Savings account on-budget or tracking?

I read in a thread somewhere here that YNAB staff advised someone to move his savings account to ON BUDGET, where he had had it as a tracking account. When I set up my structure, following that advice, I set up one of my savings accounts as on budget.

I couldn't understand why the inspector panel kept telling me I had a lot more $$ available to budget than I thought I did. I finally realized it was including the savings balance. I do not budget from savings: only from checking.

Is there a way to "turn off" the savings balance in an on-budget account, so those $$ don't show as available? I just moved that savings to a tracking account, so that misleading total available (in my case) is now correct, but I wonder why the advice given to someone else was to move the savings to on budget.

For me, doesn't it make sense to keep that account as a tracking (off-budget) account, since I don't want to include its balance in my available? What am I missing out by not having it be on budget?

Thanks.

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  • Any on budget account is counted towards your budget.

    What you are missing is the clarity that can come with assigning a job to every liquid dollar (ie that's why IRAs and 401(k)s are recommended to be tracking accounts because they aren't liquid and easily accessible). What is that money for? Is it your loss of income pot? Your medical emergency pot? Then assign those dollars to those categories. But don't tie yourself in knots making sure that the balance in your savings account equals the balance in a specific grouping of categories.

    I have 3 savings accounts on budget and each and every dollar has a job. I certainly don't "spend" from my savings account. But I may move money out of it. For example - I'm replacing my HVAC. I've had the money saved up for months but don't plan to do the replacement until March. Now is all that money in my savings account? I honestly couldn't tell you. I have 3 checking accounts and 3 savings accounts. I will put 100% of the cost of the HVAC replacement on my credit card. And sometime after the statement closes, but before payment is due, I'll likely move some funds out of the savings account so that I can pay the credit card bill. But I doubt that 100% of the cost will come out of my savings account as I should be able to have most of it already in my checking account by not sending any money from my February paychecks to one of the savings accounts like I usually do. None of the individual balances on any of my accounts equal any set of categories because the location of my money has absolutely nothing to do with the purpose of my money. It's not like the $20 in my wallet has "2pm Diet Coke Emergency" written on it in Sharpie even though it is likely that's where some of it will go. But it could go on my credit card if I happen to do a CVS run tomorrow at lunch. Some time this week, I'll break that $20 and use $5 as a tip when I get a pedi I think, but can't guarantee. And the budget doesn't care!

    Reply Like 4
    • jenmas I found this post after a search. Similar to my post on the old YNAB forum. This sounds like a complicated approach. IF, when you go to pay any bill (for example, the credit card bill to pay for your new HVAC) you transfer cash from Savings to Checking, THEN spend it (and categorize the transaction accordingly) WHY is it so important that the Savings account be on-budget?

      Reply Like
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 yr ago
      • 5
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      Sea Green Hammer Because usually you don't. The idea that you have to is still based on the assumption of trying accounts to categories. Sure for something like an HVAC replacement, you might need to make a transfer, because that's loads of money. (Though note that jenmas is pointing out that she probably won't have to do that, simply by ensuring that funds build up  in checking ahead of the purchase.) But say I just want to spend $80 from my car repair savings category to get my oil changed and my tires rotated. Because I'm not trying accounts to categories, I just pay it from checking. If I add up all the money in all my accounts, it has now gone down by $80, but it doesn't actually matter which account took that hit. 

      It really does take a moment to understand the idea of not tying accounts to categories. But it is so worth it to make the effort to understand for both simplicity's sake and for the benefit to interest earning. 

      Reply Like 5
    • WordTenor Then why not just have one account? With two accounts, a Savings and Checking account, there is the added hassle of moving money from Savings to Checking. It seems to defeat the purpose of having a Savings account, which by nature is designed to sequester money from your regular working account. In my mind, the Savings "account" is designed to be a place where money is stored (not unlike an investment account).

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      • jenmas
      • jenmas
      • 1 yr ago
      • 6
      • Reported - view

      Sea Green Hammer I make about $60/month on interest in my savings accounts. Giving up $720/year to simplify down to one account is not the right fit for me. It might be the right fit for you. Also, my money is scattered across multiple banks for security reasons. I travel all over the world for work and have to use ATMs that are potentially shady. If a criminal cleans out Account A, I like knowing that I have immediate access to uncompromised Account B at a different institution.

      Reply Like 6
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 yr ago
      • 1
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       In my mind, the Savings "account" is designed to be a place where money is stored (not unlike an investment account).

      I understand that in your mind, that's what a Savings account is for. What we are saying is that there is a big benefit to changing the way you are thinking about this. When you use YNAB, Savings accounts cease being for sequestering money; you instead have them for the benefits of the account (security, interest). If you don't need those benefits, then you are absolutely correct that one only needs one account, because your categories sequester the money for you.

      Reply Like 1
    • WordTenor  Duh! Your explanation did it. Thank you so much. I FINALLY get the concept. I kept seeing all my savings account monies in the "to be budgeted." Was totally confused. Now I get it! Ah, time for a glass of wine ...

      Reply Like 2
  • You should budget your savings because Rule 1 is to give every follar a job, and Rule 2 is to Embrace your true Expenses.  What Rule 2 means is to break down your non-immediate expenses, the money you wouldn't necessarily keep in a checking account, and budget the money into categories.

    If you keep those accounts off-budget, then moving money to the savings account looks like spending in your budget. And then to actually spend it, you'll have to bring the money back into your budget when you transfer it to the checking account (another category) and then another category when you actually spend it. Moving the money back and forth becomes a budgeting/categorizing/reporting nightmare.

    But when all of the accounts are on budget, the transfers between accounts have no categories. It's just like moving a $5 bill from your left pocket to your right pocket... it doesn't matter what you plan to do with the money.

    You should read this:

    The Relationship Between Your Budget & Your Accounts: It’s Complicated

    Reply Like 1
  • If you 100% didn't want to budget the amount in your savings account, you should leave it in tracking. However, it was and is recommended that you put your savings account in the budget group because the method teaches giving  dollars a job and PURPOSE. Saving is good. Saving with a purpose is better. It doesn't matter if the savings are for a new big purchase or if you don't intend to spend it, you should assign it a job.

    If you don't know what it is you're saving for, then might I suggest giving that some thought? By the way, Buffer, Emergency Fund, and other rainy day funds ( as they used to be called ) are all examples of budgeting categories that you would assign dollars to that you didn't really spend out of frequently (hopefully!). So, it remains valid that they can be on budget and not meant to be spent.

    Hope this helps! :)

    Reply Like 1
  • Thanks, everyone, for the feedback. I'll transfer the account to on-budget for now, but seriously: How do I assign a job to dollars that have no job? What has become evident here is that I think of this savings account as an emergency fund -- DO NOT TOUCH THIS, JOE -- and having it out of the way, rather than still sitting in a visible account whose balance is lumped in with my available spending cash, is contrary to what I see as its "job."

    I'll give it a try and see if it works for me. Reading some of your replies makes me realize my situation is much less complicated than yours. I have never tied myself in knots over this: it's been easier than what has been described.

    Anyway, thanks again.

    Reply Like
      • eloquentz
      • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
      • eloquentz
      • 1 yr ago
      • Reported - view

      JoeDid Except that the dollars DO have a purpose.  It is your "emergency fund".  What circumstances allow you to draw on those funds?  Is it job loss?  Sudden house repairs?  It's great that you've moved them to a less accessible place, but the dollars still need a job, even if that job is hopefully to never happen.

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      • JoeDid
      • Remember: It is To Laugh
      • Purple_rain
      • 1 yr ago
      • Reported - view

      eloquentz As I said, I am now thinking of it as an emergency fund. Not for job loss (I'm retired, with a guaranteed income for life); I rent: landlord pays water, heat and air, fixes whatever breaks, replaces appliances, etc.; I live in a major urban area where a car is a liability, so I sold that 25 years ago; my health insurance covers every penny of my medical needs, for any meds and for any unexpected medical expense.

      The major problem I have with a category rather than a transfer to an account is that I can't assign a category to a transfer. If I merely assign the $ to a category, that category builds but my savings account (a real asset) does not show the incremental monthly increases. That makes it impossible to reconcile the account with the bank, which I do every month.

      How would I show that account balance growing unless I transfer the funds? And if I transfer the funds, how to I assign an Emergency category? As an off-budget account, I can assign a category; on budget I can't.

      All I can come up with for a "job" for these funds is UNKNOWN.

      More I'm thinking about this, more I realize that in my case, off budget makes the most sense. Thanks for making me think about it again. 🙂

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 2
      • Reported - view

      JoeDid 

      JoeDid said:
      The major problem I have with a category rather than a transfer to an account is that I can't assign a category to a transfer. If I merely assign the $ to a category, that category builds but my savings account (a real asset) does not show the incremental monthly increases. That makes it impossible to reconcile the account with the bank, which I do every month.

       That's not a problem. You just aren't separating the purpose from the location in your mind.

      You will still need to create the transfer transactions in your accounts so the account balances match reality. That needs to happen regardless of whether the transfer has a category assigned or not. That goes back to my analogy of moving a $5 bill from your left pocket to your right pocket. What you plan to do with the money doesn't change, just where it's located.

       

      But the other reality is that the money has a reason for being in the savings account. Figure out what it's for. It doesn't seem like you have much use of an emergency fund, so maybe you don't even need it. If you don't need it, why is it sitting in a savings account and not working for you? Figure out the purpose of the money and all will become clear.

      Reply Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view
      JoeDid said:
      When the automatic transfer from checking to an on-budget savings account occurs, when and how do I assign a category?

       You don't. Money is "saved" in YNAB by assigning To Be Budgeted money to a category and then not spending it. The account the money it is in doesn't matter.

      Did you read the blog post I linked to earlier?

      The Relationship Between Your Budget & Your Accounts: It’s Complicated

      Reply Like
      • JoeDid
      • Remember: It is To Laugh
      • Purple_rain
      • 1 yr ago
      • 2
      • Reported - view

      nolesrule Thank you! The light finally lit up. I see that the funds entering my checking account go to TBB from which I assign X to the Savings category. After that, I transfer X to the Savings account (no category allowed, but it has already been taken care of.)

      Wow. Hey, don't get old. Things don't sink in as fast as they used to.

      I did read the post you linked to and I get the right/left pocket analogy. To me, that's the same as right pocket=checking; left pocket=savings/buffer/emerg. whatever. Looking forward to the value of this savings category,

      Anyway it makes sense now.

      Thanks again.

      Reply Like 2
  • How do I make my savings account off budget..? Where do I click on the budget screen? I can't figure out how to do this

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      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 yr ago
      • 3
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      Maroon Drum Good! Don't make your savings off-budget. :) 

      Reply Like 3
      • JoeDid
      • Remember: It is To Laugh
      • Purple_rain
      • 1 yr ago
      • 3
      • Reported - view

      Maroon Drum Hey, Maroon, 🙂 this is probably the wrong thread in which to ask that question, given that the consensus here (to which I now adhere) is that savings accounts should be on budget. It took me a while to understand why savings should be on budget, but now that I get it, I switched them back on budget.

      Reply Like 3
  • This is a really helpful thread. But I'm still trying to figure out the status of the $1,000 in my savings account right now. I put it there as my emergency fund and didn't think it was being factored into my budget. How do I reckon that $1000 as emergency fund within my budget now that I'm in the middle of a month and not starting out? Can I somehow set $1000 as the goal for that budget category and say that it has been filled? Or do I budget $1000 for it this month and then it'll just stay there forever until I use it?

    Reply Like
    • Hi BrooklynBoy !

      It's the latter. :)

      I don't see one in your screenshot, but if you have an Emergency Fund category move money from your other categories to get that $1,000 total. That $1,000 will sit in your Emergency Fund until the day comes when you need it. :)

      Reply Like 1
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