Factoring Account Minimum Balances in your budget

Hello all.  A lot of banking institutions penalize you for falling beneath a minimum amount for all account types.  They make their money from fees, right?  However, YNAB wants you to 'give every dollar a job,' including those that are wrapped up by the bank to keep you above a minimum balance, in my case, $100.  How do I tell my budget to ignore the $100 minimum that is being held hostage by my bank? 

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    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 3 mths ago
    • 4
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    Add a category for bank account minimums and budget $100 to it for each account you need to keep $100 in.

    Reply Like 4
  • Most people do exactly what eloquentz suggests at first. But note that eventually, you're going to get to the point where an account minimum seriously will.not.matter and you will be able to delete the category. That's the goal. 

    When I started using YNAB six years and a job change ago, if my checking account had had even a $5 minimum, I would've been in trouble (it didn't). I now have a money market account that has a $10,000 minimum and it's no big deal to keep it above that number., 

    Reply Like 8
  • A "padding" category is a common attempt, but doesn't actually guarantee you won't overdraft if you have multiple deposit accounts as is typical (e.g., checking and savings).

    The location of money in any multi-account scenario is up to you to manage (transferring as needed). If you find that difficult, I suggest you consolidate to a single checking account.

    Reply Like 4
  • Adding to what WordTenor wrote, the reason it becomes easy to stay above the account minimum is Rule-2. When you adhere to rule-2, then at any given moment you should have lots of money saved across various categories for things like "Car Repairs", "Vacations", "Next Years Taxes", "Christmas Shopping", and many more. The sum of all that money should easily satisfy your bank's minimum balance requirement.

    In the unlikely event that all of your various rule-2 expenses become due at the same time -- your car breaks on Christmas, taxes are due, and you had a vacation planned that month! -- then you hopefully had some additional padding in your budget above-and-beyond just your Rule-2 expenses. That's where Rule-4 enters the picture.

    Reply Like 3
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 mths ago
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      bret There used to be a beautiful blog post that explained this with a really cool graph that showed account balance as it looked with Rule 2 and then with Rule 4. I can't find it anymore, more is the pity. But it basically showed how once you have money sitting around, you're doing all your spending on top of the money that's sitting. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • Reported - view

      WordTenor Was it a blog post? I vaguely recall a whiteboard wednesday.

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      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 mths ago
      • 2
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      nolesrule It was. Or it was part of the original support materials. Back when the support materials contained info about personal finance concepts. That was a thing that used to exist. 

      Reply Like 2
    • WordTenor 

      I may be wrong, but I swear that some of the support materials I used to learn YNAB (fall 2018) just aren't there anymore. There's a really good video ("Budgeting When You're Broke" - I think it was a class that had good participants with good questions and got uploaded) that I saved the link for - it's gone. The closest content I can find is from Nick True, but his is twice as long and shows some tricks that aren't the standard company line.

      I took some of the workshops out of curiosity, and they're well done. I can see how someone who's confused would really benefit from that context. However, they're broken down so much that you have to devote 2 hours to see the 4 rules in action, and they still don't really offer the same kind of examples that really helped me - software applications of possible financial scenarios. I appreciated the personal finance info. It seems like they're not trying to step on people's toes/hurt people's feelings by assuming a scenario. As if people can't apply the concept to other situations. If they keep going in this vein, new users will not experience the power of YNAB.

      There was also a Whiteboard Wednesday that had exactly what you described in it. It was one of the first 10 because I didn't have the patience to watch more than that, but I don't see it now.  I don't know if you can edit the title (or video) of an already published video and still show the original date, but I do find it suspect that the WW#4 video is called "Age Your Money". If it was really made 4 years ago, why wasn't it called "Live on Last Month's Income"?

      I know one of the stated company goals for 2019 was to make the onboarding process easier for new users/overhaul the support materials, but I think it's now being taught so simplistically and generally that people can't see how things fit together or why each part of the software works the way it does. If users can't see the purpose clearly, then it won't actually help them much. 

      Or maybe I'm just done with helpful new initiatives and bureaucracy for the day...

      Reply Like 2
      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 3 mths ago
      • 1
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      Move Light Sound Life the Budgeting When You're Broke video was the best! I must have watched it half a dozen times the weekend that I started YNAB. I was so bummed when I discovered they had taken it down. 

      Reply Like 1
    • Hi Vibrant  and Move Light Sound Life !

      We did shuffle a good amount of our support material around (we changed how the material was hosted for a number of reasons). The Budgeting When You're Broke material was renamed to Break the Paycheck to Paycheck Cycle. That video, and the Break the Paycheck to Paycheck Cycle workshop should tackle the same topics from the original material. 

      Sorry for the hassle in finding that information! We made the change so, hopefully, the materials will be easier to find from here on out. :)

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 3 mths ago
      • 3
      • Reported - view

      Faness 

      No offense intended.  The original budgeting while you're broke video with Dave (?) (not sure I remember his name, but he had an English accent, and you could tell from his voice that he was excited about the course material) was a whole  lot better.  This new video has the rehearsed modulated tone of someone doing a guided meditation, and the preamble never ends. OMG! Snore. 

      Reply Like 3
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 mths ago
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      What’s really funny is that at 5:56 the lack of correlation between 30 days AOM and actually budgeting a month ahead is demonstrated clearly. 

      Reply Like 3
    • HappyDance No offense taken! I wasn't sure if that was the video you were looking for or not. Dave is amazing - I'll keep an eye out for the video you mentioned!

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  • Final thought:

    This conversation highlights the fundamental flaw with the "Age of Money" (AOM) metric in YNAB. It's inextricably tied to Rule-2. Just as your bank account balances will rise naturally as you save for True Expenses, your AOM will also rise and easily surpass YNAB's suggested 30-day AOM goal. (Money that's sitting around in a True Expense category is aging, after all.)

    This leads to the (mistaken!) belief that Rule-4 is merely a consequence of following Rule 2; that the money you've set aside for True Expenses is also "buffer" money. But that's a violation of Rule-1 -- the same dollars can't have multiple jobs.

    It's a shame that YNAB broke Rule-4 when they launched the web app.

    Reply Like 9
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • 4
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      bret Kinda wish I could Like that post more than once.

      Reply Like 4
      • dakinemaui
      • dakinemaui
      • 3 mths ago
      • 4
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      bret Getting ahead raises AoM, but a rising AoM doesn't mean you're getting ahead.

      Reply Like 4
      • bret
      • bret
      • 3 mths ago
      • 6
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      dakinemaui 

      That's the pithy version, yeah :)

      I'm mostly irritated that YNAB no longer considers Rule-4 to be actionable. There's no guidance about what a user is supposed to do on the budget screen to follow Rule-4. It just sorta...happens?

      The other rules can each be boiled down to very specific actions that a user should take on the budget screen:

      • Rule 1: Make sure your "TBB" balance is always 0;
      • Rule 2: Make sure your budget includes categories for long-term expenses;
      • Rule 3: If a category is overspent (negative), move money from other categories to restore it to 0;
      • Rule 4: ?????

      This quote straight from the docs really says it all: https://docs.youneedabudget.com/article/1137-age-your-money

      With these three rules and habits firmly in place, your money will age all by itself. 

      What a cop-out. Rule-4 used to describe an actionable budgeting behavior -- something users should do in their budgets, apart from the things they're already doing when following Rule 1-3. It wasn't something that just happened  "all by itself."

      Honestly, YNAB should just get rid of Rule-4 at this point.

      Reply Like 6
      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 3 mths ago
      • 3
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      bret Rule 4 should be: And don't f*** it all up.

      Reply Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 3 mths ago
      • 1
      • Reported - view

      Annieland 

      That should have come with a warning to not be sipping hot coffee when reading. After cleaning off the coffee, I'm 😄 ....still chuckling.

      Reply Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
      • 4
      • Reported - view

      bret I'll make it actionable.

      Rule 4: If you have a credit card payment category with a positive balance, move it to a spending category.

      That should grow your AOM.

      Reply Like 4
      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 3 mths ago
      • 2
      • Reported - view

      HappyDance Heh sorry.  Glad I didn't get flagged or something.  I'm trying really hard to balance my marginally helpful participation on the board with what I really think :).

      Reply Like 2
      • dakinemaui
      • dakinemaui
      • 3 mths ago
      • 1
      • Reported - view

      nolesrule Guaranteed

      Reply Like 1
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 3 mths ago
      • 3
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      bret The funny thing is that the support materials still indicate the "pay for this month with last month's money" in the diagrams they draw (I went on a mad hunt looking for that blog post I wanted to post above and didn't find it). But there's no longer any advice about how to do that or what it means. 

      https://www.youneedabudget.com/the-four-rules/

      The original version that shipped out to the alpha testers didn't even have AoM. When I look back on that alpha test, all the problems that still plague the system were there. Basically everything that makes sense was present in the alpha version, with the exception that the alpha version had SFTF. Everything that is crazy and seems like a half-baked idea was added between the alpha ship and the soft launch. If they'd launched this app in January 2017 instead of January 2016, I have no doubt it would be a much better app. But now, to make a major change to the software means walking back all the rhetoric about why the buggy version is the best thing since sliced bread. 

      Reply Like 3
      • bret
      • bret
      • 3 mths ago
      • Reported - view

      nolesrule 

      You jest, but a reasonable Rule-4 action might be:

      • A new month should be fully budgeted on the first day of that month;

      The tricky thing is that (unlike Rule 1-3) some users may not be able to put that into practice right away. They need to have some savings first.

      So you'd also need to define some "sub-rules" with specific steps a user should follow to attain those savings. And you might even have some supporting app mechanics to help users along in that journey.

      Instead, YNAB essentially says, "f*** it" and suggests that Rule-4 is simply a no-op.

      Reply Like
      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 3 mths ago
      • Reported - view

      bret Isn't this just "classic" YNAB Rule 4: Live on Last Month's Income - ?

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      • Ceeses
      • Ceeses
      • 3 mths ago
      • 4
      • Reported - view

      WordTenor Well, I followed the link you shared to the four rules and had a look at this, that is shared with the Rule 4:
      https://www.youneedabudget.com/the-magic-of-getting-a-month-ahead-how-to-do-it/

      In there, there is this quote:

      Follow YNAB’s method, and you’ll naturally begin to age your money with the first three rules. By zeroing in on your true financial priorities and giving every dollar a job (that’s Rule One), you’ll consistently spend less than you earn.

      How untrue! If the jobs of my dollars are all about surviving and paying my bills and none of them are about long-term savings, I do not spend less than I earn! I just spend what I earn. So it won't create debt but it will not allow me to plan ahead. 

      I guess they are counting on the fact when people see the plan laid out, everybody will want to include some slack "just in case". But this is still not getting people ahead, because this money has a job called "just in case.." and not called "getting ahead". 

      Sorry definitely not related to the initial query at all.  

      Reply Like 4
    • Ceeses It makes me wish I had copied all the support materials I used last year... I feel like they're being edited out from under me, and it's simply not helpful for the 5 people IRL who I'm trying to help use YNAB (not even for a free month - they've all expired because they couldn't see how it would work soon enough - just because I think it would be good for them).

      As a side note, I think that this discussion has more relevance to the OP's situation than the new Rule 4 has to using YNAB well. At least this discussion explores details of how using Rule 2 (and both Rule 4s) typically affects cash flow, which is the fundamental issue here.

      Reply Like
      • bret
      • bret
      • 3 mths ago
      • 1
      • Reported - view

      Vibrant 

      "Live on last month's income" was problematic because some people don't earn regular income. You literally can't live on last month's income if you didn't earn any income in the last month!

      My suggested Rule-4 is a slight tweak intended to work for a broader audience; budget (not "live") using income earned prior to the start of the month (but not necessarily "last" month!)

      It's still not perfect -- you'll still have people who receive paychecks on the 30th/31st questioning whether they're already "Rule-4 compliant" just by virtue of their pay-schedule. Obviously if you're relying on a paycheck earned on the 31st to pay a bill that's due on the 1st, you don't have much financial security. (What if that paycheck doesn't arrive?!?)

      But the thing about Rule-4 (at least in YNAB 4) is that it was only partly about financial security. The real benefit (IMO) was that it breaks the link between your income and expense streams. You stop worrying about when your next paycheck will arrive and how you're going to use it -- aka budgeting paycheck-to-paycheck -- and you start focusing on the bigger picture trends and longer term goals.

      YNAB beginners (or those with tight finances) are taught to budget paycheck-to-paycheck. "What things do I need this money to cover until I'm paid again?" That's a fine approach when you're just starting out, but as you build wealth it quickly becomes too constraining; the focus is too narrow. Should I apply tomorrow's paycheck toward December's bills? It's not useful to concern myself with that kind of detail 5+ months in advance. It's a distraction from the bigger picture.

      YNAB no longer promotes that version of Rule-4 and instead encourages users to budget paycheck-to-paycheck forever, further and further into the future. Many veteran YNAB-4 users -- and anyone who craves that bigger-picture perspective -- find that untenable and have found ways to recreate the old Rule-4 workflows.

      Reply Like 1
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