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?
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
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:Reply
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
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
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 pockt 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.
I'm sorry to be so clueless about this and I appreciate you sticking with me.
Transfers aren't allowed to have categories (except between off-budget accounts.) When the automatic transfer from checking to an on-budget savings account occurs, when and how do I assign a category?Reply
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