Not clear how YNAB is managing the positive balance in my CC

Hello folks! I'm doing some testing to understand how YNAB manages the positive CCs balances. I have read other topics around that explain how it works, but I'm still seeing a strange behavior based on the scenario I'm testing. Below the details:

 

1. For accounts, I'm considering 1 Credit Card Account (CC) and 1 Checking Account (CH). Both are unlinked accounts and both starts on December 15, 2020 with the following balances:

  • CC = 0
  • CH = 10,000

 2. For Budget I'm considering 2 categories (explained below) + the "Credit Card Payments" Category:

  • Incomes/01: This category will be used to represent the job assigned to every money that arrives to the To Be Budgeted (TBB) Category. In a real scenario I have many Income sub-categories for every monthly bill I have to pay like Incomes/Tuition, Incomes/House Rent, Incomes/Car Payment, etc. In other words, I distribute all the TBB money on every Income subcategories, until TBB is equal to 0. This is the mechanism I use to give every money a job
  • Outcomes/01: This category will be used to categorize every expense transaction of my CC and/or CH accounts. In a real scenario I have many sub-categories under Outcomes for the majority of the expenses I have during a month, like: Eating Out, Gas, Shopping, including a sub-category that matches any Income sub-category of my monthly bills.

   3. The way the money flows around my budget categories, based on my logic, is as follows:

  • When a transaction is done in a CC or Checking account, it falls under any of the Outcomes subcategories. And those subcategories will often go negative, and is ok, because I have the money reserved for it under Incomes. Later I move money from an Income sub-category to and Outcome sub-category to zero it. For example, when the Tuition payment arrives to my CC, I categorized that transaction to the Outcomes/Tuition sub-category. And later I cover that spent with the money I budgeted in the Incomes/Tuition sub-category.

Based on the previous explanation, I built the following scenario to understands CCs positive balances:

  • Starting balance in the CH account of $10,000 for December 15, 2020.
  • Starting balance in the CC account of $0 for December 15, 2020.
  • Move money from TBB to Incomes/01 Category
  • Enter a transaction in CC for $3,500 for December 20, 2020 and categorized in Outcomes/01.

  • Transfer $3,500 from CH to CC in December 21, 2020. The previous will cause a positive balance in my CC, will add $500 to TBB and CC Payment column will show an overspent of $3,500 for the CC.

  • Cover the Outcomes/01 category spending with money from Incomes/01 category. And move the $500 from TBB to the CC

  • So far, everything looks good. My CC account shows the $500 positive balance, the CC Payment column is $0 and the Outcomes/01 has been covered.
  • Next is when I don't understand how YBAB manages the positive balances. Add a transaction to the CC with category Outcomes/01 for $100 in December 22, 2020.

  • According to other topics I found, when a CC has a positive balance, like this case that we have +$500 in the CC account, it acts like a checking account. My understanding is that any new transaction that arrives will not move money or have an effect on the CC Payment column because it has a positive balance and it should be showing $0 to pay. But what is happening is that the CC Payment columns shows the a -$100, meaning that I'm overspending and I have to cover that money, which I already did when I moved the $500 from TBB to the CC. If I cover the $100 spending in Outcomes/01 by moving money from Incomes/01 the CC Payment column will be $0 again, but this means I budget extra $100 that should be taken from the $500 that I budgeted directly to the CC from the TBB

Hope my explanation was clear. I appreciate any guidance and advice on what is happening here to understand correctly the way YNAB handles this scenario.

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  • apocalepsis said:
    In a real scenario I have many sub-categories under Outcomes for the majority of the expenses I have during a month, like: Eating Out, Gas, Shopping, including a sub-category that matches any Income sub-category of my monthly bills.

     Why? Have you taken any of the classes on the YNAB method and how the YNAB software works? They're free. 

    I'm not seeing a reason or benefit to your structure/workflow. I just see extra work and categories that don't inform spending decisions. 

    So, why?

    Like 1
    • Move Light Sound Life Thanks for your response! I took the classes and I have been using YNAB for 2 years now and it has been very useful for me. I fully pay my CCs every month and I'm proud to not have any debt. The reason of why I want to understand how positive balances are handled is curiosity because, this year, when I transferred money to my CC, I transferred more by mistake, then I fixed it, but I saw that the money went to the TBB; so that captured my interest. In the real life, I haven't moved more money to my CC than what the monthly statements request.

      I believe I'm following the 4 rules in my methodology but probably I need to give you more context on how I work with my money every month and probably I'm missing something that I need to learn from the experts. So below are more details of a how a month looks like.

      The scenario will be as follows:

      1. ACCOUNTS
        • Credit Card (CC) 
        • Checking Account (CH)
      2. CATEGORIES
        • Income - Group (I apply Rule 1 and Rule 2 every fortnight to give every dolar a job)
          • Person1/Fortnight: This is for budgeting the money that Person1 can spent in a fortnight
          • Person2/Fortnight: This is for budgeting the money that Person2 can spent in a fortnight
          • Emergencies: This is money budgeted for unexpected expenses or to cover overspending in other categories
          • Bills/Tuition: it is a monthly payment but I budget money from the two monthly fortnights. When the charge arrives to my CC, I have the money budgeted in this category
          • Bills/Mortgage: it is a monthly payment but I budget money from the two monthly fortnights. When the charge arrives to my CC, I have the money budgeted in this category
          • Bills/Person1/Cellphone: it is a monthly payment but I budget money from the two monthly fortnights. When the charge arrives to my CC, I have the money budgeted in this category
          • Bills/Person2/Cellphone: it is a monthly payment but I budget money from the two monthly fortnights. When the charge arrives to my CC, I have the money budgeted in this category
          • Vacations: I budget money every fortnight based on the estimation for vacations during the year
          • Savings/Funds: This is money budgeted every fortnight and cannot be touch (is about 10% to 15% of the fortnight payment)
        • Expenses/Person1 - Group (Here I will categorize every expense transaction in my CC or CH of Person1. This expenses will be budgeted, later, with category Person1/Fortnight in Income group. This expenses should not exceed the total budgeted per fortnight in category Person1/Fortnight in the Income category group. If the expenses exceed the money budgeted in Income, then I use money from Emergencies category in Income group to cover that spending.
          • Food/Eating Out: to categorize transactions about expenses in restaurants
          • Food/Groceries: to categorize transactions about expenses regarding groceries
          • Health/Medication: to categorize transactions about expenses in meds
          • Health/Bills: to categorize transactions about expenses in medic, psychologists, etc.
          • Misc/Shopping: to categorize transactions about expenses in shopping
          • Transportation/Gas: to categorize transaction about expenses in car fuel
          • Transportation/Ride-hailing: to categorize transactions about expenses in Uber, Cabify, etc
        • Expenses/Person2 - Group (has the same categories as Expenses/Person1 group) but the money is budgeted from category Person2/Fortnight in Income category group.
        • Expenses/Bills - Group (This categories will map to some of the Incomes categories because are expenses that happen every month)
          • Bills/Tuition: When the charge arrives to my CC, I categorize the transaction using this category. Then I used the Bills/Tuition in Income category to budget this expense and zero it.
          • Bills/Mortgage:  When the charge arrives to my CC, I categorize the transaction using this category. Then I used the Bills/Mortgage in Income category to budget this expense and zero it.
          • Bills/Person1/Cellphone: When the charge arrives to my CC, I categorize the transaction using this category. Then I used the Bills/Person1/Cellphone in Income category to budget this expense and zero it.
          • Bills/Person2/Cellphone: When the charge arrives to my CC, I categorize the transaction using this category. Then I used the Bills/Person2/Cellphone in Income category to budget this expense and zero it.
      3. MONTHLY FLOW
        • I have two fortnights (FNs) in each month. FN1 (1st - 15th) / FN2 (16th - 30th or 31th)
        • I receive my paycheck every fortnight. Let say that the income is $5,000 per fortnight
        • Let's say that I receive the first paycheck fortnight payment on Day 1 of the month. So TBB = $5,000
        • By applying Rule1 & 2, I budgeted that money into the categories of Income group. So, moving the money from TBB ...
          • Person1/Fortnight: $500
          • Person2/Fortnight: $500
          • Emergencies: $700
          • Bills/Tuition: $500
          • Bills/Mortgage: $1,500
          • Bills/Person1/Cellphone: $100
          • Bills/Person2/Cellphone: $50
          • Vacations: $400
          • Savings Funds: $750
        • The expenses started to arrive to my CC and CH during the fortnight period (from 1st to 15th). Each expense is categorize accordingly on any of the categories from the Expenses category group. They are negative and overspent because no money have been budgeted in them.
          • Expenses/Person1 - Group
            • Food/Eating Out: -$70
            • Food/Groceries: -$100
            • Health/Medication: -$30
            • Health/Bills: -$100
            • Misc/Shopping: -$100
            • Transportation/Gas: -$50
            • Transportation/Ride-hailing: -$50
          • Expenses/Person2 - Group
            • Food/Eating Out: -$70
            • Food/Groceries: -$100
            • Health/Medication: -$30
            • Health/Bills: -$100
            • Misc/Shopping: -$200
            • Transportation/Gas: -$50
            • Transportation/Ride-hailing: -$50
          • Expenses/Bills - Group
            • Bills/Tuition: -$500 (The charge arrived in FN1, and we are ready to pay it, because we already have the budget in the income category group. Here I budgeted the entire amount in FN1, because I wanted to show a monthly workflow, but in the reality, $250 should have been budgeted in FN2 from previous month, in order to always budget 50% of the payment every fortnight).
            • Bills/Mortgage:  $0 (The charge has not arrived yet in fortnight 1, but we budgeted half of the expense.)
            • Bills/Person1/Cellphone: -$100 (The charge arrived in FN1, and we are ready to pay it, because we already have the budget in the income category group. Here I budgeted the entire amount in FN1, because I wanted to show a monthly workflow, but in the reality, $25 should have been budgeted in FN2 from previous month, in order to always budget 50% of the payment every fortnight).
            • Bills/Person2/Cellphone: $0 (The charge has not arrived yet in fortnight 1, but we budgeted half of the expense.)
        • Now, I apply Rule 3 to zero all overspent by using the money budgeted in Incomes categories to move it to the expenses categories. After moving money, the categories outputs resulted in:
          • Income - Group
            • Person1/Fortnight: $0
            • Person2/Fortnight: $0
            • Emergencies: $600
            • Bills/Tuition: $0
            • Bills/Mortgage: $1,500
            • Bills/Person1/Cellphone: $0
            • Bills/Person2/Cellphone: $50
            • Vacations: $400
            • Savings Funds: $750
          • Expenses/Person1 - Group (this was budgeted from "Person1/Fortnight")
            • Food/Eating Out: $0
            • Food/Groceries: $0
            • Health/Medication: $0
            • Health/Bills: $0
            • Misc/Shopping: $0
            • Transportation/Gas: $0
            • Transportation/Ride-hailing: $0
          • Expenses/Person2 - Group (this was budgeted from "Person2/Fortnight" and "Emergencies" because Person2 spent $100 more than the Fortnight budget)
            • Food/Eating Out: $0
            • Food/Groceries: $0
            • Health/Medication: $0
            • Health/Bills: $0
            • Misc/Shopping: $0
            • Transportation/Gas: $0
            • Transportation/Ride-hailing: $0
          • Expenses/Bills - Group (these expenses were budgeted from each of their 1:1 mapping from the "Income - Bills/XXX" categories)
            • Bills/Tuition: $0 (took from Bills/Tuition)
            • Bills/Mortgage: $0 (nothing to budget because the expense has not arrived yet)
            • Bills/Person1/Cellphone: $0 (took from Bills/Person1/Cellphone)
            • Bills/Person2/Cellphone: $0 (nothing to budget because the expense has not arrived yet)
        • By this time, the overspent in Expenses have been covered, the money has been budgeted in the CC Payments and everything is in sync.
        • When Fortnight 2 arrives, I repeat the process.

      Why I do it in this way? The reason is because I wanted to have visibility on what each person of the family spends in each fortnight and take decisions. I know I could categorize each expense of the persons in their specific PersonX/Fortnight category from Income, but that will not allow me to do reporting on expenses.

      Hope this can give you more clarity on how my workflow works. Let me know if this is not a best practice or I'm not using the tool correctly but this has helped me so far. And I wanted to know how a positive balance can work in my workflow, in case is need it in the future.

      Like
    • apocalepsis Ok, that does actually make some sense (I don't recommend it for most people). It seems like what I do with food, but on a larger, more comprehensive scale:

      I know I want to spend $400 on food (total), so I fund groceries at that level, with treats/dining out at $0. If I decide during the month that it's worth it to eat out or get something fancy (chocolate, alcohol, ice cream, etc), I'll categorize it to Treats but move the money from groceries. I look at groceries to make the decision based on what's available. 

      It looks like you're trying to do a work around that gives you more specific reports, but ends up complicating the budget. 

      I think a lot of people on here try to make things more streamlined on the budget side and just live with less flexible reports. 

      It's obviously your call.  But, since you're doing a lot of manual moving, you might need to compensate for the automatic things YNAB does (credit/cash overspending conversion, positive CC in conjunction with overspent CC category are confusing to many people with a normal budget). It's good you're asking about them so you can manually do them. 

      Does it make sense about the difference between the effects of a positive CC, an overspent CC category, and credit/cash overspending conversion? You just got lucky 😆 with all three at once. Try experiments that isolate the functions... Have fun!

      Oh, and also consider simplifying your budget side. I've tried mine organized both ways (one that optimizes reports, one that optimizes the budget), and using it focused on the budget workflows is superior, IMO.

      One way to do that is to separate yourself from budgeting with each paycheck by holding income until you can budget the whole of (for instance) March with February's money. 

      I highly recommend learning about using the Buffer/Income for Next Month (INM) workflow to make budgeting and using the budget more powerful. 

      Like
      • Ceeses
      • Ceeses
      • 3 mths ago
      • 1
      • Reported - view

      apocalepsis I can see what you want to achieve but doing it this way you are losing the main advantage of YNAB: spending decisions guidance. How does say Person 1 know if they can spend $X on  Food or if they have already spent their whole allowance? To be able to have this guidance, one would have to cover the overspending in the Outcomes categories each time there is a transaction. I imagine that is not what is happening.

      I would rather use the memo field to keep track of Person 1/ Person 2 split in the spending. You can search on the memo in the All Account window. But maybe ensuring an exact split between the expenses of Person 1 and Person 2 is more important for you than spending guidance that ensures the household will not rely on Emergency funds for non-emergencies by reducing the risk of overspend.

      Like 1
      • MadDog
      • Navy_Blue_Pegasus.2
      • 3 mths ago
      • Reported - view

      apocalepsis I am not understanding why you need to budget to the income group first and then do it a second time to move it all to the expense groups. Why not budget directly to the expense groups? It seems like busy work because at the end of the month the income group is zeroed out so over time, there is no information to be gathered from it. 

      In your example, Person 2 was covered by the Person2/Fortnight AND the emergency amount. How did they know that they could do that? What happens if both persons overspent and there was not enough to move from emergency? It seems like it would be done after the fact rather than the recommended method of checking your category and seeing if there is enough money. In your case, I would have to look at the income group, then add up the Person 2 expense group, subtract to see if there was enough left and then do the same tosee if there was enough anywhere else. If it was all budgeted directly to the expense categories, I can see if there is enough somewhere else before I make a purchase.

      Like
    • Move Light Sound Life Thank you! I will read more about the INM workflow and do testing of a positive CC, overspent CC category and credit/cash overspending conversion, independently to understand all of those effect. But your input really gave me more clear vision and I will also give a try on adjusting my methodology to be more budget oriented rather than report oriented.

      Like 1
    • Ceeses Thanks for your reply! I actually use memos to add metadata that help me find details quick and easy. But I will give a try on using the memo to identify each person expense. Lets see how I can adjust my methodology to your suggestion.

       

      Answering your question: "How does say Person 1 know if they can spend $X on  Food or if they have already spent their whole allowance?" Actually the visibility of how much a person can spend is related to cover all those Expenses (Food, Health, Misc & Transportation) with the budget they have per fortnight". In my example, every fortnight, each person has $500 available to spend and they are responsible to not overspend more of that.

      Like
    • Navy Blue Pegasus Thanks for your perspective Navy. The reason of why not to budget directly the expenses into the incomes is because. By budgeting directly all those expenses, I will not be able to create a report based on expenses because the report will show activity only on the Incomes/PersonX/Fortnight category and that will not tell me how much it was spent in Food, Health, Misc & Transportation.

       

      Answering the other question about, how they know if they can spend more, is based on the Activity column of each expense category in the Expenses/PersonX group.

      Like
  • I suggest you use the tool as designed and recommended. What you're doing is extremely far from that. Once you've given it a fair shake, then branch out if you still feel the need. (I doubt you will.)

    Like 2
    • dakinemaui Thanks for your response! I have posted a reply on Move Light Sound Life 's comment about how a use my workflow in a more real scenario in order to give more visibility and clarity on how I'm using YNAB. If you have a chance to read it and comment it, I will appreciate it.

      Like 1
  • apocalepsis said:
    but this means I budget extra $100 that should be taken from the $500 that I budgeted directly to the CC from the TBB

     No, that "extra" $500 that appeared in TBB needed to go to the CC payment category because you randomly decided to pay more than you had budgeted for the payment. It's not actually extra. It has to fund the CC payment.

    You're seeing two things: a positive card as well as an unbudgeted (that then became budgeted, so again, not extra) payment. 

    Like
  • apocalepsis said:
    Enter a transaction in CC for $3,500 for December 20, 2020 and categorized in Outcomes/01.

    Transfer $3,500 from CH to CC in December 21, 2020. The previous will cause a positive balance in my CC, will add $500 to TBB

    Nope. The CC account balance is -$3500 after the Dec 20 transaction. The transfer on Dec 21 makes the CC account balance $0. Nothing is added to TBB.

    Like
  • apocalepsis said:
    My understanding is that any new transaction that arrives will not move money or have an effect on the CC Payment column because it has a positive balance and it should be showing $0 to pay.

     Sure, if you had money budgeted to your outflow category, like YNAB is intended to be used. 

    However, you're seeing YNAB notice that you overspent a category with both cash and credit, which then prioritizes the cash overspending in that generic outflow representation.  This leaves your CC category short, which puts your CC payment overspent again. 

    Fix the credit overspending in the generic representational category, and the rest will fix itself. 

    Again, this is not a positive credit card issue. This is an unbudgeted/overspent category with mixed cash and credit spending that converted the type.

    Like 1
  • This will fix all your problems:

    1. Inflow money to TBB.

    2. Budget it to functional categories (Rules 1&2). 

    3. Spend from those same categories, ensuring activity is supported by available amounts by looking at categories as/before you spend. 

    4. When the plan changes, move money to support the unplanned activity (Rule 3). 

    Automate using scheduled transactions/goals/INM workflow. 

    I would only use your workflow for wish farm items and medical next year category types (fund next year's now so it's full and useable then, use this year's for transactions).

    Like 2
    • Bottom line: every transaction should be budgeted for, ahead of time. 

      Then, if you happen to have a positive CC balance, the mechanism will work as expected (well, once you think through it).

      Like
  • Move Light Sound Life said:
    this is not a positive credit card issue. This is an unbudgeted/overspent category with mixed cash and credit spending

    ^^ This ^^. Cash spending is prioritized when there's a mix within a given category, and the money's gotta come from somewhere.

    Like 3
  • To answer your question, a positive CC is not managed at all. It's effectively just another checking account holding some of your cash. Consider a CC with $0 balance and $0 Payment Available in the following. Some bottom line facts:

    1. When you make ANY payment to a CC, the CC Payment category is decreased.

    2. The total money in the budget ALWAYS matches cash on hand.

    3. Since your cash on hand has NOT changed with the transfer (positive CC IS cash, right?), that decrease of the Payment category MUST be balanced by an increase somewhere. That somewhere is TBB.

    In practice, the decrease of the  Payment category is usually enough to take it negative, turning red. Nothing related to a positive account going on with that. You sent more than was available!

    Generally speaking, though, red categories should be corrected IMMEDIATELY. Conveniently when the account ALSO goes positive, there are funds in TBB to do that.

    After doing that, the budget looks the same as if you had transferred that money to another checking or savings account; i.e., NO change.

    If you remember a positive CC is just another cash account, you should be able to make sense of everything.

    Like
  • apocalepsis said:
    The reason of why not to budget directly the expenses into the incomes is because. By budgeting directly all those expenses, I will not be able to create a report based on expenses because the report will show activity only on the Incomes/PersonX/Fortnight category and that will not tell me how much it was spent in Food, Health, Misc & Transportation.

     Why not budget directly into the expenses, though? There's not a report available for your income expenses, because you said you're going through TBB. They're literally just a holding category. 

    I mean, unless you're exporting the budgeted column data and creating a report in Excel?

    Reports in YNAB are only based on transactions, not budgeted dollars. 

    Or, maybe you're actually inflowing to the income categories, and not using TBB?

    Like
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