Age of money and buffer?
What is the difference?
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Age of money is a metric that only potentially really has meaning at the beginning of your YNAB journey, that some people find as a motivating thing to see as it increases. It will increase as you save, and don't spend every dollar as soon as you receive it. With more money being saved, the dollars can sit in the bank for longer before they're used.
As far as the buffer, it's a category that is used for accumulating money with the goal of removing yourself from the paycheck-to-paycheck cycle. Eventually the goal is that every paycheck you receive this month goes into this category, and once all of your income has been received, you can dump it into TBB and move into the next month and budget the entire month in one session, instead of each time the money comes in.
Building the buffer will by default increase the Age of money, but the goal isn't necessarily to increase the age, simply to save your money, and save up those true expenses.
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AoM is a spending metric. A buffer is a source of funds for unexpected expenses. Simply 2 different things. Certainly a buffer causes an increase in AoM, but so does charging nearly everything to your CC and not paying it off.
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There are also two types of buffers often discussed. The traditional one meaning a financial cushion against unexpected expenses and one specific to YNAB that facilitates budgeting on a cycle aligned with the calendar boundaries. I was talking about the former, and Bruce was talking about the latter. Both are extremely useful. Do let us know which you had in mind, won't you?
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dakinemaui Well there's also "Days of Buffering" as far as the Toolkit metric. OP might not be referring to that, but it's also a metric that is occasionally mentioned.
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Annieland Yes, good point. Days of Buffering is how long until you run out of money at your average spending level with no additional income. This is another way to view the traditional usage of "buffer" as a financial cushion.
That is what many people think Age of Money is, which is exactly opposite of the truth. If you lost your job, AoM would continue to rise until you spent your last dollar.
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To better understand the difference, be aware that AOM of 30 does NOT equal being 30 days ahead. A lot of people think that's what it means, but AOM is calculated by looking at spending transactions in your account registers. It is backwards looking, never forward looking.
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Bruce said:
It will increase as you save, and don't spend every dollar as soon as you receive it.You know what else increases as I save my money? My account balance. Which is a lot more straight forward and easy to reason about than an opaque Age of Money (AOM) statistic.
But in all seriousness, AOM represents YNAB's ham-fisted attempt to encourage users to look beyond their immediate living expenses. If Rules 1-3 are about breaking even with your expenses, then Rule-4 is about getting ahead. AOM is a clumsy attempt to measure how far ahead you are (measured in days).
In practice, the most straight-forward way to get ahead is to establish some category in your budget unlike your normal spending categories. The quintessential example is an "Emergency Fund". You don't plan to ever spend that money. Its job is to just sit there and wait until some unforeseen expense comes along. The larger the category balance, the further ahead you are. (So tracking your Rule-4 progress becomes a simple matter of observing a category balance, instead of relying on a flawed/confusing AOM statistic.)
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My favorite way to track my progress is the net worth report.
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Superbone
Mine too, but it's sometimes nice to separate the money that I've saved-for-spending (True Expense) vs the money that's truly extra / above what I expect to spend (Rule 4 / Getting Ahead).
Sure, having a fat account balance tells me that, should an emergency expense arise, I'll be able to deal with it without going into debt. But that'll impact the plans that I already had for that money. "Emergency Fund" is great because it's "extra" money that I didn't have any specific plans for -- so I can absorb an emergency without impacting my other plans.I *think* that's what YNAB is trying to encourage with Rule 4, but who can really say anymore.
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