How to budget for True Expenses

I have many true expenses .  My understanding of a true expense is one that is not due immediately but I know it is going to be due in a next few weeks or sometime this year.

I start by creating a spending goal by date for each true expense .  I can then make sure ( in theory) that I have enough money in my budget to pay for these as and when I need them.

Not that  I don't trust my self and YNAB ! but I have created a savings account in my Current Account with the current total of all this years true expenses.  This is so I am 100% sure I have the money when I need it.

My question is do I need to create a separate category  under savings with this true expenses total?

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    • Vibrant
    • No more counting dollars, we'll be counting stars
    • vibrant
    • 12 days ago
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    First, True Expenses include ALL the things we spend money on outside of a typical monthly spend - both expected, like annual car registration, and unexpected, like a car repair; and short term, like the water bill due every three months, and long term:  buying a new car in five or ten years. One of the initially terrifying but eventually empowering things about YNAB is how it opens our eyes to ALL the things we spend money on.

    Next, to your actual question: which is a more powerful deterrent to spending money: taking $5 out of your wallet and putting it in your pocket (moving money from your checking account to your savings account), or putting that $5 in an envelope labeled "HAWAII VACATION" and sealing it so that you have to break the seal to spend the money (assigning your money to a specific category in your budget)?

    Once the money is in an envelope, does it matter if the "true expense" envelopes are kept in your wallet vs in your pocket, or some of each? 

    Hint: the answer is no. 😉 Once the money is assigned to a category, it doesn't matter if those physical dollars live in your checking account, savings account, back pocket or in a shoebox under your bed. With YNAB, you save money by assigning it to a category and leaving it there. 

    Some people like to group their true expense categories together for organizational purposes when reviewing their budget, but you will make strides with YNAB faster the sooner you let go of the idea that you need to correlate the "job" of any particular dollar with where IRL that dollar is stored.

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  • If it reassures you to move the money, you can, but really it’s just creating work. There is an expression “YNAB poor” which means, you have a ton of money in the bank, but none available to spend on going out. As you get used to using it, you will find you follow your own rules, and can have thousands in the bank, but can’t afford a new pair of headphones till next month. It is both strange, and liberating.

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  • I strongly support the advice that you don't need to put the money in the savings account for the purpose you expressed.

    But if you really feel like you need to continue, to the question whether you need to create a new category for this savings account or not, the answer is no. The money in that account is already budgeted. It is budgeted through out your true expenses categories.

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  • If you are using YNAB as intended, it is impossible to accidentally use funds earmarked for true expenses.  Category balances dictate funds available for spending, not your checking account's balance.  The only functional reason for a savings account is to earn interest on the dollars that won't be spent for a while.

    In the event that you want to use some of your "savings" on something now (like a night out, a new bike, flowers), using YNAB to move the money from another True Expense category is an enlightening experience.  It forces you to realize exactly what you are giving up to allow you to spend right now.  Without YNAB, it is very easy to skim off the top of a savings or checking account without having to think about what job those dollars already had.

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      • lindsay_g
      • Beige_Banjo.3
      • 11 days ago
      • Reported - view

      Cash which is exactly why so many of us were drowning in debt…. Until we started using YNAB!!
       

      ”skim”…. *Hollow laugh* More like baling it off the top in a bucket 😃

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  • Sky Blue Hail said:
    My question is do I need to create a separate category  under savings with this true expenses total?

     It's fabulous that you're prepared for these True Expenses! Woo! 🎉

    As you're considering how to set up your budget and accounts to be prepared for these expenses as they come up, it might be helpful to know how saving works in YNAB. Whenever you assign money a specific job by budgeting it to a category, you're saving. You might save rent money for 14 days, or save a home remodeling fund for 5 years, but every category in YNAB represents an amount of money you're saving for a specific purpose.

    So, when it comes to your True Expenses, you might need to save for them incrementally if they're bigger amounts or not due for a while and you have other obligations that are more immediate.

    The simplest way to save for these True Expenses? Create a category for the True Expense and assign dollars that job. If you need to save up over time, create a goal to help yourself set money aside monthly and watch that Available balance grow! 🪴

    As long as you're using your budget as a compass for your spending decisions, it doesn't matter where the money you assigned to that True Expense lives while you're saving it. It could be in a checking account, a savings account or cash in a shoebox in the closet. The important thing is that you don't spend money you've assigned to your True Expenses on other things because that money already has a job.

    Of course, when you pay the bill, you'll want to be sure you have enough in checking to cover it, which is a good reason for simplifying your accounts so you're not relying on transfers between accounts when a bill is due. Many YNABers have one checking account for Immediate Obligations and True Expenses so they always have a good buffer, and keep long term investments in different savings vehicles.

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