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.

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  • 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? 

    Like 2
  • 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. :)

    Like
      • Amy Rizzo
      • Business Analyst and Wife
      • creeping_shadow
      • 4 days ago
      • Reported - view

      Move Light Sound Life We could create a category called buffer that we use to fund categories that are overspent, however, we just leave that 'buffer' money in To Be Budgeted.  We put all the other overage money in a 'savings' category.  So everything is accounted for, we just opt to use To Be Budgeted rather than creating another category.  

      Like
    • Amy Rizzo I'd recommend making that "Buffer" category (a lot of people call it "Unexpected" or "Stuff I Forgot to Budget For").  Rule #1 in YNAB is to give every dollar a job, which means your TBB should always equal $0. 

      If you want to allow yourself to overspend and cover from your slush fund, be aware that by never reallocating from other monthly categories, you may more easily have lifestyle inflation.  YNAB's method is about reorganizing the plan for your money now, with what you have now, and not trying to make it up next month.  It's vertical (total money available to you now) thinking versus horizontal (linear time along a category) thinking. 

      Alternatively, perhaps you're not budgeting enough to your categories if you keep overspending them, so consider upping their normalized amounts.

      Rule #2 says to contribute to your True Expenses, which is another term for non-monthly expenses.  Have you funded these in categories, or are you relying on your slush fund to be there when annual expenses come due/unexpected repairs require spending/medical expenses come up?  Make categories and fund these.

      Another part of Rule #1 includes giving every savings dollar a job, too.  Without separate savings categories, it's so easy to think that the extra $X sitting in TBB will cover all sorts of things, when in reality, it can only cover the first $X worth of anything non-monthly or unexpected.  Do you have categories for things like Loss of Income, Medical, Dental, Veterinary, Home Repair, Auto Repair, Vacation, Technology Replacement, etc.?

      In YNAB, it's ok to have every month's budget look different.  That just matches real life.

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      • Amy Rizzo
      • Business Analyst and Wife
      • creeping_shadow
      • 4 days ago
      • 2
      • Reported - view

      Move Light Sound Life We have savings categories.  We also have categories for home taxes, car maintenance, home projects.  One very neat thing my husband started a decade ago when we were on Mvelopes is to have Pet Medical and Pet Stuff categories.  Instead of getting pet insurance, he funded those every month.  Our dachshund paid for all his own vet visits, pet deposits, dog food, etc.  At one point, he had over $5000 in his envelopes.  We never wanted to put a price on his health and have never had to.  And when he goes (which will be soon), that money will simply be absorbed back into our budget instead of sitting with some insurance company. We also saved in our Car Maintenance category and eventually used that to pay cash for our Camry Hybrid a couple of years back.  We tell people - we didn't just randomly buy a new car - we made car payments to ourselves then bought the car once we had enough.  So we do use it quite extensively.  Honestly, this style of budgeting virtually eliminated all financial arguments between us.  We love it. 

      But, being that we do have that extra buffer, we will allow ourselves to occasionally go over.  For instance Home Stuff - we save up for a kitchen update.  We may start the work and find that we want to do something extra while we're at it.  We'll allow it to go over and then we won't do any more home projects until the monthly funding of categories pays it back and builds it up again.

      But as I type this, I see your point...  If we put the TBB in a "Buffer" category, then we pay out the Home Stuff overage from that, we will see it is low and begin re-funding Buffer over the next few months to build it up again.  

      Like 2
    • Amy Rizzo What about calling it "Undecided"?  It's money that you're saving for an undetermined, discretionary purchase or more.  I know Superbone calls his "Freedom Fund" because he can do whatever he wants with it.

      Also, I'm right with you on the benefit of the envelope style budgeting.  It has done the same for our relationship!  Congrats on using it so well!

      Like
  • 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.” 
     

    Like 2
  • FWIW I have a category called “oops” into which such transactions go. It is also used for fines or other unexpected negatives. 

    Like 2
  • The target balance of the Hold category is $0. The fact it was not $0 immediately gives you insight into the need for action.

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  • 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.

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  • 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 :)  ?

    Like 1
      • dakinemaui
      • dakinemaui
      • 4 days ago
      • 4
      • Reported - view

      Amy Rizzo Wrong or not, that charge was real. If you cover it with cash, just put that amount in the category name for reference. As long as the Available is lower than that amount, then you are owed.

      Sure, set calendar reminders if you need to ping someone about it.

      Like 4
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 days ago
      • Reported - view

      dakinemaui Yep! I always match reality.

      Like
  • 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.

    Like
      • Amy Rizzo
      • Business Analyst and Wife
      • creeping_shadow
      • 4 days ago
      • Reported - view

      dakinemaui Well, the least important category is the unfunded money sitting in To Be Budgeted.  We've funded all of our categories with the spending amounts we strive to hold to.  We've put a bit more than the required amount in savings for retirement, etc.  We've essentially given a whole bunch of dollars jobs and we have some leftover (an excellent problem I never dreamed I'd have!)  This leftover money - we could increase some of our budget categories, but we don't want to plan on spending more than what we feel is reasonable.  We could just dump it into savings, but it feels less available that way.  In reality, we've worked hard to get to complete financial freedom and we'd like to enjoy it.  So we really just want the "extra" after funding the categories and savings, to be available to work in whatever way is needed.  Or to simply grow if there is no need.  Maybe this month we spend a bit too much on Groceries...  Maybe next month we do that kitchen project we've been wanting to do.  Maybe I buy too many Christmas presents.  Maybe my dad needs a new wheelchair.  Whatever it is, it doesn't belong to a specific category to "increase" funding to every month.  It's the whatever-is-needed category.  And the least important category is the TBB or "Buffer".  Its only importance is to provide planned safety to handle life's curveballs.  And from that perspective, I do want to ensure there is always money in it to handle those situations.

      Like
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 days ago
      • Reported - view

      Amy Rizzo That's not the way to handle it in YNAB. You are not even following Rule 1 here. I have a category called Freedom Fund that has the exact open ended purpose that you describe above.

      Like
      • Amy Rizzo
      • Business Analyst and Wife
      • creeping_shadow
      • 4 days ago
      • 2
      • Reported - view

      Superbone I'm confused...  How is a Buffer category different than a Freedom Fund category...?  I'm not quite getting what is wrong with it.

      Like 2
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 4 days ago
      • Reported - view

      Amy Rizzo 

      Amy Rizzo said:
      Well, the least important category is the unfunded money sitting in To Be Budgeted.

      It sounded to me that you were leaving funds in To Be Budgeted rather than budgeting to 0. Maybe I misunderstood?

      Like
      • dakinemaui
      • dakinemaui
      • 4 days ago
      • 1
      • Reported - view

      Amy Rizzo Rule 1 is to take To Be Budgeted to $0. Make a plan for every dollar. I strongly urge you to not leave funds in TBB.

      You are in the wonderful situation of having what seems like "plenty". However, being deliberate with your plan allows you to optimize things to a very high level. Many users here have very high net worths, but they still embrace the sense of scarcity that leads to meeting/exceeding their savings goals.

      In other words, I feel like what you're doing is "good enough", but there are additional gains to be had if you want them.

      Like 1
  • 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. 

    Good luck!

    Like
  • 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?

    https://www.youneedabudget.com/the-relationship-between-your-budget-your-accounts-its-complicated/

    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.

    Like
      • Amy Rizzo
      • Business Analyst and Wife
      • creeping_shadow
      • 4 days ago
      • 1
      • Reported - view

      Move Light Sound Life I changed the name of my buffer category to prevent confusion for myself.  

      Regarding "savings", I was referring to our savings categories within our budget.  Some of these are separate savings accounts for retirement and some are just regular bank savings.  But all are in anticipation of the wonderful day hopefully less than a decade from now in which we stop this thing called work and start living off of what we've prepared.  So putting money into that - we don't like taking it out again.  We prescribe a certain amount we add each month to ensure solid growth in preparation for that glorious day.  That's why I don't really want to put money in there that I want to use for "extras".  

      Like 1
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