True Expenses

The way YNAB explains or categorizes these is a little misleading. Isn't a true expense a bill that comes due every month?

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  • The way YNAB uses the term refers to expenses that you truly have to plan for in your monthly budget, even though it may not be obvious because they are non-monthly expenses.

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  • No, an immediate obligation is a bill that comes due every month.  As in, a non-negotiable expense.  A true expense is something you also have to pay (driver's license, for example) but it doesn't happen monthly so it may fall off your radar.

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  • YNAB uses the term to remind you that you have more expenses than just the stuff you see every single months. What YNAB calls True Expenses are any non-monthly expenses  that you will need to save for. The idea is that even though they do not happen monthly, you should be saving for them every month so that when they do happen, the money is available in the category, rather than having to scramble to figure out how you are going to pay for it.

    These True Expenses fall into 3 different types of categories, recurring non-monthly bills, sinking funds and savings goals. When these are funded monthly at their "correct" amounts, then you can easily figure out how much extra money you really have each month for discretionary spending, paying down debt or increasing retirement contributions (once you send money off to one of these, you can't take it back without some sort of financial penalty).

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  • In practice, as nolesrule said, TEs are three types: non monthly fixed bills, sinking funds, and savings. The reason they’re called “true” is that the standard way to handle these things is to consider your monthly budget just your income vs. your monthly outgo. But then you get whammed with an oil change and go “@%$&! No extra money this month!” Or you get to the December holidays and are surprised that, yet again, they cost a significant amount of money. 

    Instead, YNAB would have you plan for all these things. So sure, your car insurance might be a semi-annual bill that you know precisely, so you save up 1/6 of the amount. But also, your car will need to be maintained. To what extent? Well, it’s a little unpredictable, but if each month you’re throwing $50 in there, the oil change won’t destroy your spending cash. The idea is that you recognize that insurance and maintenance cost you money *every* month, not just the months they come due. This reduces the “@%$&!” moments and lets you better plan for your money. 

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  • Check out this thread for a big list of true expenses that other YNABers have come up with. 

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  • WordTenor said:
    “@%$&!”

     Knowing you are a linguistics expert, this makes me giggle. 

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