Line of credit advance messing with my budget...

I had get paid on the 30th and I automatically sweep my to be budgeted income to a ‘for next month’ category. I also have a line of credit overdraft facility that just happened to get drawn on on the 30th which is recorded as a transfer. On that same day I also transferred cash to pay back the line of credit, paying off the line of credit immediately (but it didn’t clear in the bank feed until the 2nd April). 

What I hadn’t noticed was that the amount drawn on the line of credit joined the to-be-budgeted amount, which then got into the next months spending. I’m doing great I thought. Then the repayment appears, putting March over budget and messing with all my planning.

I’d just committed to a holiday in April but now find myself short as the handling of cash advances caught me off guard.

Much better if cash advances worked like credit cards that you pay off every month. I.e. the advance automatically creates a budgeted amount to cover the advance stopping you going into debt. Easy not to spot this!

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  • Hello, Sea Green Commander !

    The reason a cash advance doesn't automatically put money in the Credit Card Payment category is because there's no category to take the money from—the typical reason for a cash advance is to have more cash available to work with, in exchange for additional debt.

    Sorry you got bitten by this, though! To avoid this in the future, the thing I would do differently is: when you pay the line of credit, record that payment immediately without waiting for it to import. That will make it clear what's going on in the budget right away, instead of having to wait for your bank to catch up.

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  • Thank you. That would be a work around for the delay in the bank feed.

    But that is not the only problem. There's money showing up in 'to be budgeted' that wasn't meant for extra spending, and caused me to go over-budget. I maintain that it would be better if it could work like a credit card for those that that don't like to carry a balance month to month.  The advance automatically assigns budget to the line of credit so that I am budgeting enough to cover the draw. I get there's no category to draw from, but some sort of alert to re-distribute budgets would be useful. I have a "next month's spending" category as I operate a month ahead - and this is where it could draw from in my case. Having to manually remember to do this is the work around, but it was weird in my case that the overdraft facility worked differently to a credit card.

    Also, the overdraft is drawn on automatically, so I have to be extra-vigilant to match it with a budgeted amount manually.

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  • Since you're operating a month ahead, I recommend categorizing all income to your INM category.

    This prevents money from mingling in TBB.  Had you done this, only the money from the cash advance would have been in TBB, and you would have thought, "What's this from? Oh, I needed it for this category..."

    When it's time to budget any particular money, you'll select the particular transaction(s), and then recategorize it to TBB. 

    It also sounds like you're not using scheduled transactions. It's a great work-and-error saver! Check them out.

    Lastly, you'll want to check that your previous month is cleaned up (no overspending) when the month turns before going at the current month.  Then, you would have caught the overdraft fee's implications. Since you immediately paid it off, you needed to budget for it.

    Entering the transaction in YNAB at the time of the real transaction would make this evident and allow you to use YNAB for its intended purpose - planning your spending/saving. Never pay for something without ensuring its category can support the transaction. 

    A good workflow is as follows:

    1. Schedule transactions. (Goals would be set up here, too)

    2. Use INM.

    3. Reconcile (daily, weekly, at least right before you budget).

    4. Check/clean last month's budget for any stray overspending.

    5. Sweep last month's budget, if you do that.

    6. Recategorize INM transactions.

    7. Budget the new month. 

    8. Smile.

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  • This technique can help you avoid the overdraft fees, or at least have fewer surprises...

    https://support.youneedabudget.com/t/y4hllkz/using-scheduled-transactions-for-cash-flow-projection-in-ynab

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  • Move Light Sound Life said:
    Since you're operating a month ahead, I recommend categorizing all income to your INM category.
    This prevents money from mingling in TBB.  Had you done this, only the money from the cash advance would have been in TBB, and you would have thought, "What's this from? Oh, I needed it for this category..."

    Thanks! All good advice.

    That would be a good solution if it weren't for messing up the income vs. expense reports. I believe the incoming cash has to hit the 'to be budgeted' category to show up as income. I do use the report to double check things.

    All my income and the line of credit transaction happened on the same day and I didn't notice the 'To-be-budgeted' amount was bigger than it should (I have a few different income items appearing together). I still think YNAB could do a better job with cash advances.


     

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    • Sea Green Commander No money should stay in INM. Add soon as you recategorize to TBB, the reports reflect that properly. I can't think of a reason to look at reports until after a month is over, anyways. 

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  • Sea Green Commander said:
    All my income and the line of credit transaction happened on the same day and I didn't notice the 'To-be-budgeted' amount was bigger than it should

     Yep, which is why sequestering transactions until you're ready for them is less error-prone.

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