Being fully buffered for next month - convenience or true game-changer?

Six and a half months into using YNAB, I love it and recommend it to anyone who wants to listen. Understanding and eliminating credit card float has brought me peace of mind, and the planning and tracking functions have, for the most part, helped me to assign more dollars to my student loan payment, which in turn is helping me pay off my loans faster. I've gotten to the point where I am living on the last paycheck I earn - every 2 weeks. But, I just can't seem to get to the point of being fully buffered so that I can budget, let's say, the entire month of October on the 30th of September. How important do you all think being fully buffered is? And these facts may matter: I do not include investment and retirement accounts in my budget. I could, for example, move some money out of an investment account and into the budget to become fully buffered, but I have been hesitant to do that.

Looking back, I see that with some extra money - let's say, a work bonus or raise - I could have used to bring myself to a buffered state, I have instead thrown it at my student loans, or to a lesser extent, spent it on budgeted-for travel. This makes me question whether I should continue doing this going forward. Am I missing something crucial in the YNAB method if I don't prioritize being fully buffered for the upcoming month? I'm curious to hear who has found it to be a game-changer, and who has found it to be a mere convenience. 

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  • You are likely to get two responses to this question. 

    "Eh, I've never seen much value in it, so I've never done it." 

    "Yes.  I am buffered and I would never, ever go back." 

    I can't think of a time when I've seen someone go, "I got buffered, but then I just decided, 'meh' and switched back to budgeting one paycheck at a time." People have either done it,  realized it is a game-changer, and would claw tooth and nail before they give it up, or they have never done it and are giving advice based on something they've never tried. The only people I think who don't benefit from a month's buffer are people who get an entire month's pay on the last day of the month and have no other sources of income. But notice that this is effectively still being buffered: one entire month of budgeting is done entirely at once. 

    The clarity of the decisions you make when you are working a month at a time are massively better than you do when you are working one pay period at a time. YNAB started to minimize the need to get a month ahead, and even changed the software to that effect, because getting and keeping a buffer isn't easy. So rather than encourage people to do something hard and frustrating people (and potentially causing them not to renew if the buffer didn't happen fast enough), they seem to have decided that it's better to just stop encouraging people to do the frustrating thing. 

    tl;dr yes. You should prioritize the buffer. 

    Reply Like 17
  • Being buffered is what made it possible for me to keep afloat when I was underpaid, and to limit the amount I borrowed when I went back to school to the tuition. Since then, I have been able to aggressively save up for a house down payment while taking several trips. Knowing exactly what I have each month has always made it possible to make better decisions regardless of how much I was earning

    Reply Like 1
    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 1 mth ago
    • 1
    • Reported - view

    It's a game changer. Been both places many times, much prefer being buffered. 2 months much better, working on 3 months now. Been hard with major house repairs, otherwise I'd be at like 5 to 6 months out now. The key benefit is quietness. A large car repairs come, you shop around for the best value, pay the bill without making a category go red, maybe some WAM, and have time to rebuffer. No replying on credit, skipping being on time with another bill because of this car repair. It's just a small event, the reason you've been working so hard. 

    Reply Like 1
  • I've been using YNAB for almost 4yrs. I have not gotten to a point of being fully buffered. It dawned on me why a few months ago when talking to my friend that got me started on YNAB; I have had different goals than being fully buffered. I've been feeling stressed that I haven't fully buffered myself, but the reality is, my priority was to pay off my debt as fast as possible and then build up a 6 month emergency fund. I could have easily been fully buffered, but I haven't made it a priority.

    It is now my main goal (after talking with my friend). Even though I haven't tried it yet, I know it will bring a lot of financial peace not budgeting check to check.

    Reply Like 1
      • jenmas
      • jenmas
      • 1 mth ago
      • 8
      • Reported - view

      I_NAB there are many users who have said that being fully buffered (in the classic rule 4 sense as opposed to have 3 rent payments in the rent category) actually helped them accelerate their debt payoff because they could more clearly see what was extra when the month was fully budgeted on the 1st.

      Reply Like 8
    • jenmas I write out my month's plan each month on paper as if I were buffered. I have a holding category that I release to get me through to the first paycheck, then I just input the plan in YNAB on paydays. Right now, the priority is debt, and I know nearly as much information as I would if I were buffered.  It is much easier to make the decisions with the whole-month picture.

      If I funded up to a buffer for one month (actually, it would take more than one month) instead of sending that money to debt, I would be paying $100s more over the life of the loans.

      Sure, if I lost my job, I'd have to change the plan halfway through the month, but I think I'd be changing it anyways...

      So, I'll claim the middle camp. I haven't done it, but I do think there are more imminent priorities. 

      After we're done with debt, I actually don't know if we'll choose to build the buffer or stock up savings to a more appropriate level in contingency categories. I like having the hard copy original plan for reference. 

      Reply Like 1
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 mth ago
      • 7
      • Reported - view

      Move Light Sound Life So here’s one small example of how this works. When I started YNAB, I was a broke grad student living in an incredibly high COLA. I planned out that I needed $50 per week for groceries. Each week, I budgeted $50, spent $50, and paid down my debt the amount I’d planned. 

      When I was buffered, I found that being able to take advantage of sales, bulk buys, etc. allowed me to spend $160/mo on groceries. Even though I had been budgeting each paycheck according to a plan, and sticking to the plan, having all the money in place made a 20% difference over the course of the month. Multiply that by most discretionary categories and you see the power of the buffer in debt paydown mode.

      Nobody’s saying you have to do it, but I think it’s very telling that the only people who go, “Meh, I think it’s fine” are people who’ve never operated buffered. 

      Reply Like 7
    • WordTenor I suppose it also makes sense that people who believe there is another, higher priority than the buffer are going after the other priority first.  I'm used to making my money decisions a month at a time because I'm paid monthly. If the buffer is simply a logistical, organizational state that provides clarity for decision-making on a monthly basis, then I'm already functionally there. Perhaps it's not as pretty as yours because my cycle starts in the middle of the month so I require a few steps outside of YNAB's interface. However, I think I'm smart enough to apply YNAB's logic in that situation.

      Don't worry, I already calculated the effect on my interest that waiting for a buffer would have had.  When I'm done with my payoff, I'll have a few extra hundred dollars to play with than if I had gone for the buffer first. 

      And in terms of discretionary categories, my bulk cycles run about 6-8 weeks for groceries and about 3-4 months for household items. A month buffer wouldn't really impact that... And our fun money is 13.24 each per month. It used to be 0, then 5, and then it was 10.  When we mapped out the month, that was the number that put everything else where we wanted. We're used to the scarcity.

      We don't seem to need the psychological boost of the snowball because we mapped out the avalanche and can trust it.  Perhaps the buffer is like that. Ours is transposed by half of a month, but we can trust it because we do the extra logistical steps.

      Reply Like 2
    • Move Light Sound Life The value to someone who is paid monthly is indeed less than to someone with multiple income events. At this point you probably have your groups setup to facilitate the "split" budgeting you must do.

      One of the things I do like is that I can efficiently budget while having functional groups, as opposed to temporal. For example, Housing, Transportation, etc. instead of Check 1, Check 2 (in the case of bi-weekly pay), or Post-check & Pre-check (in the case of monthly pay).

      Of course, some may sacrifice efficiency for other organizational structures, but when buffered you can have your cake and eat it, too! 😉

      Reply Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • 3
      • Reported - view

      dakinemaui 

      dakinemaui said:
      The value to someone who is paid monthly is indeed less than to someone with multiple income events.

       I don't know of anyone who really only has one income event per month. Maybe one paycheck, but not one income event. Bank interest, credit card rewards, the $10 birthday check from grandma are all income events.

      Reply Like 3
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 wk ago
      • 6
      • Reported - view

      Move Light Sound Life I will repeat that I find it telling that the only people I've ever heard go, "My set up is just fine; I don't see the big deal" are people who've never operated with the full, 1-31 buffer. 

      Do with that information whatever you wish to do. 

      Reply Like 6
    • nolesrule Not sure why this is a big deal. I hold any money like that in a category until it's time to budget. It's just that my time to make decisions about my money (budget) happens on the 15th, not the 1st.  This means we make the budget outside of YNAB, using its philosophy, on the 15th.  We put the second half of the month in YNAB then, and when YNAB and real life experience the change of month, we populate the first half of the month. I use the same kind of IFNM category talked about in the forums because I had SFTF bite me before I even knew about the forums or toolkit. I used a different terminology (variable expenses) because I didn't know about the more finished workaround. I found the forum a few months after getting settled this way, and was happy to learn the fundamentals.

      Reply Like
    • dakinemaui I suppose I'm erring on the side of a couple hundred I know I will save by getting rid of debt before getting a true, 1st of the month buffer. Perhaps I could save some somehow by getting the buffer first, but that is an unknown. Our budget takes so little time now that I'll go for the interest savings instead of approaching an ever closer line of perfect efficiency. 

      And you're right - it was when I figured out how to use YNAB to budget for a whole month that I was able to switch to functional category groups instead of temporal ones.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • Reported - view

      Move Light Sound Life 

      Move Light Sound Life said:
      This means we make the budget outside of YNAB, using its philosophy, on the 15th.  We put the second half of the month in YNAB then, and when YNAB and real life experience the change of month, we populate the first half of the month.

      What you are missing is you haven't broken the paycheck to paycheck budgeting cycle, because you are still having to wait for your next income event to budget the second half of the month. Additionally it

      Additionally, trying to split a monthly budget across months is rather tedious because of the monthly design of the software, and it most likely results in you structuring your budgeting (and spending) in half-month increments, which is pretty much the opposite of budgeting efficiency and clarity.

      Reply Like
    • nolesrule I am fully aware that I am budgeting paycheck to paycheck. You're budgeting month to month. Our only categories that are split across the month with the holding categories are food, fuel, and household items. Turns out we only buy household items every 3 months, so that's moot. It also turns out that we do well parsing out groceries in smaller increments while maintaining an alternating bulk cycle. Gas doesn't have much variance, now that we've got a good history.  Everything else is set and used monthly.

      I feel that any further efficiency in the part of groceries will be determined by my job and it's lack of work/life balance, and not my YNAB interface. Maybe I'm wrong. I'll let you know how it goes when I'm buffered. After the debt is gone.

      Reply Like
  • I fall into the second category referenced by WordTenor .  If you are in a financial situation to create the buffer then I highly recommend that you do it.  My wife and I already had the buffer amount in our emergency fund when we started using YNAB at the beginning of 2011, but were budgeting paycheck by paycheck.  A couple of months in I went ahead and budgeted the following month with part of our emergency fund.  It was transformational.  I'm not saying that your experience will be exactly the same, but I found money in the budget that I didn't need and reclaimed to savings.  We still budget a month ahead, which cushioned the blow when I was laid off in 2017 and went a couple of months without a paycheck.  Regardless of what the rules are now, for me Rule 4 will always be to live on last month's paycheck.

    Reply Like 10
    • bobbucy We're in a similar situation; had an emergencyfund before starting YNAB but were budgeting paycheck to paycheck. A little while after starting I divided that fund up into a smaller emergency fund and bugetting for next month. Some months ahead even. But it gave me a feeling of loosing grip; how was I to see if I was getting ahead or the opposite? By remembering and checking how many months ahead I had buffered? Combined with still discovering new catarogies all the time (bacause of being new, but also because of creating wants and shifting priorities) it all became very blurry. Also, budgeting so far ahead brought back that restrictive feeling about budgetting that YNAB had succesfully taken away. I felt I was forecasting instead of allocating (Jesse's whiteboard wednesday advises to do the latter).

      So I've put the money back in the old emergency fund and have started from scratch to safe for true expenses. Paychekc to paychekc again, I suppose. But without anxiety if a big bill would come. Would that possibly put me in the second category? (WordTenor said:
      You are likely to get two responses to this question.) Or do I not understand what fully buffered means yet? I'm not sure.... 

      Reply Like
    • Powder Blue Pony PS: I've never known anything else but monthly payments

      Reply Like
    • Powder Blue Pony Fully buffered is not an extra source of funds for unanticipated expenses, since you already have a plan for every single one of those dollars. 

      The "buffer" is in the temporal sense, like a streaming YouTube video: you eliminate the sporadic arrival times and watch/allocate (YouTube/YNAB) all at once.

      Reply Like 2
    • @dakinemaui  Nice metafor!

      That's slightly different from what people usually (non YNAB) mean by buffer, because of taking into account true expenses. So good to realise.  Thanks.

      It does make sense to have a smaller buffer once your true expenses are properly looked after, doesn't it? I suppose part of my confusion is in the 'how big is big enough' question. Always tricky and arbitrary... Pre YNAB I'd settled for a certain amount and became used to that being the amount to feel comfortable with. Seeing all my true expenses and the 'how big is big enough for an energency fund' question opening up again makes me insecure.

      A well, leaving the old buffer what it was and saving up for true expenses certainly won't harm.

      Reply Like
    • Powder Blue Pony said:
      have started from scratch to safe for true expenses

      You might reconsider this plan.

      It's much easier to budget when you're in a relatively "steady-state", so I suggest that you use your Emergency Fund to catch-up on various True Expenses (TEs). For example, for an annual TE due in 3 months, you could put 10/12 of the expense into the category up front. Moving forward, your TE contributions will be at their steady-state / nominal levels.

      This avoids the "Can I can catch up later?" game. You KNOW what you can and cannot afford with certainty (assuming income stays consistent, of course).

      Put it this way, IF you did have an emergency, you could always reallocate from those TEs. Until then, improving the clarity of your planning process is a far more valuable use of that money. Rebuilding your emergency fund is then one of the competing demands on your budget, but the point is it's a consistent demand (as are all the TEs).

      Reply Like 3
    • dakinemaui clever! Thanks for the tip. (Doesn’t sound complicated but hadn’t thought of that at all)

      Reply Like 2
    • Powder Blue Pony 😂 I adjusted lots of goals today, but am going to do it again tomorrow! This is so clever I can’t ignore it 😁

      Reply Like 1
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 3 wk ago
      • 1
      • Reported - view

      Powder Blue Pony 

      The beauty of test-driving dakinemaui recommendation is that nothing has changed really:  you still have all the same dollars; those dollars are still in their original accounts; you've just shuffled stuff around on the budget screen a bit to look at your financial plan from a different angle; and, if you don't like it, you can just undo the changes and reinstate the previous numbers.

      Nothing changes; but your perception of your financial reality is really challenged (or liberated).

      Reply Like 1
    • HappyDance quite right. Before shifting things in YNAB this morning I asked my husband if it was allright with him if I’d use part of the buffer/emergency fund/ big chunk of money we saved for this purpose. When he understood I only meant in YNAB he almost wondered way I asked. 😊

      Does show how much I rely on the budget already.

       dakinemaui Just wanted to tell that I implemented your advise and finally found clarity! Very happy about it. I now know we can actually pay for all our monthly and true expenses. How good is that!

      And I’m sure we’ll be able to rebuild that buffer (or what am I supposed to call it again) in no time, as it’s finally clear what I can count as ‘extra’ money. I mean after all expenses are lookes after.

      thank you all again for al the explaining.

      Reply Like 2
    • Powder Blue Pony  Your note made my day, and I'm so glad you're happy!

      Reply Like 2
  • YNAB teaches users to budget paycheck-to-paycheck. The mantra is, "What jobs do I need this money to do until I'm next paid?"

    I think that's a great way for beginners to approach YNAB because it reinforces a fundamental rule: You can only budget with money you actually have -- not with money that you expect to have in the future. That's very different from other budgeting systems, and it's crucial for users to understand & embrace it. The whole budgeting system depends on it.

    However, as your financial situation improves, paycheck-to-paycheck budgeting becomes less practical. Right now I have enough funds in my bank account to cover all my living expenses for the next 6 months, and I just got paid today. What job does that new money need to do? Should I start chipping away at the mortgage payment that'll be due in April of 2020? 

    Buffering partially addresses that problem. Instead of perpetually budgeting paycheck-to-paycheck and chipping away at expenses further and further into the future, you gather up multiple checks (earned throughout a month) and budget them all-at-once. It's like moving from micro-budgeting to macro-budgeting. The rules of YNAB don't change, just the scope. Instead of fretting about individual bills, you focus on the bigger-picture trends. You aren't trying to link specific inflows (paychecks) to specific outflows (expenses) anymore -- you take a more wholistic approach and treat the inflow/outflow as independent streams.

    Obviously, I'm a big proponent of the buffered approach.

    Reply Like 12
    • bret Part of why I didn't feel so much pressure about building a buffer is that I felt I was literally following YNAB's rule of assigning dollars to jobs I needed done before the next paycheck. As much as I feel more financially secure and am achieving goals while using YNAB, I still very acutely feel the paycheck to paycheck cycle because payday is when I have always budgeted. Your explanation about taking a more macro view of things makes a lot of sense, and has the added benefit of budgeting once per month instead of every two weeks- less work. 

      I am hopeful that as I switch over to the buffered approach, perhaps when I have my next three-paycheck month, that third check will really feel more like a windfall. I had a three-paycheck month earlier this year and it didn't really feel like a windfall, as I was so accustomed to budgeting for variable expenses such as groceries, dining out, transportation, etc., on a two-week basis.

      Reply Like 1
  • Thanks to everyone who has replied; you are overall making me think that I should try the buffer. I don't know why this hasn't dawned on me before, but bobbucy reply has illuminated a lightbulb in my brain: I have an emergency fund category that has a month and a half of living expenses in it and could be used to create a buffer without even needing to bring additional funds into the budget. Even though I don't live paycheck to paycheck in the common parlance, I absolutely do my budgeting from paycheck to paycheck in YNAB parlance. So..... I'm going to make the jump and try this! 

    Now, for the mechanics. I was just paid, so besides a few items such as the rent, where I have a full month's amount ready to be paid on the 1st, most categories are funded for only *some* of October, through more or less 2 weeks from now. So, is the best course of action to try to identify how much it will take to fund all of those categories through the *end* of October, and to move the cumulative amount into a "next month's income" category, where I will release that amount into TBB on the evening of September 30, to then be actually budgeted into October?

    Reply Like 1
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
      • 1
      • Reported - view

      Slate Blue Pilot There are quite a few threads out there that lay out the mechanics and best practices for a buffer. You basically categorize all income each month to an Income for Next Month category and then sometime after you've received all income for the month and before the next month rolls around, you recategorize that income as To be Budgeted and budget the following month in its entirety.

      Reply Like 1
  • Game changer. It also allows me to have functional categories rather than timing-based categories.

    What many people don't realize is that if they have enough emergency fund savings, they can instantly have a full buffer.

    Reply Like 7
  • Just wanted to follow up and let you all know that, you convinced me and I did it- all of October was budgeted right after midnight. I had become so accustomed to budgeting in two-week blocks with regular paychecks that it took me a bit longer to budget for the entire month. But I did look at my last six months of monthly average spent figures to guide me. There were a few categories where I wanted to budget more aspirational amounts but the averages do not lie, and I don't want to be constantly WAMing toward the end of the month. So, I held my breath and budgeted for realistic numbers rather than aspirational ones. I feel the budgeting every paycheck kept me on a short leash, so to speak, and that this new procedure of budgeting once at the beginning of the month gives me more slack and autonomy, but means I may need to be extra vigilant about looking at category balances BEFORE doing any discretionary spending. I'm nervous about this but am up for the challenge. 

    Reply Like 7
      • Couch Cat
      • Lavender_Violin.3
      • 1 mth ago
      • 1
      • Reported - view

      Slate Blue Pilot  thanks for starting this thread! I am still chipping away at our CC float but can now see the appeal of the month-ahead approach. We will have more income in the future, and that will help a lot - also, at year-end, we will have 6 months of expenses to go by, and I can see how that information will be very helpful.

      When we started with YNAB, although I had been tracking expenses faithfully for years, I had no clue what our true expenses really were. I can already see how they are NOT what I'd expected. I think I'll continue to clear the CC float and start putting money away as budgeted, then as part of my new year refresh, I'll look at the big picture and prioritize monthly instead of paycheque-to-paycheque budgeting.

      Reply Like 1
    • Couch Cat Riding the CC float is effectively an interest free loan. I would use it to become buffered, as that's quite useful. The increased clarity when budgeting month-sized chunks often accelerates subsequent debt reduction. (It's very obvious what is "extra"each month.)

      Put it this way, since you don't spend the buffer, you could always revert back to your current level of float if you didn't find it valuable.

      Reply Like 2
  • Superbone said:
    What many people don't realize is that if they have enough emergency fund savings, they can instantly have a full buffer.

     WOW! Light bulb moment! Count me in as one of those. I've been so busy squirreling money away into various savings categories and then wondering why I'm still not ahead a full month when the new month rolls over. I've set up goals for my savings categories and when those and all of my non-discretionary categories are filled, I've been putting the excess into what i call Income for Next Month. But there's never enough in there to fund  a full month in advance so like Slate Blue , when the month rolls over, I can only budget for part of it. Since I started YNAB this past April, my AOM has increased from 10 to 76 days, yet I'm always feeling bummed out that I don't have enough to fund the entire month at once. So I guess I also need to make a decision about what to do. I have more than enough money saved in various categories to be able to pull out enough to fund the entire month, but honestly, somehow that feels scary to me. Since I started YNAB, the word SAVINGS has been seared into my brain! But it sounds so appealing to sit down on the last day of the month and do it all! I need to give this some serious thought.

    Reply Like 5
    • KnitPurlKnit you touch on something I don't understand: if I were to pull out funds from various saving goals, I'd neglect my true (future) expenses that are part of what I need to budget for, am I not?

      Reply Like
    • Powder Blue Pony I don't pull out anything from my saving categories or goals. The following is my workflow:

      • Its' now almost the end of October. I have stashed all my incoming money during this month in a  category called "Funds for Next Month". On the last day of October, I will move all that money into TBB. 
      • Then, on that same day, I fund all the categories in November that need more funds to reach their goals. (I will only fund for November at this time. I never fund beyond the next month). When I was budgeting without being fully buffered, I would fund the categories according to the due date...i.e. bills that were due at the beginning of the month were funded first and then as I received more income throughout the month, I would fund categories that were due later in the month or were discretionary items. Since I've been fully buffered, I changed my budget format so that alike items are grouped together, not taking into account what day of the month they are due. So, for example, I lump all my auto expenses into one category, all my health care expenses into a different category, etc.
      • Once all my non-discretionary and true expenses are fully funded for November, I decide what to do with the money left over. Sometimes I just dump it into the Funds for Next Month Category (which would be for use in December) but most of the time, I disperse the left over money into discretionary categories that I'm saving for: wish list items, savings above and beyond the monthly goals I've set up, etc. 
      • This method has allowed me to get a better view and understanding of where all my incomes goes because I do the budgeting all at once. Since I've started this method, I'm keeping track of how much money I have left over every month after all my non-discretionary and true expenses are funded. Knowing what that lump sum is (my income doesn't vary much from month to month) has allowed me to plan in advance how much I want to sock away in the discretionary categories and get a good handle on how long it's going to take to reach some goals I'm working toward. 

      In order for me to get to the fully buffered state, I decided to pull money out of an Emergency category I had been saving for. That was the only category I pulled money from in order to be buffered. All the rest of my categories, including the true expenses, were left intact with the funds that had accumulated in them. I'm now in the process of replenishing the Emergency fund category that I drew money out of in order to be buffered.

      I hope this helps explain how I got to this point and how I manage it.

      Reply Like 1
    •   KnitPurlKnit it does help indeed, together with the other explanations. Thanks.

      Reply Like
  • You don't have to fill next month's categories to be fully buffered! You  just have to spend only dollars that are 30 days old.

     

    I start budgeting for the a month on the first day of the month. Yet I'm fully buffered, because my accounts have more than 3 months worth of expenses in them.

    Reply Like
    • Wessel I thought being buffered meant that you had enough money in the TBB category at the beginning of the month to fill all the categories for that month. What am I missing?

      Reply Like 1
      • jenmas
      • jenmas
      • 3 wk ago
      • Reported - view

      KnitPurlKnit - nope you are right. An AOM of 30 days is a backward looking metric that does not mean that you have 30 days' worth of money in your budget right now.  This discussion is about the YNAB Classic Rule 4 - live on last month's income. You are fully buffered when you could send all of this month's money to full fund next month.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • 1
      • Reported - view

      Wessel That's not what we're talking about. We're talking about using only the income from a month to fund the budget in the following month. It's not a financial cushion. It's a budgeting method.

      Reply Like 1
      • Wessel
      • wessel
      • 3 wk ago
      • Reported - view

      KnitPurlKnit As I understand it TBB should be empty most of the time. Whenever dollars come in, you give them a job. Giving them a job means moving them out of TBB and to a category.

      From the support pages:

      Is there any time I don’t budget to zero?

      Typically, no. All dollars should be assigned to a category. However some people save for their Buffer by letting some money roll into next month.

      Reply Like
    • Wessel  I may have stated that incorrectly. I do always budget to TBB=zero. However, as  income arrives during the month, I place it into a category called “Funds for Next Month” At the end of the month, I release all those funds to the TBB category and budget the following month all at once. That’s what I meant by being fully buffered. I have enough income left over in the current month to be able to budget the following month completely. That’s my understanding of what being fully buffered means.

      Reply Like 4
      • jenmas
      • jenmas
      • 3 wk ago
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      KnitPurlKnit and you are correct in your understanding 

      Reply Like 5
    • Wessel If you budget any money received in October in the October area, then you are not fully buffered.

      This is completely different concept than Age of Money. AoM is a backwards looking spending metric that has nothing to do with budgeting. In fact, AoM could be 200 days with you having spent the last dollar to your name... and nothing to budget.

      Reply Like 3
    • jenmas including all the monthly payments for true expenses, right?

      Reply Like
    • Powder Blue Pony I find those are sort of flexible; for example saving for our sons college might feel like a must do/real true expense/not a want but a must. But on the other hand: it's still a matter of priorities; some things are more important. So because I kept coming up with new categories I couldn't decide what being fully buffered meant. I lost the connection between monthly income and expenses.

      Am making a better budget template at the moment. Hope that will help to give that connection.

      Reply Like
    • Powder Blue Pony And have created that money-for-next-month category

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      • jenmas
      • jenmas
      • 3 wk ago
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      Powder Blue Pony yes. I budget the same amount every month for the vast majority of my categories - groceries, mortgage, charitable giving, Christmas, Holiday stuff (decorations, etc), holiday food (extra groceries), taxable investing, birthdays & other gifts, vacation, home stuff, personal care, entertainment, technology replacement, car insurance, etc. Now there are 2 categories that you don't really see in my list of regular monthly budgeting - home and auto repair. But that's because I by the time I was buffered I had a huge amount in both of those categories (I had 3 years right before I started YNAB where I basically had no living expenses other than food and I hoarded that money) so they get refilled as they are used because even with budgeting all of my categories at the same amount every month, I have a few hundred dollars left to go to things that I am saving up for (new furniture, framing because that is always stupid expensive, stuff like that). Next year I am going to start saving more aggressively for a new car in 10 years; to date I've been lazily saving. But that's because I want to buy a new car, not just new to me.

      Reply Like 3
      • WordTenor
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      • WordTenor
      • 3 wk ago
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      Powder Blue Pony The idea of the classic rule 4 buffer, which is what most of us are talking about, is that you take this month’s money and budget it next month, no further. This gives you the upper limit of what you can budget. There’s going to be a limit, when you look at all your money from one month, to how much you can set aside for your son’s college. You’ll have to make decisions about where to prioritize. 

      Then, you’ll likely get into a pattern where you fund everything evenly. 

      Reply Like 2
    •  WordTenor  jenmas Thanks a lot, both. It makes it clearer. I guess it's that pattern, which will only come over time (after my 'short term true expenses' because for example this chistmas is in only 2 months), which I'm longing for. :-)

      And budgeting ahead but no more then a month makes sense to me.

      Reply Like
  • Powder Blue Pony said:
    It does make sense to have a smaller buffer once your true expenses are properly looked after, doesn't it?

     I have a fully funded category called Loss of Income. This will get me through 6-8 months. I would not be comfortable with anything less than that. I add a little bit to this every month, but it is not a set amount. Well, it's X% of my end of the month sweeps: I empty out a few categories at the end of the month and if certain categories are at their cap (I have a bunch of categories that I budget to each month, but that I have a self-imposed cap, but rather than not budget to them in November, I will reduce them at the end of October so I can keep up with my process of budgeting the same amount every month to the category). Plus a piece of any windfall. Once I hit a particular milestone in the total, I may cut back a bit.

    Reply Like
  • Powder Blue Pony said:
    It does make sense to have a smaller buffer once your true expenses are properly looked after, doesn't it? I suppose part of my confusion is in the 'how big is big enough' question.

    It's true the word "buffer" is ambiguous, and definitely people outside of YNAB consider it to solely be a "financial cushion". Often YNAB users will speak of "the Buffer" in the context of Classic Rule 4 (assuming they know about that) and "a buffer" for a financial cushion. (I try to avoid both where I can and use "push income into next month" vs. "financial cushion".)

    So I assume in the above you're talking about a financial cushion. TBH, most will eventually have various dedicated emergency-like funds, including the big, mac-daddy: Income Replacement (used if you lose your job). With all the likely bases covered, there is no generic Emergency Fund at all. Of course, combined, there is $X that could be reallocated in the event of a big or unanticipated emergency, but at least the high-probability events are covered. Things are not "emergencies" because they were anticipated. Hopefully!

    Starting out, though, is usually a different story. In the face of "just living", being prepared for "might-happens" may have to take a back seat. One typically has to get by with a generic Emergency Fund (e.g., $1000 or even relying on credit) and hope for the best. Obviously not a long term prospect, but it is what it is.

    In summary, by making specific, "emergency-like" (but are really true expenses) categories, you will naturally figure out how big is big enough. Because the water heater doesn't care that you slipped and broke your arm on the ice the day before it decides to die. Cover the likely needs (medical deductible, roof/hail deductible, major appliance repair, auto repair, phone replacement, etc. etc.) and hope for the best.

    Reply Like 2
  • I would love to be buffered, but paying off my debt is my priority right now. So unexpected inflows go straight to debt. For me, extra income (i.e. I've fully funded October, and get paid on Oct 30th - most of that paycheck will go toward November) right now is going straight to buffer. 

    Reply Like 1
  • These discussions always seem to get bogged down in semantics. "Buffer" and "emergency fund" are overloaded terms that mean different things to different people. It would probably help to agree on definitions or avoid using those terms when engaging in these discussions. Here's my $.02 on the subject:

    "Emergency Funds":

    One of the ultimate goals in using a budget system like YNAB is for financial "emergencies" to become an exceedingly rare thing. Emergencies are stressful! You've achieved budgeting nirvana when your big expenses aren't emergencies anymore -- because you anticipated them and had a plan to deal with them.

    It's hard to give any hard-and-fast rules here, but I'd say this: If you're tapping into a catch-all "Emergency Fund" category several times per year, it's a red flag that you're not recognizing your True Expenses. The next time you need to tap into emergency money, take some time to reflect on whether the expense was truly unforeseeable, and think about whether it's likely to ever happen again. If so, then you should try to carve out some money in your budget so that, next time, it's not an emergency.

    After several years of using YNAB and learning what all my True Expenses are, I no longer need a catch-all "Emergency Fund." I renamed that category to "Income Replacement" to reflect its true purpose -- it's money that I'd only access if my wife or I ever lose our jobs unexpectedly.

    "Buffers":

    The purpose of an "Emergency Fund" is to provide financial security, and the purpose of a "Buffer" is to provide budgeting clarity and convenience.

    Budgeting each inflow as it arrives can be very tedious. In my dual-income household we receive about 10 inflows per month -- paychecks, savings account interest, credit card rewards, FSA reimbursements, and other miscellaneous one-offs. It's hard to see the big picture and wisely budget the (e.g.) piddly $20 credit card rewards cash I earned yesterday. Is there some particular expense category that needs a tiny boost? (Perhaps setting up lots of goals can aid in those decisions or even automate them, but I find them to be visually distracting.)

    A buffer addresses that problem by gathering an entire month's worth of inflows, setting them aside, and then budgeting that money all-at-once instead of piecemeal. Now I only need to make budgeting decisions once-per-month (instead of 10 times per month), and I can do it more holistically with a big-picture perspective. I'm not trying to align specific inflows to specific outflows anymore. They're two independent streams, and I just need to ensure that over the long term inflows > outflows, without fretting about the exact timing of when my next check will arrive or at what point during the month any particular bill is due. It's very liberating, and I'd hate to budget any other way!

    Dealing with credit card debt:

    Both "emergency funds" and "buffers" should (arguably) take a back seat to paying down high-interest debt. When you have outstanding debt, any money that you save (for emergencies or buffers) is money that could have been used to pay down debt faster and lower your long-term interest costs.

    From a strictly mathematical standpoint, your best move is to aggressively pay down high-interest debt as quickly as possible. If an emergency expense arises and you don't have cash to cover it, then you'd probably just have to charge it to your card and re-grow your debt. I.e. you're no worse-off than where you started. (And if an emergency doesn't happen, then you're much better off!) 

    But there are emotional considerations, too.  A setback that forces you to increase your debt can be a huge demotivator. It often leads to depression and catastrophic thinking; "I'll never tackle this debt! I may as well stop trying." So you might try to avoid that and leave yourself some breathing room to absorb some (moderate) expenses without resorting to credit card. Whatever helps you achieve the best outcome!

    Likewise, I consider a "buffer" so beneficial (see above) that I'd consider it "worth the cost" of paying a little higher interest over the long term. 

    The cool thing about YNAB is that it's very un-opinionated about how your should budget your money. It's just a framework. Yes, you should "Give Every Dollar a Job", but it's up to YOU to decide which jobs are most important and to weigh the costs/benefits.

    Reply Like 3
      • WordTenor
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      • WordTenor
      • 3 wk ago
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      bret I agree, and I would shorten this explanation this way: 

      Emergency fund : is not a YNAB term. It comes from other personal finance methodology. YNAB does not teach having a generic pot of money for anything. All money should have a specific, named job--rule 3 allows money that was for one job to be re-purposed for another in the instance that becomes necessary. 

      Buffer: is a YNAB term, and has a meaning that is very narrow in scope as a result. It is not a cushion of money. You operate buffered, you don't have "a buffer." The only time it gets an article is when we're talking about the chunk of money that gets saved so that the user can operate buffered, which might be zero salary, half the salary, or a month of salary. But it means directing all money earned this month to next month's budget. Might be necessary now to make clear that this process and ability has absolutely nothing to do with a given AOM.  

      Reply Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • Reported - view

      WordTenor The problem is that even though "Buffer" is a YNAB term with a YNAB meaning, it has an alternate meaning that can be applied to a financial situation and which leads to confusion in discussion and implementation... which is why some of us have advocated for years to stop using that term.

       

      WordTenor said:
      Might be necessary now to make clear that this process and ability has absolutely nothing to do with a given AOM.  

       I'm pretty sure that a given AOM has absolutely nothing to do with anything. 😉

      Reply Like
      • WordTenor
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      • WordTenor
      • 3 wk ago
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      nolesrule I mean, polysemy is not a foreign concept to me. :) I agree that's definitely the root of the problem. But I don't think the fact that it has more than one meaning is a reason not to point out, "I know you think it means 'x,' but in this context, it means 'y' and only 'y'." The idea that words work that way shouldn't be surprising to anyone. 

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • Reported - view

      WordTenor I don't disagree, but it feels like we have to continually supply the YNAB definition because the non-YNAB one is inherently ingrained. You don't get tired of it?

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      • WordTenor
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      • WordTenor
      • 3 wk ago
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      nolesrule I do get tired of explaining it, but I never get tired of seeing the penny drop for someone, so I suppose it works for me. Explaining to people the narrow meaning of a word they think means something else is what I do all day, every day, so it's second nature at this point. 

      Reply Like 1
    • WordTenor thanks for explaining, anyway 🙂

      Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
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      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 wk ago
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      nolesrule I refuse to get a reddit account because then my time will *really* disappear but I read the thing at least once a day and you crack me up. 

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
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      WordTenor unfortunately I have too much time on my hands right now. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 wk ago
      • Reported - view

      WordTenor And apparently they don't like me criticizing immature release notes. And I thought us "old-timers" from the original forum were supposed to be the cult.

      Reply Like
  • WordTenor said:
    YNAB does not teach having a generic pot of money for anything.

     Been ages since I created a new budget in YNAB, but as I recall the default budget categories includes something like "Stuff I Forgot to Budget For", which seems like a cute alias for an "Emergency Fund."

    But I wholeheartedly agree, the point of Rule 2 is to avoid generic pots like that and identify the specific jobs you'll need your money to do (before they happen)!  But I think generic pots are a reasonable crutch for beginners who don't have a good handle on their True Expenses yet. Just as long as they're working to wean themselves off of it!

    Reply Like 1
      • jenmas
      • jenmas
      • 3 wk ago
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      bret I think the intention of "Stuff I forgot to budget for" was for non-monthly expenses that slipped your mind - Costco renewal, quarterly sewer bill, annual gym membership.

      Reply Like
    • jenmas I consider Costco renewal, sewer bill and annual gym memberships as true expenses and fund accordingly. I do have a category called "Stuff I forgot to Budget For" but I use it only when something pops up that will not be repeated. Probably ever.

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      • WordTenor
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      • WordTenor
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       bret Yes, what @jenmas said. "Stuff I forgot to budget for" has a specific history that YNAB the company decided to ignore, or more charitably, didn't understand thoroughly enough to communicate to other users. It was a category that on the old forum, seasoned users would teach new users to create. The idea was that you'd likely forget when you set up your budget in February that you need to pay for a yearly membership in October, and that for the first year or so, those sorts of expenses would crop up and probably make you feel bad about your budgeting ability. So each month, as you budgeted, you would give some dollars the job of "Sit here until I remember what job you're supposed to be used for." The typical new user would be expected to stop using that category after a year or so, the idea being that as each of these things cropped up, you would create a category and begin saving for them specifically. 

      In nYNAB, seeing the utility of this category, the developers made it a default category. But they didn't understand or didn't care to explain that it was not a generic "miscellaneous" money pile. As a result, a whole generation of users now exist who aren't using this category anything like what it was originally created for and instead going, "I found myself at the ice cream shop and oops! I forgot to budget for triple-dip sundaes!" 

      That's not what it's for.

      Reply Like 1
      • jenmas
      • jenmas
      • 3 wk ago
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      KnitPurlKnit right, they are true expenses, but when you are setting up your budget for the first time, did you remember all those costs? Are you sure there aren't some looming in the future that you haven't budgeted for yet.

      Reply Like 1
      • bret
      • bret
      • 3 wk ago
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      jenmas 

      Eh, people forgot to budget for all kinds of things, large and small. I wouldn't make assumptions about how people use categories like "Emergency Fund" or "Stuff I Forgot to Budget For."  Story time:


      When we bought our first home years ago we had no idea what kind expenses awaited us and were constantly blindsided. At first we had a generic pot of money ("Emergency Fund") to deal with that stuff, but we quickly realized that it'd be better to put it in a "Home Maintenance" category.

      But even that was too coarse (or "generic"). We got pretty good at anticipating the little stuff (e.g. annual HVAC maintenance), but it wasn't long before we realized we needed to do more long-range planning for much bigger things like "new roof" and "exterior paint", and it didn't make sense to have all those things in a single pot.  Some of that stuff we have the luxury of time to figure out -- there were still a few years of life left in our roof so we could move money around and do some catch-up budgeting.

      Other stuff we had to learn about the hard way, e.g. when our air conditioner died in June out-of-warranty but much sooner than we had expected. Or when our water main broke and we learned that we probably ought to have at least enough money set aside to cover our insurance deductible.

      Point is, it's not easy to anticipate every potential True Expense or accurately estimate its cost. There's some inherent guess work there, and it's not reasonable to expect YNAB users to have that stuff all nailed down from the start. I think a (generously funded!) "Emergency Fund" category is a perfectly reasonable crutch  while you're figuring that stuff out. It certainly beats the alternative of no emergency savings whatsoever (and being forced to tap into funds that already have specific jobs.)

      Reply Like 2
    • bret that’s definitely how it works for me; first Month I kent coming up with new things (true expenses). And still am, though not as often.

      Reply Like
    • WordTenor oh come on, I found it quite clear what to use that category for. Wouldn’t anyone? If you wouldn’t, you just haven’t listened to the four rules, old or new, have you?

      If you’d allocate the money for the sundaes from forgot-to-budget-for to eating out first, in the beginning it would even grow your insight in the amount you apparently need to budget if you want to support your current lifestyle.

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      • WordTenor
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      • WordTenor
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      Powder Blue Pony You know, I would've thought the same thing, but then I spent about nine months very active on the YNAB fans Facebook group and...you'd be astonished. 

      There's also the subtlety that SIFTBF is not, as it used to be explained, supposed to fund any spending. The idea was that it was a pot of money you could WAM from, but not categorize anything to. That's the biggest difference: I see many newbies saying "Oh, I would just categorize that to SIFTBF" and I want to go NO NO NO YOU DON'T CATEGORIZE ANYTHING TO THAT CATEGORY. But I had to cut myself off of the FB group so that I would stop trying to gouge my eyes out. 

      Reply Like 3
    • WordTenor 😂 okay, I understand where that remark came from now. I deleted Facebook alltogether a couple of years ago. “Good for me health” 😁

      Reply Like 2
    •  I do actually categorise to the category, so I can take a different moment to sit down and decide if I need a new category from now on, or need to recategorize.

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      • WordTenor
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      • WordTenor
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      Powder Blue Pony the idea is that if you feel the need to categorize something to that category, that is the signal that you need another category (or need to think more broadly about what you’re budgeting for in one of your existing categories)

      Reply Like 1
  • Reply Like 1
    • nolesrule 😂 I definitely see other, more important, reasons as well! You can live below your means without giving very dollar a job, actually... 😊

      Reply Like
  • nolesrule said:
     90%* of why people get into financial  trouble is because of generic pots of money. *unscientific claim

     Too harsh!

    Should you try to get a handle on your True Expenses and stop treating everything as an unforeseeable generic "emergency"? Absolutely, yes!

    But I don't agree that having a generic emergency fund makes it more likely that a person will get into trouble. On the contrary, I think it's a positive sign of fiscal responsibility -- a conservative way of budgeting while trying to nail down those True Expenses. And it's certainly quite useful to have such a fund when a surprise expense arises!

    But I take your point that an EF can be abused to the point of absurdity. Taken to an extreme it eliminates Rule 1 & 2: I only need one category in my budget -- "emergencies" -- and every expense is categorized as such. Sadly, I know that some people basically live that way, but I suspect anyone who's reading a YNAB forum has got a better handle on things than that.

    Reply Like 3
  • bret said:
    After several years of using YNAB and learning what all my True Expenses are, I no longer need a catch-all "Emergency Fund." I renamed that category to "Income Replacement" to reflect its true purpose -- it's money that I'd only access if my wife or I ever lose our jobs unexpectedly.

    I refuse to rename mine. 🙂 But as long as I know what it's purpose is for me, it doesn't matter what I call it, right? I've never touched it since I finished fully funding it some years ago. I personally prefer the more robust name even if it's meant as an income replacement fund first and foremost. However, I like a little bit of wiggle room in the name.

    Reply Like 2
      • bret
      • bret
      • 2 wk ago
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      Superbone 

      I definitely feel like a category's name has a significant emotional/psychological effect on how I use that money!

      "Emergency Fund" feels pretty damned important, and I'd never access it to cover frivolous expenses that weren't true "emergencies."  On the other hand, "Stuff I Forgot to Budget For" certainly feels more ripe for the taking!

      I can see how the name "Income Replacement" would have different connotations for different people. It probably depends on one's sense of job security, the terms of unemployment insurance in their state, appetite for risk, etc. 

      For me, "Income Replacement" feels just as sacred & untouchable as an "Emergency Fund," but that's not going to be true for everyone. It's an interesting topic!

      Reply Like 3
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      bret Yes, that's a very keen observation. I feel very secure in my job and I am very confident that I will retire in this position (I'm less than a decade away.) I also feel like I'm in a financial position that if I were for some reason to lose my job, I would be secure enough to never need to get a traditional job again. The chances of me using my Emergency Fund for income replacement are extremely low which explains my word choices. Thanks for your insight! You've always been one of my favorite posters for your ability to lay out concepts in such a clear and concise manner.

      Reply Like 2
      • bret
      • bret
      • 2 wk ago
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      Superbone 

      Hey thanks, and ditto!

      But I don't think I'd call myself "concise" after that longwinded dissertation I posted yesterday. Still, fun to chat about this stuff and bounce ideas off other smart folks and hear different perspectives.

      Reply Like 2
  • bret said:
    Too harsh!

     I was actually agreeing with you. 

    As soon as you know what the job is, the dollars should be given that job. It's okay to hold some back while you're figuring it out, but my point was that most people need YNAB precisely because they lump their jobs in a generic pile and get confused about how much they really have for what purpose.

    Reply Like 2
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