Need Help Overhauling Budget: Way too confusing

I've been using YNAB for a few years now, and it has been a great tool to help me plan spending.  We are buffered 1 month, and have been able to save enough to buy a house with a renovation as well.  I'm getting to the point now, where I think my budget needs an overhaul. 

We are first time homeowners, and now feels like the perfect time to revisit some of the pain points in the budget. 

I think I'm dealing with a few issues:

1. I think that I spend way too much time focusing on the wrong things (for example, over analyzing what my averages are in some of the variable categories)

2. Striking the right balance between over-categorization and when to create categories (Ex. I pay my first mortgage payment next month and created categories for P&I, Property Tax, and PMI.  In theory, I could have just one category.  The only reason I created multiple is to track increase in Property Tax, and adjust budget when PMI is removed from Mortgage Payment.  I wonder if I am too granular for the wrong reasons)

3. Inconsistency with my review process (Reviewing and adjusting variable expenses).  Which categories can be easily identified to WAM from?

 

When it comes to the house there are going to be tons of expenses over the next month.  I will need to buy tools, blinds, have bills I have no prior spending history on (i.e. electricity, water, gas, etc).  I find myself overthinking these things way too often and need to come up with a better process.  I.E. Do I create a tools category, or a more general category?  When should I wish farm something?  How do I budget for the unexpected things that we will need from Home Depot?  How much?  Do I create granular categories, etc. 

At times, I wish there was a rulebook that clearly outlined where things should live within YNAB.  I'd like to simplify my budget process, and have a more consistent review process. 

The way I have it set up now is I have:

  • Fixed Expenses (Everything from Mortgage, to Insurance)- These are the easy ones
  • Variable Expenses that happen frequently
  • Annual Expenses (Credit Card Annual Fees, Annual Subscriptions, Holidays, etc).  I have 25 Categories here.  One for each line item tied to a spend by date Goal
  • Savings (Kids College Fund)

My questions:

  • How do you budget/adjust variable expenses?  For example, with Beauty, or even kids diapers, I budget the average, but sometimes there might be a surplus that I need to WAM from to cover something else.  What is your process in reviewing/doing this? 
  • How do you have your budget setup to easily flow from category to category so that the priorities are in a logical order?
  • How do you have the budget outlined to clearly denote which categories are non-negotiable never WAM from?
  • What is your approach to creation of a category? 

Thanks in advance for humoring my OCD. 

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  • jestarr said:
    created categories for P&I, Property Tax, and PMI

    Most don't bother with that. It is more effort (setup and maintenance), so to make sense there needs to be a benefit in your eyes.

    Ultimately, what I care about is that $X is reserved for the payment -- which means that $X is NOT available to plan for other things. When PMI drops off, I would deal with that then.

    Like 1
      • jenmas
      • jenmas
      • 3 wk ago
      • 2
      • Reported - view

      I agree with dakinemaui , if you log onto your mortgage servicer's website they can tell you how much is going to all those things. Even if the mortgage servicer is paying your property taxes on your behalf, you typically receive a bill letting you know how much you owe and there are typically other notifications about hikes to your property tax.

      Like 2
  • jestarr said:
    Which categories can be easily identified to WAM from?

    I typically WAM from discretionary categories. By their nature, they are lower priority to me. I can just not go out to eat for the rest of the month if those funds are taken, raid the freezer, wait until the 1st to buy booze, etc. I moved these sort of categories to the bottom of whatever group they're in. (I use functional groups, so it's not as easy as it would be if I had those categories under the same group, but it's still pretty easy.)

    Like 2
  • jestarr said:
    How do you have the budget outlined to clearly denote which categories are non-negotiable never WAM from?

    Some use emojis in the category name. (I simply have a "+" on the end for things that should accumulate, although after all these years, I don't need them.) I wouldn't say "never", but I will hit all the categories without pluses first when WAMming.

    Like 1
  • jestarr said:
    What is your approach to creation of a category? 

    If something doesn't fit into a current bucket but will continue to need money, I'll create a category for it. I then adjust my nominal values for other categories so the total remains within the limit of my expected income.

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  • OCD can get out of control with this stuff, can't it? I am an uber detail person, so I struggle with finding the balance sometimes, too.

    For the mortgage - if all of those things are rolled into one payment, then I wouldn't worry about (I.e. if you have escrow for the taxes, etc), at least in the beginning. When you change formats, you can shift to expanding it into multiple specific categories later. The other option is to create a category group for the mortgage, and put all of those separate things into their own categories. That means you can expand or collapse the group as you need to and it won't take up as much room.

    For the other specific bills - I have them set up in my budget in order of their due date. So for us, Mortgage is first, then comes the security system, fridge payment, Phone, car payment, then I have the power bill, the water bill, and the car insurance all at the bottom. The last 3 I work from averages, so I don't necessarily need to know the due date because I add a consistent amount of funds, and only need to worry about them when the bill is due. I've had enough funds in the power bill category ever since I started working from averages, and the other 2 bills are due every 3 months, and 6 months respectively.

    After that, you may want to create a household category, but this depends on how OCD you want to be. For us, I just dump everything in together because the BF has a tendency to buy all sorts of weird random things and I don't always know what it was. So if it was Lowes or Depot, it just falls into that category. You could probably break that out into a tools category (anything from power tools, to measuring tapes, etc), a supplies category (so parts and pieces for things, or consumables), and maybe a Items/Stuff category (this would be the things, like cabinets, light fixtures, etc). The thing that I see right away is that it would be a pain in the butt to maintain this because VERY likely you'll have all 3 on almost every receipt that you have for a while in the beginning (at least if you're starting from NOTHING if this is your first house).  SO do what you will with that, just decide what makes the most sense. You can always change it later, that's the good news :)

    Just a tip on power tools - I don't know if you have Home Depot in your area, but their Rigid line of tools have some of the best warranties (I believe it's lifetime, and the batteries are warrantied, too) right now if you register your tools after you buy them. And with the holidays coming they have some really amazing bundles that are VERY well priced, and often come with additional batteries, which is really helpful. Almost all the tools in our house are orange now because of that. The BF has asked for various tools for the past several christmases and birthday (his birthday is in Nov so he gets to take advantage of those sales for his birthday, too), and so he has quite a lot of really nice tools now, and we can do almost everything we need with what we've got.

    Enjoy your new house! I really enjoy the process of making a house a home.

    Like 1
  • jestarr said:
    How do you have the budget outlined to clearly denote which categories are non-negotiable never WAM from?

    I just moved to the new version of YNAB from an old copy of YNAB 3, and I was hoping there was an easy way to color code or mark which categories are "negotiable" and which were not, to make it faster to balance things out when needed (WAM?).   I take it there is no such feature (yet?)

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    • Cadet Blue Commander I cheat and actually have a category named "WAM" with $150 in it just in case I need to WAM. I have very few categories I'd be willing to pull from in the case of an occasional overspending event, so I found this relieves any stress I feel on the rare occasion I need it.

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      • Bruce
      • Software Engineer
      • Bruce
      • 3 wk ago
      • Reported - view

      Periwinkle Flute mine's called "slush fund" but basically the same thing. Names don't matter, but it sure does make it easier to find a few extra bucks when you've planned for them to be there! 

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  • I don't suppose suggesting you create a "House" category and throwing $10,000 into it every year would be helpful, would it? (Or maybe $15,000 if you live in my house! 😵)

    Mortgage - I just have 1 category for this, called "Mortgage" (shocking, I know). I pay extra each month and that is a separate category (under my Savings Goals) called... "Extra Mortgage"

    I have a Home Maintenance category in which I try to keep at least $3,000. I never seem to know what's going to go next (2 dishwashers within 5 years) same dryer for 12 years (until the basement flooded last year). I basically put all home maintenance in there - painting supplies, tools, new appliances, A/C repair, etc. It's basically the cost of keeping the home running and in somewhat decent shape.

    I did have my Kitchen cabinets refaced and the tile in my kitchen replaced a few years ago and that was its own category.

    For stuff like blinds, shower curtains, bedding, trash cans, couch, new bathroom vanity I have a Home Items category. I used to separate this by room, but really, who cares what room the stuff's for? It's all in the same house...

    I also cheat and don't WAM (everything in my budget is important!). I have a category called "WAM" with $150 in and use it when needed.

    For things like electric, gas, utilities (water, trash & sewer) I kind of estimate - on the high side - and every year reassess my estimate. Any money left in these categories each month I let carry over for that year.

    I also have a category called "Large Unexpected Expenses". I think I'm going to change the name to "Large Expected Expenses". This year we needed a new furnace ($6,000). Last year we had flash flooding and needed new everything in the basement (except the furnace) - $6,000. The year before one kid needed oral surgery and 2 implants. Guess how much it cost? Yup, $6,000.

    Anyway, I hope this helped somewhat and congratulations on the house!!

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  • Cadet Blue Commander said:
    I was hoping there was an easy way to color code or mark which categories are "negotiable"

     Lots of people use emojis in the category name. Stop signs, skull & cross bones, colored circles, etc. I've long used "+" at the end to denote that category should accumulate and that I shouldn't reallocate from it. Not as fancy, but certainly effective for me.

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  • jestarr said:
    How do you have the budget outlined to clearly denote which categories are non-negotiable never WAM from?

     I use the order of the categories from top-down to show this. Rent and utilities (non-negotiable) are at the top, and they continue in descending order of importance all the way down the budget.

    Like 1
  • jestarr said:
    How do you have your budget setup to easily flow from category to category so that the priorities are in a logical order?

    I have my category groups set up as a hierarchy. I want to retire someday so "Financial Independence" is first, followed by "Housing" followed by "transportation" etc.  The items within each group are placed by their importance. For example, paying the mortgage is more important than buying new curtains so "Mortgage" is first followed by "Home Maintenance" and so on with the curtains as "Small upgrades & Niceties" last.

    I've tried a couple different approaches and like this the best as I can clearly see what I'm spending in each area of my life.

    jestarr said:
    What is your approach to creation of a category?

    For me, when I begin to question, "does this really belong here?" or I have had several purchases that I waffle on where they belong, it's time to stop and think...

    My son loves motorcycles. Before YNAB he had a motorcycle and all the gear that goes with it. This past summer he got a new bike and all new gear, we started riding more and needing more parts, which ultimately led to a new category "off road".  

    Initially, the cost of fuel and parts came out of the regular fuel and vehicle maintenance categories, but I realized that those purchases were really eating into the wrong categories. These needed their own place lower on the priority list than the gas I need to use in getting to work (don't tell my son!).

    Like 2
  • In my category groups, which are give, savings, needs, wants, I move all the fixed expenses to the top and put a lock emoji in the category name so I know not to take from those.  Below that are categories that I could theoretically take from because they aren't fixed expenses.  At the bottom are the categories that I'm trying to grow over time, and I put a little dollar with wings emoji from apple in the name of those.  Emojis are fun for me :)

    As for categories for home, I have a mortgage and utilities category where the mortgage, power, water and internet bill are all combined into one category and I try to make it so I'm putting in the same amount every month so I have enough to cover the more expensive bills in the winter without having to change my budget each month.  Then I have a Home and Garden category, for things I want to buy for the house that aren't permanently part of the house.  Then I have a House Maintain/Repair category and I'm working on saving 1% of my home purchase price a year into that category so I have enough saved for major expenses when they come up.  But I'm definitely in the "fewer categories" time in my YNAB experience.  I'm just trying to simplify my budget as much as possible without losing any value, and for me, I found this was a good compromise.

    Between my car repairs, car insurance, and house categories, YNAB has made my life so much less stressful!!!!  It's great when something goes wrong in your house and your only worry is how to get the right person there or the right parts to repair it, rather than stressing about how you're going to pay for it.  

    Like 2
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