What about expected income?

So I get that when money comes in it becomes available to budget.  But a budget is a plan, and if I'm on salary and my take-home is the same every paycheck, twice per month, then I would plan on giving each "expected dollar" a name at the beginning of the month.

What happens when you plan out your expenses and your intended expenses exceed the actual cash on hand because you're planning for spending money from the first and second paycheck before you get the 2nd paycheck.

Is the "Ready to Assign" simply going to fall negative until the next income event?

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  • YNAB is based on the envelope budget method, which only allows you to budget with money you have (because you can only spend money you have).

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  • SmashCrashBoing said:
    Is the "Ready to Assign" simply going to fall negative until the next income event?

     No. You partially fund your categories with your first paycheck, and then when the second paycheck comes in, you finish funding them. The question to ask/answer is "what does the money from my first paycheck need to cover until I get my second  paycheck?" This includes bills/expenses that will actually happen *and* bills/expenses that can't be fully funded from the second paycheck.  At no point should RTA ever be negative.

    This is why a lot of people recommend getting one month ahead/the buffer. It separates funding a month at a time from when your paycheck comes in. But that's not always possible for people, and some people opt to keep the money in savings rather than having that buffer. In the mean time, you fund half a month at a time.

    I think YNAB recommends setting targets as your plan - the sum of the targets tells you how much you've planned on funding, and you can use that to see if your plan is more/less/equal to your pay. Some people recommend staying away from targets until you have the YNAB system down.

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  • Yes, a budget is a plan. But YNAB is based on the cash envelope system which means that you only budget the money you have now. Once the cash is gone (RTA is zero), you stop because there is no money left to put in the envelopes (categories).

    A couple of things that are helpful to know about/learn more:

    Budget using last month's income - It was a key principle in previous iterations of YNAB. You save up money and then budget the following month with that money. So, right now all of my August cheques go into a category called "Next Month Income". When September rolled over, I moved that money to RTA and used it to budget the entire month of September. There are some really good threads on the forum about it. The other option is to budget directly into the following month but there are other potential issues such as "Stealing from the Future" (search the term for more info)

    Once you develop a budget plan, you can use targets to make a budget template to help with budgeting. Targets have their own nuances which can lead to misunderstandings so an alternative is to put the amount right in the category name along with the due date. Rent $1000 1st.

    Always feel free to ask questions. Lots of great support on the forum. Good luck!

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  • Hmm...well, I suppose I could start my first month by fully funding all of my budget categories from my Emergency Fund category and then as the income rolls in, move it into the Emergency Fund until it's fully funded so I'm ahead of the game.  I suppose that would mean that once I'm ahead, I would either see a perpetual "Ready to Assign" value equalling my 2nd paycheck amount, or I would budget forward into the next month so the 1st paycheck on the following month would fill in the back half of the month's expenses.

    Either way, I'm trying to stick to the pattern we have, which is working, and took a long time to develop.  That pattern is close to a set it and forget it method.

    On the first of every month, we pull cash from the account equal to the sum of our "envelope" categories, of which there are only 5.  That money appears spent immediately and is limited to only what it is intended for.  I get that YNAB acts as a "cash envelope" system, but it removes the actual act of paying with cash, which still carries more weight than using a debit card.  Cash is still king.  I mean, I suppose I could still get cash every time I need to actually spend money from that category, but then that again increases the number of tasks I have.  Ultimately, we've been able to minimize the amount of actual work we do on the budget because we put in that hard work in the beginning, and small changes like fee increases, bonuses, gifts, or salary increases are so few and far between that it's not that much of a hassle to make an adjustment.

    I would prefer, for example, to know that we're receiving $5,000 this month and give all of that income a name right away, one time, without having to wait until the money is actually there, even though I understand that in principle, budgeting money that is expected is similar to borrowing from yourself, and from an accounting perspective, creates a negative balance on paper.

    I'm sure I'll figure out how to adapt.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 3 mths ago
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      • Reported - view

      SmashCrashBoing Sounds like you have enough EF funds to start a month ahead. That's what you should do. Then you can budget a whole month at a time as many of us that have gotten ahead do. We have an Income for Next Month category that accumulates all income each month and then is released at the end of the month to fund all of next month. Rinse and repeat.

      In YNAB, CC spending is the same as cash spending. Every purchase is backed by cash.

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    • Superbone No consumer debt in this house.  Only thing we have is a note on the house.  

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    • SmashCrashBoing Out of curiosity, if you already have a system that works for you, why are you starting YNAB?

      For me, I started YNAB because YNAB *is* the system that works for me, and I hadn't found another program that uses this system and I wasn't keeping up with spreadsheets. So nothing was working for me before YNAB.

      But it sounds like you have a system that works for you, that is not the YNAB system. So why this app, instead of one that matches closer to what you already do? Is there something about your system that doesn't work, that you're looking for in YNAB?

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    • Fuzzball Meows I have a methodology that works, but not the actual system (i.e. software) that's logical and accessible. I'm coming from a history of Quicken / Mint / Everydollar.com, and I'm currently using GNUcash because it's self hosted and off the grid, but it has terrible budgeting tools...and the worst part is that there is no way to share or access the information on a mobile device. So, at the behest of Tim Ferriss, I've gone and tried out YNAB, and so far 98% of it makes more sense than all of the rest of the crap out there put together.

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    • SmashCrashBoing Ah, valid. Thanks for explaining 🙂I'm sorry you haven't found an app that matches your methodology better, and hope you're able to find a way for YNAB to work for you.

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    • Fuzzball Meows I think the opportunity cost of using any other system may be greater than the cost of adapting to how YNAB designed their system.  I think I can shift my ways to fit their best practices, especially if most of it makes sense.  So far, thumbs up.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 3 mths ago
      • Reported - view

      SmashCrashBoing said:
      No consumer debt in this house.  Only thing we have is a note on the house.  

      Same! 🙂

      I don't consider the amount that sits on a card and is paid automatically every month as consumer debt. Every penny is backed by cash in my budget accounts. It's just an additional convenience with benefits.

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  • SmashCrashBoing said:
    I mean, I suppose I could still get cash every time I need to actually spend money from that category, but then that again increases the number of tasks I have. 

    I have an account in my budget called Wallet. So I just treat getting cash out as a transfer from checking account to wallet account with zero impact on the budget. I also rarely use cash (I haven't gotten any cash out of the ATM since March 17 2020 (yes 2020, not 2021) for anything other than tipping or my afternoon diet Coke habit (and since I haven't been to the office since March 13, 2020, I get my soda from the fridge nowadays rather than the hotdog cart on the corner). But I did spend 3 years living in a country where there were very few places that I could use credit card so I've done the all cash thing as well. I manually enter all transactions (have done since 2014) and it's no big deal to record my cash spending as it happens. I've never been off by more than $0.03 when reconciling my wallet account.

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  • One of YNAB's strengths is emphasizing the scarcity of money.  At this moment in time, you really do have <1 month's salary> less money in your possession than your forecasted budget tells you.  Move the money from whatever you're currently saving for and use it to fund the planned spending you are currently using forecasted money for.  This will show you how close you are to "the edge" and will possibly impact your spending habits and how you treat money.  If you can't fund your forecasted budget with real money in your possession, that can be a jarring realization.

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