Budgeting Per Paycheck
So I usually budget on paper, and I separate it per pay period. My husband I both get paid biweekly. So for example I would pay our first of the month bills with the first paychecks, and the second half of the month with our second paychecks. I would write out what needed to be paid each period.
How can I do this with YNAB? If I separate my bills between Paycheck 1 and Paycheck 2 it shows a very large negative account. How can I budget for FUTURE things, without it reflecting out of my current balance?
Do I just need to leave Paycheck 2 items at $0 til I'm ready to pay them?
Violet Ink said:
How can I budget for FUTURE things, without it reflecting out of my current balance?
You can set up goals for future expenses. Here's an article about setting up a budget template.
Also, there's an example of budget categories set up for two paychecks in a month in this article. It may be helpful to set up your budget in a similar way, if it's not already.
I feel the best solution is to get ahead enough so you don't need your income for expenses in that same month. When that is true, when you are actually paid during the month is immaterial. You can accumulate your income in a holding category throughout the month, then release it at the end of the month to budget ALL of next month in one fell swoop. (You shouldn't leave TBB nonzero for a number of reasons.)
Some people use startup capital to do enable that transition. Others use some of their Emergency Fund. (It's easily reallocated back IF there was an emergency, but until then, the simplified process is invaluable.) Others have gradually gotten ahead over time. (The occasional 3rd paycheck on a bi-weekly pay schedule is frequently applied toward this.)
Regardless, though, I don't know of ANYONE who has reached this point that has said, "Nah, not worth it. I'll go back to budgeting piece-meal with every single income event."
So the answer is that you don't.
The key to wrapping your mind around this is to remember that YNAB is a look at exactly what you have, not a projection of what's going to happen.
And while you aren't supposed to count on dollars that you don't have yet, you can at least with some confidence count on the next pay check that is coming. And in the beginning you sort of have to to a certain extent until you get things organized a little better to be prepared for what is further out.
So take the funds that you have right now, and budget them ONLY for the items that will be due between now and the next pay day. Then, if there are funds left over, start working through the list of the next due things, etc.
I would suggest that you not worry about budgeting for any outstanding credit card debt, unless you are SURE you are not riding the credit card float. You can look that up if you're unsure, there's LOTS of information on that out there. Focus on the important bills first - mortgage/rent, power, utilities, car payments, internet/TV, phones, and don't forget things like groceries and gas, or other consumables that need to be purchased frequently.
It is also helpful to put the due date of each bill in the title (ex: Power Bill, 25th), and then organize them in order they are due to help make it easier to know what is the next most important thing on the list.
So cover what's important between now and the next pay day, and then focus on whatever is left after that. In the beginning it is bumpy because you have no idea how much your averages are for things that fluctuate, like groceries and gas, and even the power bill month to month. But a few months in you'll start to see trends and patterns and that makes it easier.
We have the same situation here. We came from the Dave Ramsey world where we budgeted the whole month on paper before the month began. In order to make that work in YNAB I entered a placeholder for the entire month's net pay on the 1st of the month (2 transactions but both dated the 1st). Then as each actual paycheque arrived, I would enter it and delete the corresponding placeholder. This led to a couple of issues. One was riding the credit card float. Second was that I could not count on YNAB to advise me if I had enough actual money in the bank to ensure I didn't go into overdraft.
We bit the bullet and went to budgeting paycheque by paycheque with actual real money as it came in. The first one was killer as we had to address the credit card float. Also hubby didn't like this change (at first).
In YNAB I made the following changes.
- I added the due date to the name of the category so when I budgeted I knew that it had to be paid with this paycheque vs the next paycheque, embracing the only budget money you have philosophy.
- I created a next month category where I started building up my month ahead balance. We are currently one paycheque ahead which is nice because we can budget all the expenses for the first pay from that and don't run into the issue where the mortgage is due on the first but the first pay of the month doesn't land until the 5th.
- I did not do this but some people create category groups based on the payment schedule rather than types of expenses. So they would have a paycheque 1 and paycheque 2 group with the applicable expense categories under these. Then a monthly "whenever" category group for things like gifts and other sinking funds. Some also have an annual category group for insurance etc.
- Goals and scheduled transactions are key. When I do my budget, I can quick budget everything needed based on underfunded goals and scheduled transactions. Takes me about 3 minutes to do the budget. Generally the fixed expenses and scheduled transactions come out of the first cheque and then the rest gets caught in the second cheque. Our lives are pretty boring finance wise so the budget meeting usually consists of my telling hubby its done and asking how much he needs for any specific projects or if he's going golfing.