Handling Suspicious Charges the YNAB way
SCENARIO: As I was dutifully categorizing my new charges from the Credit Card, I noticed one I didn't recognize for $99 from InstaCart. Hmmm.... Success #1: Able to catch questionable charges since I'm reviewing every charge!
I contacted InstaCart and told them I have nothing to do with them and would appreciate them not charging my account. There was some back and forth (and a changed CC number along the way), and eventually, said company issued a credit.
MY FLAWED SOLUTION: I thought, no problem, I'll just create a category for "HOLD" and put that charge into it. That category will not be budgeted so it will show the $99 negative amount, thereby letting me know that there is an outstanding issue to stay on top of. Then, once the company issues the credit, assign the credit to the "HOLD" category and voila.
PROBLEM: The credit did not come until the month rolled over.
Issue #1: because the month had changed, I completely lost all visibility to the reminder that I was tracking a problem.
Issue #2: once I assigned the credited $99 to the "HOLD" category, it showed as having a balance of $99, since it did away with the negative $99 from the previous month.
QUESTION: Obviously, the ever-debated negative-balances-carried-over feature would have made this work. But as that line of thinking is anathema in YNAB-land, what I'd like to know is: What is the correct YNAB way to handle this use case? What I did obviously didn't work, so what *should* I have done?
BONUS SCENARIO: We are financially secure and carry no debt. We have good jobs and plenty of 'buffer', as we do not live beyond our means. We budget to ensure our future retirement and to loosely make sure we aren't being irresponsible and wasteful with our spending. Use case: We fund $100 in "Eating Out" each month. We spend from it during the month and towards the end of the month decide to go out for dinner and spend $30 on food, causing a negative balance of $20. This is done on a credit card.
As this tiny decision is buried in a million other things going on in life, we don't recall it when the month changes. So we happily fund our categories, putting $100 in the "Eating Out" fund. A few days go by and we are assigning transactions and assign the dinner to "Eating Out". It has no impact on our budget at all and we lose sight of the fact that we overspent.
The effect is that we are rolling along thinking we have more money than we actually do. It took a few months to realize this as the overage was "hidden" from us.
QUESTION: My intent is NOT to begin the negative balance debate all over again in a new thread. I truly want to understand the expected way to handle the negative balance use cases in the best possible way that keeps our budget true. If you know you've gone negative, you can address it in the month. However, the timing issue with the month rollover and delayed transactions causes a hidden-overspending scenario with no visibility into it. When we finally realized what was happening (3 months in), we decided that as part of our regular routine, we will just have to wait till a few days into the month and then review the previous month, covering any overages from our To Be Budgeted pool for that month. We did this for all three months this morning.
What I want to know is: What is the correct YNAB way to handle this scenario?
REQUEST: I won't ask you to add negative balance carryover, but please please please add some way to have visibility into these situations so it's not 'hidden' just because the month rolls over.
Regarding your HOLD category, whenever it turns green, move the money somewhere more useful. I wouldn't use it as the ToDo reminder, because it's not going to be consistently there.
Regarding the small dining out overspend, use Rule #3 and find the money before you overspend (or if you forget, clean it up in that month's view). You'll be reallocating from another, less important category. If you can't pull money from another category and you want to increase your credit card debt, reallocate from the credit card payment category.
If you turn on the Toolkit's Paid In Full (PIF) CC assist feature, it will alert you when you don't have enough to pay the whole balance, which means you're carrying or floating some sort of debt.
Then, paying down past purchases becomes something you can budget for directly in the CC category.
That's the YNAB way. You always want to be able to look to your categories for spending guidance. Of course, if you're looking at YNAB before/as you make purchases, why not just input the transaction so your budget is up to date instantaneously?
You say you have enough of a cushion - where is that money living? Do you have a category called buffer that you reallocate from when you overspend? Or, do you just mean that you can cash-flow purchases so that your accounts don't go negative?
Accounts and categories should be viewed separately in YNAB, and you can't cash-flow the budget. All activity must be backed by budget dollars in order to trust your category Available amounts.
Well, actually, you can cash-flow with annual expenses, but that's not what you're talking about. :)
Any time your credit card payment category is less than the working balance on the card, there is debt floating without a plan to pay it back. The only signal you need is that these numbers don’t match. The toolkit has a feature which makes your payment category orange in this instance as an alert, and the mobile apps have visibility into debt carried on the card if you tap the card payment category and look at “payment.”
For the overspending, recommended practice is to enter transactions as they occur. You would have been immediately notified there weren't funds available. Ideally, though, you would have checked the balance before spending. Failing that level of engagement, yes, you should make a habit of checking last month on the 2nd or 3rd once transactions have posted and go back and address any overspending.
Yes, it would be nice to have a summary of current-month overspending in the header.
Another option is to represent your paid-in-full credit cards with checking accounts. Any missed overspending on the card will be shown in the new month's header, and you can go track it down.
ok, I think you've all convinced me. Our final handling of the budget will be:
First, of course, try not to overspend on your categories on a regular basis and check the balance before making a purchase. However, understanding that life does happen and you sometimes go over, we'll just make it a habit to:
- Use a Buffer category and put all our non-budgeted money in there to use for the occasional overspent category or over-budget projects. Then, we'll just have one category to pay back to make sure it doesn't get too low.
- Wait a couple of days into the month and then just review the previous month to check for any trailing transactions that may have impacted our categories without our realizing it.
Regarding the erroneous charge (that first scenario I mentioned), I still don't have a good idea of the best way to handle that...
How to keep track of a charge you don't want to budget for because it is a wrong charge that you expect to be refunded.
Perhaps there is just no good way to handle that other than just treating it like a real charge and processing that way, then keep track of it using phone or calendar alarms :) ?
Amy Rizzo said:
However, understanding that life does happen and you sometimes go over, we'll just make it a habit to:
Use a Buffer category and put all our non-budgeted money in there to use for the occasional overspent category
You should be covering overspending from the least important category in the budget with funds. Hopefully you'll agree with that premise.
The problem with a vague Buffer category is it's difficult to gauge the relative priority.
The fact you also intend it to fund project overages suggests you may think it to be more important than you have previously described.
Amy Rizzo said:
Use a Buffer category
I also want to let you know that the word buffer has developed into meaning something rather specific in the YNAB forums. When you have the time and interest, you're welcome to find out what we're used to having that word mean. I compiled what I had learned in this post: https://support.youneedabudget.com/t/m1hqyb3/trying-out-the-ynab-buffer
That would be why I was looking for a different name for your category, I think. Of course, it's your budget so you do what you want. I would say that your new solution of getting that money out of TBB and into a specific category will be good, and that you also have some good things to think about as you move forward.
Amy Rizzo said:
We could just dump it into savings
Ok, so I just typed a good comment asking about what you mean by this, and I lost it. 😣
In short, since you're looking into more YNAB techniques, have you come across this?
Try using scheduled transactions combined with the running balance to ensure proper cash flow while maximizing interest. Savings accounts should be on budget.
If you meant investing, well that's different.