Budgeting for the Future
So I just read a *heated* thread about budgeting for future months. The experienced YNABers said not to budget more than a month in advanced because your financial situation changes often.
It makes sense to account for change, but I thought that budgeting out a few months ahead would be easiest to see how far my money goes. I'm struggling with the idea of a separate fund that is set aside for living expenses. Could someone explain that a little more? Do you use that money later? Or is it more of an emergency fund if something big changes?
I've only been using YNAB for about a month so I'm still trying to figure it all out!
I have a loss of income category. It will cover 6-8 months of reduced but not necessarily bare bones expenses. This is my security blanket because I have been laid off twice in a ten year period. The first time I was lucky - I got a lot of notice and my last day at Job 1 was on Friday and first day at Job 2 was the following Monday. The next time I was laid off (about 3.5 years ago), I was out of work for 6 months before landing some consulting work and then as that finished up, I got a full time job. The ultimate goal is that this money never gets spent and then it just becomes part of my retirement funds.
This money isn't to be touched when my heating bill goes up or I get a parking ticket. I do not have a general emergency fund. I have several thousand for home repair/maintenance, several thousand for car repair/maintenance, my annual medical out of pocket maximum at the beginning of the year. These categories were absolutely expected to be spent. Hopefully not down to zero. But it is expected that things will happen and I am prepared.
If I had budgeted out the rest of the year using my Loss of Income category, I would have to go in to 9 months to update the amount budgeted for Netflix which is going up in the next billing cycle. That's stupid busy work and I'm too lazy to want to do that. Now I just have to update it this month and use the Quick Budget feature in the future to fill the category with amount budgeted last month.
Here's my take:
Budgeting in future months is financially/mathematically equivalent to holding all that money in a single category ("Money for Future Months".) Either way, the money is going to sit and wait in your budget until some future date arrives.
Emotionally/psychologically, imagining specific (future) jobs for that money might be appealing for some people. A generic "Money for Future" bucket might be tempting to steal from, but calling it "Groceries for July" makes the consequences of stealing feel more real. Perhaps that helps you make better decisions -- if so, great!
On the other hand, maintaining detailed future budgets can be rather tedious. YNAB only presents a single month-at-a-time, so you have to navigate back-and-forth constantly. And as others have pointed out, plans are likely to change over time, and that can have cascading effects across months. Finally, the slippery TBB mechanics and the Stealing From the Future issue can trip you up if you're not careful.
Nothing is set in stone. It's very easy to try it out each way for a while and see which you prefer.