Any benefit to budgeting future months rather than a buffer?
I know Age of Money has been covered at length and I believe I completely understand the concept. But I still don't get why I would actually get rid of my emergency fund category and budget that money for the next several months?
Is it not extra work, where do I budget the latest pay then?
Would it be at the next month that is missing funds allocated to categories? That might be several months down the line if I start budgeting all my of my emergency fund?
It just seems like a lot of work and possible confusion rather then just having a nice fat category called emergency or whatever and then having to budget as per usual when I'm paid.
Am I missing something here?
Thanks to all who offer advice
I agree with you 💯%.
The only piece of advice about budgeting ahead that I would give is for people with more than one major income event per month. And that is to use the Classic YNAB Rule 4 (live on last month's income). In fact the previous version of YNAB4 had functionality where you could assign income either to the current month or the next month. By assigning it all to the next month, it allowed you to get the money out of the way in the current month and then budget next month all in a single pass.
This buffer was administrative, and separate from the emergency funds. The current Rule 4 (Age your money) does not replace it in any actionable or functional way.
To me, that functionality was the genius of YNAB because it made everything more clear. You can still do it in nYNAB, but it requires hacks and workarounds. They should bring back the functionality so that the people who want to continue to use it don't have to develop the workarounds.
I'd like to understand more about this too. Budgeting future months (that I can't see when I glance at this month's view) seems confusing. I have enough trouble figuring out where my money is, spread across all these categories.
For a category like "oil" or "car maintenance", for instance, where clearly I need to let money build up because it is "lumpy", I am keeping unspent funds in this month's category. I assume that when the month rolls over, so will those funds? I have set target goals so I know how much to add each month. In the long run, I'd like enough money in oil to buy the next few tankfuls (basically, I'd be one year ahead, because this is such an unpredictable expense). Ditto with care maintenance.
I also have a "buffer" category, which is just extra money that sits in my checking account. I figure that this could be dispensed to categories for which I forgot to budget, particularly as I'm getting started. Over the long run, I'd like this to be about a month's worth of expenses, so I'm not waiting for the next paycheck to fill the categories.
I realize that I should probably do one or the other of these strategies, not both. However, I like the buffer because I can see at a glance how much extra I have. It's also necessary for operational purposes, since some of the money I have is sitting in other accounts, and while it is available for me to spend, it can't be as easily used to pay bills or credit cards as my primary checking account.
Because I don't trust any of the metrics (Age of Money, or the one the toolkit offers), I'm trying to develop my own goals so that I can know if I'm comfortable with my situation. Mostly these are target amounts for all the categories, which I'm developing as I go. That includes the "buffer", which in my system is just another category.
I don't fully understand this either. My guess is YNAB has given us the freedom to decide how we become buffered. According to my AoM (74 days) I'm officially buffered. But, it isn't sitting in next month, or a buffer category. The categories I want buffered have some extra money in them and my savings categories are growing nicely.
Think I would like to have a specific "buffer" category to put enough money to fully fund the next month but always have a savings place to put any extra income this month. Guess I love watching my savings categories grow more than I want to see a buffer category grow.
In my opinion, t's another choice YNAB allows it's users to make for themselves.
I will budget to next month, but I don't bother budgeting further out than that. I could quite easily budget out three or four months with money on hand. I typically assign the same amount to each category every single month, so that is easy to copy with the quick budget feature. But the problem is that I would have to reassign my emergency funds to do that with actual dollars.
I spend differently when I feel impoverished, and seeing a significantly reduced emergency fund category balance would make me feel vulnerable and put me back in scorched earth mode when it came to spending. So it might result in me saving more. That would be a plus, I suppose. But I'm already a little shy about spending and have a tendency to inflate my anxieties, so I'm glad to be past that phase in my budgeting life.
On the pro side, I have seen posts from people who live on lump-sum income -- commission sales, students, seniors, researchers, teachers on summer break -- and some of them have explained how essential it was to take the lump sum and budget out the months ahead that they want that lump sum to cover. This also helps them to recognize that there is no extra in the large account balance, that it is all needed to cover essentials and basics until the next income is received (months away).
I budget one month in the future and no more. According to what I've seen from the book, Jesse himself now budgets money far in the future but I think that's so much more work than it's worth. With money one month in the future, you have smoothed income events. But beyond that, you're likely just creating extra work.
i am still on classic Ynab4 so don't have Age of money. However, should I switch, I would largely ignore it. I keep my spare buffer money in my emergency fund and some other reserve categories. I don't budget it beyond the next month. I have been doing it this way for 3.5 years and won't change it. As Nolesrule has said below, i just use the Rule 4. I am paid at the end of the month and all of that goes to the next month
I am not a fan of budgeting into the future either. I do admit that though old me, would have wanted to, but now I just want to reduce my workload.
I came from a cashflow style budget where I would have the whole year plotted out and then over type each week with the actuals. It did not work well for me, hence coming across to Ynab.😉
Much more comfortable using goals and the scheduled transactions to top up categories, then using what is left over to top up our emergency fund or a buffer category.
I may change my mind in the future on this.
I'm still "officially" still on YNAB4, just giving nYNAB a test drive.
I too miss rule 4 and how this was implemented in YNAB4. Here's my "workaround":
I created a master category labeled "Income" with a single category labeled "Paycheck". When my paycheck arrives, I go to next month and budget 100% of this paycheck to this category.
When I have all my income for next month, I can move that money OUT of the Paycheck category back into To Be Budgeted and proceed as usual.
I'm still experimenting, so who knows where I'll end up next. But that's what I'm doing for now.
Hope it helps!
I'm not sure if this is right or not, but I'm actually doing both: Having a lump sum of money saved for emergencies (the car broke down, hospital bill, the roof fell off etc.), and then am also aiming to increase my AOM. I'm hoping this means i'm both prepared for the unexpected, and can start building up 6 months expenses that are paid for incase of job loss :).
I’m a freelancer with very irregular income. Projects I’ve billed for can sit in my business’ accounts receivable account for 2 months before I receive payment so my buffer reflects this. I budget-out 3 months ahead (2 months + 1 month “just in case”) directly into the budget categories. To deal with the possibility of inadvertently stealing money from the future I use a widget in the YNAB toolkit to warn me if a transaction is short-changing me in a future month (it shows in red what month I’m short in and by how much). That way I don’t get caught holding the bag before next “pay day”.
Like Beige Banjo said, main reason for budgeting for future months is to figure out how much you need to cover for your consistent, known expenses before the next time you'll receive income.
So, if you're paid regularly, there's not a pressing need for it.
If you get a sudden windfall, consider budgeting to the future with a "maximum timeframe." Any amount past that time, you can dump into a CD, stock, or other "long term off-budget" account -- since you won't need that in the foreseeable future.
I get paid in the middle of the month and have managed to get myself to the position where I don't need this month's paycheque until next month. I guess that puts me two weeks ahead. When my paycheque arrives I budget it all out to next month which then gives me a six week buffer. I then ignore next month until it arrives and live off the money budgeted for this month. I also have an emergency fund, although I am toying with the idea of not having one.
I wish there was a better way to budget for future months. I have a buffer category, it is small and is only meant to cover small overspendings. My emergency savings is separate from YNAB, I track it in YNAB but it is not a budgeted account. However, what would be nice is an easy way to start budgeting more of my money for future use. Ideally, then that emergency fund now becomes obsolete (for a lack of a better word) and can be reallocated to something else. The future income budgeted in YNAB would become my new emergency savings, sort of a cyclic savings and future budgeting that allows for large amounts of cash set aside to be reallocated to something fun or something invested. Right now I allow my categories to grow and swell, which is nice and it increases my AoM so I know I am budgeting for the future. BUT, and that's a big but, sometimes it is easy for the wife and me to see the extra money sitting in those categories and reallocate that money for impulse purchases. Thus defeating the purpose.