Goals lure people in the wrong direction
Goals are getting more sophisticated over time. You can now create a yearly spending goal with a target date and a repeat option. You need a flow chart (https://youtu.be/lBgF42p2Td0?t=624) to determine which one to use.
On the forums I see new users working hours to enter all their goals. Car payments are monthly, by which date do we want to buy a new car, when does this or that subscription renew?
What that means is that they're spending their YNAB time trying to predict the future. When their salary arrives, it's all taken by goals. Instead of giving all their dollars a job, it's just "Quick Budget: Underfunded".
What can be done to make goals less distracting?
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Of course they are trying to predict the future. That's exactly what the budget is -- a plan for future spending. Goals are simply the plan for making the plan.
It makes a lot of sense to avoid doing this from scratch every time income arrives. As long as income and priorities have not changed, allocations should not change. (Priorities also encompass scope/amount and timeline.) So yes, Underfunded is a time saver, reduces the chance of forgetting something, and eliminates typing errors.
In a simpler time, people put the nominal funding amount per month (or per check) in the category name for reference. (Many still do.) For non-monthly expenses, they would divide the remaining funds needed by the months before the outflow. When they were paid, they went down the list allocating funds according to their notes. Goals merely avoid those manual steps.
Where i think things can break down is some people don't realize priorities DO change over time. That means goals should be updated as well. Being fixated on a yearly target can be a bad thing when that target becomes obsolete. That GUESS was hopefully based on all information available back then, but when new information arrives it would be folly to not consider that.
We revise plans all the time in other aspects of our life. For example, you planned to go on a picnic, but it rains on that particular day. Do you continue on with Plan A and sit in the rain? Of course not! It escapes me why some become locked into Plan A in the budget in spite of new information that contradicts that. ) I suspect it's a hold over from traditional budgeting practices.)
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dakinemaui People who use goals no longer prioritize when they assign dollars. They just move dollars into a template. They don’t use rule 1.
Goals allow you to pretend you have dollars that you don’t own. You can make a goal for a 10k car in May, or a large wedding, or monthly expenses you can’t afford. This encourages fantasizing.
YNAB works best when you think about the dollars you have.
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Wessel said:
They don’t use rule 1.They use Rule 1 --- or should, at least -- to define the template not to exceed expected income. Yes, Rule 1 is phrased rather simplistically for easier understanding, but the fundamental principle is to make a feasible plan. Since goals are the "plan to create the plan" (when income arrives), that should logically be feasible as well.
Wessel said:
Goals allow you to pretend you have dollars that you don’t own.So does taking TBB negative. It's always been on the user to make a feasible plan.
It may be true that a subset of "they" don't use rule 1, but I don't think that's because Goals exist. They're simply misusing the tool. Lots of people did that exact same thing in prior versions that didn't have Goals.
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dakinemaui Coming from other budgets like Mint, you expect to conjure up lots of numbers at the start of the month. Then you force yourself to stick to the conjured up numbers. So when they enter YNAB they are looking for planning tools. They see Goals and jump on them, and now they're stuck in Mint budget mode.
It is quite a jump from Mint to Rule #1. The presence of goals makes this jump harder.
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Wessel said:
The presence of goals makes this jump harder.Can't argue with that. Being one level of abstraction further away tends to obscure things.
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Wessel said:
What can be done to make goals less distracting?What are they distracting you (or others) from doing?
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Wessel said:
I see new users working hours to enter all their goalsBefore goals, people spent hours figuring out where their money needed to go, how much each thing would take, and then trying to deal with the constraint of a fixed income.
Understanding priorities is the hard part and the time-suck. Goals haven't changed that much.
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dakinemaui dakinemaui I think the problem is there's just too much focus on goals to the detriment of deciding on actual priorities. Too many people focus on goals as the way of creating an ideal budget and then have emotional reactions when they are unable to meet goals. It becomes a distraction.
We've seen it happen over and over. I believe it was WordTenor who called out that goals take too much of a priority during the onboarding process and in getting started. I have no idea if that has since changed. But all too often there is a question of what to do about the yellow category, as if there is something that needs to be done.
Are goals a budget template or not? What happens when the budget template or goal is not realistic relative to income? How do different personality types respond and react to this warning? And lastly, what's the obsession with goal types that are designed to keep you paycheck to paycheck rather than encouraging you to break the cycle?
I have exactly one goal set up in my budget, and it's for my HSA reimbursement category so it reminds me when I still have an outstanding reimbursement. -
dakinemaui I can see the drawback of immediately starting YNAB with goals. I think there is a benefit to doing the manual process first - just giving dollars jobs and interacting with YNAB the software and method.
Then, after the user is starting to understand how to apply the method to their finances, and they can also navigate around the software, then you bring in work-saving techniques.
Otherwise, it can be too much at once. Isolate the skills and add them as ready.
Unfortunately, people I've given crash courses to start YNAB (SFTF, goals, INM, reimbursements, reports, PIF CC) need more long term help than the people who might not set up everything exactly correctly, but they instead focus on a solid understanding/application of the method.
It could be personality, but the latter group have required less ongoing teaching - I just walk them through the new thing they need to know, and they get it because they were ready for it.
The former group, however, needs a lot more explanation because they had extraneous info to start with. Like I said, though, it could be personality. I don't have a large sample size.
*I can, however, attest to this pedagogical reality in my classroom. I have a large sample size there.
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nolesrule Agreed, a Goal should not be the focus. Great automation of repetitive tasks/thoughts, but many things are likely NOT to be very repetitive in a brand new budget. I have definitely seen it freeze some new users:
User: I can't get the goal to give me the right answer.
Me: Goals are very simplistic and aren't appropriate for this situation. Just type in the number you need!
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Wessel said:
Instead of giving all their dollars a job, it's just "Quick Budget: UnderfundedThis is not inherently bad. I don't use goals, but when I budget, I use Quick Budget: Budgeted Last Month because I budget the exact same amount each month to the vast majority of my categories. How is that not giving my dollars a job?
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jenmas so I'm assuming you don't do much rolling with the punches? Wouldn't that affect the budgeted amount, and carry forward to the next month?
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Bruce nope not much reallocation on a day to day basis. I got paid yesterday and budgeted all of December using quick budget. At the end of November I will sweep some categories down to zero (groceries, restaurants, gas). I'll adjust some categories that were hitting their cap (ex if a category has a cap of $300, I'll adjust in November so the available balance is $250 so the $50/mo that I budget can stay unchanged in December). All those swept funds get assigned to certain categories: Extra donations, extra investments, kitchen remodel, "thing that I'm saving for" (currently a sofa bed), getting 1 year ahead on IRA contribution, based on a formula I've developed.
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jenmas Giving all your dollars a job means weighing all your options. When you move money from TBB to a category you are prioritizing.
Some dollars are already committed. Like car maintenance. Goals are useful for those “true expenses”.
If you just copy from last month, why do you even budget? How is that different from going on auto pilot?
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Wessel I think there comes a point where autopilot is okay, but it's probably not during the first 1-2 years of using YNAB, because I think it takes that long to really get a grasp on your expenses.
I'm on autopilot with the exception of about half a dozen categories which use formulas that goals do not provide. Autopilot has allowed us to avoid lifestyle creep with income increases. -
Wessel I'm probably just in a different place in my financial journey than you. I am not attempting to pay off debt (I have a mortgage but have no interest in paying it off early) or reduce my expenses. I live below my means while achieving my financial goals for retirement savings and also having fun in the now (well as much fun as one can have during a global pandemic). My income and expenses are steady. There is simply no need to have priorities that swing wildly from month to month.
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Wessel said:
You need a flow chart (https://youtu.be/lBgF42p2Td0?t=624) to determine which one to use.🤣That was too funny.
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Goals are a mixed bag. In general, I like them as a template for many of my categories but you don't need one on every category as YNAB seems to teach. Also, they don't currently work really well with Rule 3, Roll with the Punches since they sometimes nag you when you intentionally follow the rule.
I use them on all my major known expenses/categories but intentionally don't have them on the rest of my categories. I don't have enough to fund every category every month nor do I want to. I like the process of using Underfunded to do my budgeting each month in one fell swoop but then also enjoy the process of making a quick audit of all categories and budgeting the remaining funds as preferred that month. Each month can be very different from the previous one on these non-goal categories. Some are already at capacity and some, like Vacation, get a lot more love on surplus months.
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Wessel said:
People who use goals no longer prioritize when they assign dollarsI think just the opposite. It is a priority that I save for a new furnace, roof, car etc. It is also important that I budget enough for dog food and doctor visits, therefore I have goals for each. If I did not have goals especially for the further out items there would always be a "priority" that took precedence and in 10 years I would not be happy with myself. Looking at my budget now, I have goals for just shy of 1/3 of my categories.
Initially I wrote the dollar amount in the category name and that worked fine, but I think it's faster to use the goals. The flow chart is funny, and agreed there are so many goals it's confusing. I just stick with the basic monthly goal it serves its purpose (for me).
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Wessel I think what happens it that new users watch too many videos and read too many forums and get confused. YNAB (and budgeting) are an evolutionary process and not everyone starts at the same place. Some people don't have enough income to cover their essential expenses, some people have more than enough income but don't have any method to manage where they spend it, some people are in lots of debt, etc. Between Nick True, FaceBook, these forums, and a quest for the "perfect" budget, new people get overwhelmed. When starting out, budgeting can be done on a piece of paper (ala Dave Ramsey) - write the income at the top and write down what that money needs to do in priority of need and timing. For recurring things, I recommend scheduled transactions as that will prompt you to not forget that you need to have enough money in the bank to cover the rent/mortgage. Goals can be used in different ways. True expenses for helping with setting aside small amounts each month. Plans/dreams/goals are things that don't HAVE to be funded but you have chosen to fund them. By setting them up in YNAB once you have the month to month set up, the quick budget by goals is awesome. Because most months for most people are very similar month to month. I have the luxury now to know that my essentials are covered and I have prioritized my spending for future things. Goals help me keep those in focus so I don't get distracted by shiny sparkly things in the moment. Do my goals change? absolutely! My Germany trip was cancelled for May 2020 and doesn't appear to be happening anytime soon. So in light of new information I was able to adjust my priorities. I took a look at the money I had set aside for the trip and redistributed to more current goals and reset the goal target dates for the trip. Also when I do the quick budget by select all - underfunded, I don't have enough in that pay to cover everything so I back off the goals that aren't as urgent or pressing to make sure I stay within the money I have. Jesse did a podcast about burning the budget to the ground periodically (annually) to reexamine the assumptions that were made when setting up the budget. Once you have some history and have accounted for every possible known upcoming expense, there is really no need to reexamine it every single time you budget. Unless the facts change (pandemic, job loss, big bonus, etc.) then there is no reason each budget session needs to be a rehash of priorities.
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MXMOM yep, I evaluate priorities *throughout* the month. When budgeting at the beginning of the month, the template has already been updated if necessary. That's my version of auto-pilot. At that point, allocation is basically a formality, assuming the amount is as expected.
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Superbone said:
theysometimesalways nag you when you intentionally follow the rule [3].There, fixed it for ya. 😉
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dakinemaui You think we'll ever have a template goal type to fix that? It seems like a simple checkbox added to the existing goal types would do the trick:
[X] Rule 3 Eligible
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Superbone Honestly, no. I realize I'm a bit jaded after so many years, but they won't even add a text control to the gui to warn funds are double-booked across screens or summarize current-month overspending.
They increase support staff instead of fixing the issues that prompt support requests.
So no, I don't see Rule 3-compatible goals, though I would be ecstatic to be wrong.
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