Credit Cards: Budgeted vs Activity vs Available
I have multiple credit cards with various balances. When we started using YNAB, we synced all of our accounts and entered the starting balances. For the sake of being clear about my question(s), I'm going to number them below.
1) "Credit Card A" has an existing balance of $1000. There have been no new charges on the card, so "Activity" shows "$0.00". I want to make a $500 payment on the card. Do I put "$500" in the "Budgeted" column? When I do this, the "Available" column turns green and shows "$500". Then, when the payment is actually applied, it all balanced out to zero. Is this the correct way to handle budgeting for a payment on a card that doesn't have any new purchases on it?
2) I feel more confused on the cards that DO have monthly activity. Let's say I charge $100 to my credit card at Safeway. I've budgeted for the $100 in my "Groceries" category. When I use my credit card, I now see "$100" in green in the "Available" column next to that credit card. (I understand this as YNAB treating all expenditures like cash - so it is taking $100 out of my "to be budgeted" and moving it over to the credit card so that I don't incur any more debt.) Where I am confused is this: When it comes time to make a payment on that card, and I want to pay MORE than the activity (since I had an existing balance of $1000 + the new $100 I've just spent) what do I put in the "Budgeted" column? If I'm going to make a $500 payment on the card, what would I put in the "Budgeted" column? Should I put $500 in there since that is the total payment I am making or should I enter $400 ($400 + the auto budgeted $100 = $500 total)?
Appreciate any help you can provide. I keep going in circles and re-confusing myself all over again every month.
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1. Yes, that's exactly right.
2. When you make a purchase on the card and categorize it as Groceries, YNAB moves money from the Groceries category to payment category for that card. That's because the money that you were planning to use to buy those groceries now needs to be used to pay off the card that you charged the groceries on. This doesn't affect To Be Budgeted or the Budgeted column for the card. If you charge $100 in groceries and then want to make a payment of $500 on the card, you should budget $400 to the card.
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Dani Devin To add to number 2, you want to budget the difference between the Available amount and the amount you plan to pay. If there's $50 Available and you want to pay $250, budget $200. If there's $500 Available and you want to pay $550, budget an extra $50. :)
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This should have been its own help category. I have been struggling with trying to wrap my brain arount this ever since the methodology changed. Just explaining it to someone so that you can ask the question is difficult, so THANK YOU for this "refresher".
Now, what happens when you have a lot of activity on the card (like I bought $1,500 worth of medicine and some other things for my mother) but I'm only planning on paying $250 to the card this month. And yes, there was also a prior balance, so I'm not making a plan to pay that one amount off, just paying as much as possible each month so that eventually the card will be back down to zero.
Do I just let the "budgeted" amount on the credit card ride over into the next month? Or do I go in and "unbudget" or "unfund" some of the purchases so that they don't appear to be set aside to pay the card? Doing the second means (I think) that they just get rolled into the total amount due on the credit card., but now they are not categorized, which impairs my ability to print out reports at tax time.
Ideas?
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kmount If you aren't going to pay off the balance on the card for one reason or another then you really should pay the amount shown as Available on the credit card payment category. Your budget already has that amount covered, and paying less will incur interest.
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kmount This is a great question. It wasn't relevant to me until this morning. Put my dog's surgery on my credit card and definitely don't have the funds to pay the whole thing off. YNAB moved the money for me, but now I am "over-budgeted" for the month. Anyone else have insight here?
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Dani Devin If you didn't have enough money in the Dog Care category (or whatever you're calling it!) to cover the credit card expense, YNAB moved all the money in that category to the credit card payment category, and then let the Dog Care category go negative by the remaining amount. As of September 1, the Dog Care category will go back to zero and the balance will become credit card debt, which you'll need to budget for manually (in the credit card payment category) like any other expense as you're able to pay it off.
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Of course you are right about that. However, I am not exactly "budgeting" in this case (deciding ahead of time how much will be spent from a certain category). I'ts more like I'm managing my mother's banking. Sometimes I spend something on her card (groceries) and sometimes she does (something from Land's End, for example, or even the veterinarian). So when it shows up in the credit card register, I "budget" it, so that I know what it was for, but I may not be paying all of it off that month because I'm making sure all her other bills are covered, as well. That probably puts me in a credit card float, but medications cost more in the beginning of the insurance year until she meets her deductible.
In which case, that leaves me with a situation in which it may look as though there is $1,500 ready to pay to the credit card, but really, I'm only making a payment of, say, $250.00. I don't see another way, other than "unbudgeting" everything above the $250 mark, in order to keep the numbers in line.
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kmount You can leave the money in the category, unless you need it elsewhere in your budget. You can pay less than the available amount, but not more.
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I agree, this took me several months to wrap my head around. I wasn't paying off my balance on a credit card and I was categorizing the transactions on the card. Mostly from medical charges. My credit card "available" kept increasing. This created a dumpster fire and my wife essentially stopped using YNAB because our budget did not quite synch up. I finally started over with a "reconciliation" rebalance.
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Hi All-
I was struggling with this same thing and the Help team forwarded me to an article that was incredibly helpful about "Credit Card Floating" which I think relates to this thread. Check it out at: https://www.youneedabudget.com/are-you-riding-the-credit-card-float/
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Hi everyone! Reviewing your answers. I thought it would alert me when people posted and it didn't. Thank you!
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It is all clean and beautiful as long as I am only paying off the balance every month -- I budget $250 in the Budgeted column, and pay $250 in the Activity column, and the Available column says 0. No balance, whether plus or minus, to wonder about. If I'm still using the card while paying off the old balance, it is not clear how the three numbers (Budgeted, Activity and Available) are supposed to look if I am categorizing the purchases in the cc register. It looks as though I've set aside money to pay the monthly charges, but I haven't really and the available amount looks fantastically high, while the amount to budget is fantastically low (in the red).
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kmount If your To Be Budgeted is in the red (I assume this is what you mean by "the amount to budget is fantastically low") , you need to cover it immediately, or your entire budget is untrustworthy. A red TBB means you've budgeted more money than you have--i.e., you've given the same dollars multiple jobs. That can't work.
If you're paying off your credit card balance every month, you should never need to budget any money to the credit card payment line. All the money you need to pay the card should be automatically moved to that category from your spending categories as you incur transactions.
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kmount , have you go through some of the learning videos. It sounds to me like this is confusing because you aren't really subscribing to the philosophy and method of YNAB and simply using the tool to track money.
The philosophy is basically don't spend what you don't have physically in cash. So let's say I have $1000 and I plan to buy $1000 in medicine. I should budget $1000 to the category Medicine.
Let's say I physically have $1000 but I don't want to spend it all this month to pay off the medicine. I want to pay $250 for the next four months. In essence, I am saying I want create a debt and trade cash for product. In which case I would budget $250 to medicine. Here's how it would look.
$250 Medicine (Budget)
$1000 Spent Medicine (Credit Card)
$250 Available (Credit Card). You have overspent $750 (which is true)
Next month you budget $250 to Credit Card and do so for the next three months until you have paid off the $1000.
You can't have it both ways where everything looks pretty like you're meeting your budget when in fact you're overspending because you choose not to trade cash for product right away. You are trading credit for product.
If you budget $1000 to medicine and then don't pay it, of course available will grow...but then you're not doing it right because you may be physically spending that $1000 elsewhere.
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I totally get it, IF you're paying off your balance every month.
Now, what if you are NOT?
I'm kind of thinking that I leave the purchases categorized, BUT I don't budget for them on the budget line. For example, I spend $100 on groceries, but $25 of that was spent on a credit card. SO on the budget line, I only budget $75 and let the $25 roll over to the next month (when it becomes part of the total cc balance).
This means that every time I update my budget during the month, I have to be mindful of the fact that the activity in the category includes some cc transactions, so when my grocery spending has gone up to $200, I am still excluding that $25 that was on the credit card, so I am only budgeting $175 on that budget line.
When the next month comes, that un-budgeted-for $25 will become part of the total cc balance and the bookkeeping for that category starts anew in the new month.
I think that this will make the budget trustworthy. Does this seem right? Anyone?
I feel compelled to restate that I KNOW the questions I'm asking do not exactly illustrate the ideals of the YNAB system - they just happen to be what I am dealing with as I manage my mother's accounts...
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I'm not sure I understand the grocery example. What do you mean by budget is trustworthy. Let's say I spent $75.00 in cash on groceries and $25.00 on my credit card. You should budget $100 to groceries assuming you have $100 in real money to pay for groceries. If you only have $75 in real money, you budget $75.00 and then you incur $25.00 in debt. The budget is still trust worthy.
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You are right in that I am in some sense just tracking the account. My problem is in documenting it accurately.
I thknk my main questions is:
Let's say I don't have $1,000 but I buy $1,000 of medicine. I categorize it as medicine and now it shows up in the Activity spot in the credit card line.
I will be paying the CC company $250 to cover the minimum payment plus some.
Do I put that in the Budgeted spot in the CC Payments section? or is it only entered into the CC register as a payment?
And what do I do about the $750 overspent at that point? I assume it rolls in to the total credit card balance the next month, but maybe that is not correct?
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kmount Essentially, for what you're trying to do, that is correct. Only budget what you actually plan to pay towards the credit card. King mentions this below. If you plan to pay $250, budget $250 towards Medicine. When you spend $1,000 towards medicine, the $250 in that category will move to the credit card category and the $750 will show as overspending in the Medicine category.
When the month rolls over, you'll have a $750 balance on the credit card. Budget $250 (or whatever the amount is that you plan to pay) towards the credit card category, to cover the payment.
If you plan to make other purchases on the card, still budget for them if you intend to pay for them. So, let's say you purchase more medicine, but only $50 in the new month. If you budget $50 towards Medicine and spend that $50, YNAB will move that $50 to your credit card category - it'll be added to the $250 you budgeted there for a total of $300 Available to make that payment.
Does that help clear things up?
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I think you're confusing the budget with transactions. Let's say you don't have $1000. You can't budget $1000 to medicine. You budget $250 to medicine. The activity is $1000 and it will go red by $750. However, you did budget $250 to credit card so available in credit card will increase by that amount. And then you pay $250 to the credit card.
You may be thinking that next month, the medicine category will stay negative $750. But that's not how that works because every month budget wise starts new. Negative balances are not carried over. Why? Well because you now have balance on your credit card for $750. YNAB will now tell you that you are carrying debt.
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Hi Everyone! I found an article I found helpful about overspending on credit cards:
https://docs.youneedabudget.com/article/944-credit-overspending
And a great video:
https://www.youtube.com/watch?v=GlwqTV77OKU
And a place to sign up for classes on credit cards:
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I'm having a problem with credit cards.
I pay my balances off every month.
My understanding is, when we spend in one category with X credit card, the amount spent gets deducted from the spend category and into the credit card payment category.
A couple of times in the 2(ish) years I've been using YNAB, my balance will get COMPLETELY out of whack with my activity. For example, right now I have a credit card with a balance listed of $4,000 and activity to match that, but the money available for payment is only $300.
If YNAB is moving money from a spend category into the credit card payment category, shouldn't the activity and the available balance of the credit card payment category be the same?
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Powder Blue Case Yes, YNAB will keep up solely with budgeted purchases. However, anything else will throw the category out of agreement with the account (assuming it was originally in agreement).
The two most common things are the starting balance (i.e., it never agreed in the first place) and overspending. Less common things are purchase rewards, reconciliation adjustments, outgoing transfers, some instances where the account balance becomes positive, and budget entries by the user.
Ultimately, you will need to move funds into the CC Payment category if you wish to restore paid-in-full status.
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Hi! Hope you don't mind if I add my question here. I feel like it relates to this topic, but I don't see the answer I need above.
I have just started with YNAB, which I suspect put me in the most confusing position: in the middle of a credit card cycle, with a balance of stuff that has not been budgeted, and also new activity that has been. I am trying to get a clear understanding of the budget columns: Budgeted, Activity, Payment.
I have paid my statement balance, and I have also budgeted some new transactions. Right now, my columns look like this:
- Budgeted: $500
- Activity: -$400
- Payment: $100
The Payment column accurately represents the amount I have budgeted for new transactions since starting YNAB. Good -- it will be applied to the next payment. It is also the difference between the other two columns. Ok. Here's my problem: the Budgeted column is the exact amount that I have already paid to the card and marked as cleared. That money is not budgeted, that money is gone.
What am I missing? Is it trying to tell me, "this is the money you have budgeted this month specifically to payment of debt on this card, even though you've already made that payment?" Like, as a record?
Thanks for any insights!
JMT
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Blue Welder Budgeted tells you how much you have assigned to the category through the act of budgeting in the current month. That's all it means, and it won't change unless you decide you want to change the amount of your money designated for that purpose. For credit cards, that's for busdgeting money to pay for unbudgeted amounts on the credit card.
Available tells you how much you have left for the category's purpose. In this case you have $100 available for your future credit card payment at this moment. The Activity is the sum of budgeted money from other categories being added less any payments made.
Current month Available = Last month Available + This month budgeted + this month Activity
Note that Budgeted and Activity can contain negative numbers, so do the math accordingly. -
Blue Welder Yes, you budgeted $500 (placed into the digital envelope) to pay the previous balance, then incurred -400 activity ($500 "spent" from this catrgory to make the payment, and $100 in other purchases that was added to this category to await your next payment: -500+100=-400 shown), so the horizontal math (budgeted+activity=available) indicates you have $100 sitting in this category, waiting to pay your next statement.
Just like any other category, the budgeted cell just shows the aggregate change to your dollar organization this month. You should only ever look at the Available amount to see how much you have. The other numbers just show you where the math has been coming from.
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Move Light Sound Life nolesrule Thanks to you both! I think I found the source of my confusion: the Budgeted column is treating the credit card like its own category, and it's acting like a record of the month. Meanwhile the Payment column is totaling the amounts from other categories that are currently available to send.
So my confusion was that I wasn't thinking about the credit card as its own category.
Hopefully I've got that right now. Thanks again!
JMT
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Blue Welder Just realized another piece that was going over my head: the Budgeted column reflects only what was allocated this month, while the Payment column reflects all the money has been budgeted in past months but not yet spent, and is therefore currently available to spend.
This distinction makes more sense on spending categories, not credit cards, which is why I kept missing it. Also, this being my first month, I haven't gotten to any accumulations yet, so I wasn't thinking in those terms.
Ok, I hope I've got all this right, and I hope this little mini-thread helps someone else in my spot one day. :)
JMT
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Blue Welder
Blue Welder said:
the Payment column reflects all the money has been budgeted in past months but not yet spent, and is therefore currently available to spend.For a Pay In Full credit card user, You will only pay the most recent statement balance, but you want money reserved for the entire card balance. As a result the Payment available amount would match the card balance rather than the amount of your next payment.
