly Contribution (not my favorite)
I pretend it's a monthly subscription so I set a monthly goal to save the yearly subscription fee divided by 12. For example, if my insurance costs $120 a year. I set a monthly savings goal of $12 a month.
Pro: When I paid my yearly bill in January. The monthly goal does not stop so I immediately start saving for the next year.
Con: There is no guarantee I reach the necessary amount at the time of my yearly invoice. This can happen if I start in the middle of the yearly cycle or when I use some of the money in the category during the year for other expenses.
2) Savings Goal: By Date (currently my method of choice)
This is the best approximation of reality I think. I set a savings goal by date to make sure I reach the necessary amount by January. In my example, I set a goal of $120 by January 2021. This works but once January has arrived and I pay my bill, the problems start.
- From the moment I paid the $120, there is obviously nothing left available in the category. So YNAB starts complaining that my goal has not been achieved and I need to save $120. Let's say I pay the 1st of January, this means that for the entire month the category will say I need to save another $120 to be compliant with the goal. Obvious solution here is to remove the goal once I paid.
- Second problem is that YNAB assumes that I only have to pay once. Which of course is not true, I will receive another invoice in January of 2022 for which I need to start saving as soon as I paid my bill in 2021. Basically, once paid, I need to manually change the date in the goal to next year.
Pro: I'm sure I will have the necessary amount by the time I need to pay my bill. Even if I start in the middle of the year or spend some of the money during the year. I also don't have to calculate anything, YNAB does the calculation for me :)
Con: When the time arrives and I pay my yearly invoice, I need to manually change the date to next year. This is not a big deal but it prevents yearly subscriptions to be fully automatic.
Am I missing something? Or are you guys using other methods of handling yearly subscriptions? :) I would love to hear your feedback!
Goals are a new feature in the web app. They’ve never been in YNAB before. When they thought of them, they programmed in a couple likely use cases.
Four years later, after many people pointing out many other common use cases, they added two new goal types.
You are correct that there are still more perfectly reasonable use cases. But I wouldn’t hold my breath for them. Reset your annual by date goal when you reach it and off you go.
For goals such as these with known amounts and timelines, I use a single category and do the math for the optimal contribution. Monthly Funding using that amount.
The common practice of using multiple categories (a dedicated category/goal per outflow/bill) will almost certainly tie up more money than necessary. See this thread for more details.
Seems like an obvious candidate for a goal type with real impact. Unfortunately, it's not a priority for YNAB developers.
I do monthly contrib to keep my budget simple. For situations where i start half way in I now do two different things:
-determine how much I am behind when starting and front load that amount up front
-make a separate goal for front loading. I use the other goal of x amount by y date. Adjust to how aggressive u want to be to get those funds. Once funded, move the funds to right category and delete front-load goal.
I never use those goals for other funds. I try to keep other buffers around to steal from if needed. I try very hard to view those funds as bills/unmovable.
We have literally dozens of categories using Target Date for yearly goals and reset them each year. Car insurance, annual fees, and subscriptions are some of these. But we also have individual categories for each person we buy birthday and/or Christmas gifts for.
An option to "auto-renew" the target goal would be awesome.