Understanding the AoM, specifically with regards to me.

I would personally like to understand the AoM metric. I have been doing my research about what it is and what it means, starting with this https://www.youneedabudget.com/how-old-is-your-money/ post, and reading a lot of posts on the forums.

What got me thinking about the metric and what it means to me (specifically, how do I interpret it or make sense of it) was this https://support.youneedabudget.com/t/181xs1/age-of-money discussion. Quite obviously, like a lot of people have pointed out, it may mean something different to everyone.

Here is my case. I (re)started YNABing from April 1st (although I have been a long time user from the YNAB3-4 days, but stopped in the middle). As of May 20th, my AoM is 42 days. I am not sure what to make of it. I am budgeted 90% into June currently, but have some credit card debt I incurred previously. Luckily for me, it is all a 0% promotional rate and I don't have to worry till Nov 2019 and July 2020, by which time, each of the respective cards will be paid off.

Given this situation, that I have around 5000 USD of CC debt, what do I make of the AoM metric? I do have around 1200 USD in a EF that I do not touch and close to 15K USD in a Roth and an OBRA (both of which I can liquidate if need be), which technically erases my debt if I wanted to pay it off with those accounts. How do I interpret the AoM? Am I truly ahead, or at least part way there? Is it a false sense of security due to the CC debt that I am paying off? If I turn on the YNAB TK Buffering feature, for the same numbers, it tells me I have -11.3 days of buffering, which is kind of not what you want to see when your AoM says you are 42 days ahead. :D Confusing much?

Please do help me interpret/understand/ignore the metric. And like nolesrule mentioned, it made sense with YNAB4 when I used it back then, since the metric and the method both made sense and were in sync. I am confused right now. :P

 

Todd Ben , your thoughts too please? Since your inputs on the aforementioned thread were very insightful. 

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  • AoM doesn't tell you how far ahead you are, it's an indicator of the age of the money you are spending at this point in time.  As you continue to use YNAB, the "better" the age calculation becomes in terms of data that generates it.  When it says 42 Days, it means that money going out of your budget was earned 42 days ago, not that you are 42 days ahead in your budget.

    AoM can fluctuate based on what the priorities are and when the oldest money in the budget heads out, such as a large purchase you were planning for over a long period of time, the AoM should drop.

    I'm currently funded through June and 50% of July, but AoM is now 38.  We paid off a vacation and country club dues that we have been budgeted for since last year.  TK DoB is at 80 which is closer to the how many days ahead and I question...

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

      mhornak 

      mhornak said:
      I'm currently funded through June and 50% of July,

       Why? Use this month's money to fund June. Use June's money to fund July. Build up an Income Replacement fund. The farther out you budget, the more has to be changed when you need/want to make changes to even a single category nominal amount.

      Reply Like 1
      • mhornak
      • technologist
      • mhornak
      • 6 mths ago
      • Reported - view

      nolesrule  -  I have both.  Funding July with May's income and off-budget accounts for Emergency/Income Replacement.  Since YNAB only lets you go ahead 2 months, any remaining income is either moved off budget or stuffed in future spendings, like Vacations or Home Projects.

      Reply Like
      • jenmas
      • jenmas
      • 6 mths ago
      • Reported - view

      mhornak minor point of order - YNAB will let you go many many months in the future as long as you have something budgeted in the preceding month. If you have $0.01 budgeted in July, you can now budget in August. Want to budget in December? Make sure you have $0.01 in June, July, Aug, Sep, Oct, and Nov. However, as nolesrule mentions, I wouldn't actually do that as it creates too much work to fix any changes.

      Reply Like
      • mhornak
      • technologist
      • mhornak
      • 6 mths ago
      • Reported - view

      jenmas - Now that is something I didn't know, I thought I had read somewhere that the 2 month ahead was a YNAB "restriction/rule".  I wouldn't do that either.  2 months ahead works for me...

      Reply Like
  • All it is is the average age of the money of the last 10 spending transactions. Basically, YNAB figures out based on the amount of money you have at the time of the transaction which income events that spending came from, calculates the date spread and averages the last 10.

    If you do a fresh start, you may have a bunch of cash on hand from previous uses of YNAB, so AOM will continue to grow for awhile because the bulk of your money entered the budget on the date of the Fresh Start.

    I don't think anyone should really bother paying attention to AOM. It really doesn't tell you anything useful. The most useful indicator of budget health is the budget itself.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • Reported - view

      The reason why I don't think people should bother paying attention to it is because it's not actionable. It's a reflection of the past and not a driver of forward behavior.

      Reply Like
      • mhornak
      • technologist
      • mhornak
      • 6 mths ago
      • Reported - view

      nolesrule - Agreed on the actionable part.  My budget tells me where I am and if the plan for the moth is going as, well, planned.

      Reply Like
  • One rule of thumb is to subtract 30 from your AOM if you predominantly pay your bills on credit cards. 

    Reply Like 2
  • mhornak nolesrule jenmas

    Thank you all for your inputs. That makes things a lot easier. Ignore AoM and focus on your budget. As far as my budget goes, I believe I am budgeted into next month, accounting for all purchases this month and my debt paydown. Would that be a good interpretation of "I am doing decently well" on my debt payoff journey?

    I am using Undebtit. My payoff plan is tailored to clearing out one of my cards by November of this year (that is when it's 0% ends) and the other one by March (the 0% ends in July). Is that going to have any effect on my buffering metric? I was able to clearly understand how AoM is calculated with  nolesrule's explanation, but am still a bit confused about the DoB metric from the TK.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • 2
      • Reported - view

      LoaferDude Days of buffering takes your expenses over a certain period of time and calculates your average daily spending. It then divides the amount of money in your budget by the average daily spending to come up with a guestimate of how long your money would last.

      It's not perfect, because it can never calculate your average daily spending to both include large expenditures accurately (it can't account for actual usefulness dates of purchases) and account for inflation. The longer the period, the more expenses are included, but the lower your average would be compared to more recent spending because inflation effects will have less weight.

      It doesn't know that $25k car you bought a year ago will last 10 years so that the daily cost will ultimately be ~$6.85. If the lookback period is 3 months, then it's not included. If the lookback period is 1 year, then it's $68.50/day (until it's been more than a year and it drops out of the averaging). If it's the whole budget period and that was 3.5 years, then it's $19.58.

      Reply Like 2
      • LoaferDude
      • Coral_Cornet.9
      • 6 mths ago
      • Reported - view

      nolesrule Danke schon. Much clearer now. :)

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