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!

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  • 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.

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  • If you have the money to truly BUDGET months ahead, I don't think there's any problem with that. Just know, you may need to adjust future budgets if something comes up. The problem comes in if you are budgeting ahead of your funds. 

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  • 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.

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      • adriana01
      • adriana01
      • 1 yr ago
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      • Reported - view

      bret yes, if Stealing From the Future wasn't a factor, it would boil down to which motivates you more & has the workflow you prefer. Until then, every conversation on this topic will have multiple people saying "here's the big problem, and while I'm on the subject here's some other annoying things about that workflow"

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      adriana01 and those other things are definitely annoying. You just don't realize it until you spend time with it.

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      • bret
      • bret
      • 1 yr ago
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      adriana01 

      Eh, avoiding the Stealing From the Future issue is really just a matter of effort. Are you willing to be vigilant and constantly review your budget to ensure that all your money is where you intended it?  Future budgeting in general requires more effort, so some people might be OK with that and consider it worthwhile.

      Personally, at the risk of making a sweeping generalization, I think future-budgeting appeals to beginners and those who are used to living paycheck-to-paycheck. It's an easy transition / continuation of what they've always done. You're still in paycheck-to-paycheck mode, but instead of chipping away at next week's bills, you're chipping away at next month's bills (or the month after that!) It couldn't be easier!

      I think a lot of experienced YNAB users eventually prefer a category-based approach because, as your financial situation improves, your perspective changes. The rules of personal finance don't change, but the scale  certainly does. You don't need to focus on individual bills anymore -- you can start looking holistically at entire months and years. You graduate from micro-budgeting to macro-budgeting.

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  • We need a survey option to all users once and a while. This would be as perfect topic. You'd just vote and no fuse or debate. 

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  • For me I don't see that value in budgeting that far out. If I have that much money sitting around it's time to consider increasing savings or if savings is good investing the extra money rather than just budgeting out endlessly into the future.

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