How do I know where the extra dollars are in my budget?
I have been mulling over this question for a while and I'm not quite sure how to ask it. The question is really two parts:
1) How do you "prioritize" your dollars? For example, my husband gets paid every two weeks. I will cover everything that's due from now to when he gets paid next and sometimes have a bit left over, $200 for arguments sake. Do I take that $200 and bank it in a savings category or put it on a card or put it toward next month's utility bill?
Which leads me to my next question:
2) How do you know when you actually have extra dollars to allocate. I feel that in reality I could just keep budgeting money into future months and never have extra for debt payments or savings categories.
I think what trips me up is that we aren't a month ahead and that the majority of our bills come out near the first so I'm always looking to get ahead on next month but we would actually need to be two months ahead for our age of money to reflect it. You would think that after almost a year of using YNAB I would know the difference between our income and expenses. I've tried using the reports to get a better idea of what our overhead is, but it's always a guess as to if we have money for extra things. So far we've been able to find the funds here and there for odd purchases, but I want to be able to know just how much extra we can put toward debt, vacation, gifts, etc. There never seems to be any money for those things, but I don't really know for sure.
1) I suggest putting it toward something that will be paid immediately following the NEXT payday. That gives you a head start on the things that money would go toward. Eventually, you will not need any of the money you receive in the same month.
2) There is no "extra". By definition, there is a plan for every dollar. What you will find, though, is that some things on which you've planned to spend money are less important than others. If you want to buy/do one of the more important things, then all the money in lower priority categories may be considered to be extra. Obviously, reallocating has consequences, so make sure you're OK with those.
You would think that after almost a year of using YNAB I would know the difference between our income and expenses
Sounds like you could do a better job of budgeting for true expenses. This is difficult when starting, and most are still finding things during that first year. Not to mention some things may have to wait because you're playing catchup (e.g., an annual bill is due 3 months after starting requires 300% larger budget contributions than the "nominal" 1/12 of the expense). It gets easier as these contributions switch to the nominal levels.
We also aren't a month ahead, but we are aggressively prioritizing paying off debt. I don't usually actually pay money towards debt until the end of the month.
I have a specific line item toward debt (i actually have multiple lines for different debts, but one is the snowball one). Any non-regular income funds (i.e. credit card rewards, cat sitting money, bonuses, etc.) or leftover funds from a paycheck go into that category.
Then I prioritize funding all my categories for the month. I utilize goals or scheduled transactions, but for most categories I use the Average Spend Quick Budget. At the end of the month/the last paycheck of the month, I look at my categories and decide what I want to fund from the debt if I'm underfunded (not over budget). Or I choose to WAM. Or I choose to leave those as not funded for the month.
We're very close to being debt free and I'm looking forward to focusing on our buffer next!
the majority of our bills come out near the first so I'm always looking to get ahead on next month but we would actually need to be two months ahead for our age of money to reflect it.
All you need to do is push your checks into the following month. This lets you queue up paychecks until you've got them all, then budget the entire month at once. Clarity is significantly improved when you can work with month-sized chunks. Since most of your expenses are in the early part of the month, the amount of money you need to "get ahead" is well less than even one month's income, let alone the two that Age of Money is leading you to believe.
There's also the option to switch your allocations to paycheck-sized contributions. Apply the True Expense concept on a paycheck basis. Half of every monthly bill is funded from each paycheck, etc. Since all contributions must "fit" within a single paycheck, budgeting is trivial -- allocate the most important category, then the next, etc. (The amounts are simply the amounts / # of checks you'll budget before payment.) Stop when your paycheck is exhausted. Record these per-check amounts in the category name for reference.