“Aging Money” in the budget
Ideally, how much money do I put into categories like “internet” and “groceries” and when? I have a few months expenses in the bank, so I can do any of these as I’m getting set up. I get paid every two weeks. Which of the following is correct according to the YNAB method?
A: Budget for all of the bills I haven’t paid yet this month. Don’t budget anything for a bill I paid five days ago. Replenish everything to full February 1. This will involve some kind of money holding tank or something, since I don’t get paid on any given day of the month.
B: Perpetually keep every category at its full monthly budget amount. Cellphone bill is $60. As soon as I pay it, put $60 back in for next month. Again requires the holding tank. Doesn’t seem to work well for groceries - it’s hard to tell what I’m spending if I’m just refilling it every few days with whatever I spent.
C: Fill up bills that get paid in the next two weeks every pay check... and let the category go to 0 after paying? Put in extra so that it never goes below its monthly cost (ie $60?) I have always thought of groceries as a monthly budget item. Should I change my mindset and think in terms of two weeks of groceries at a time?
What is the correct way to manage my utility bill, which is different every month?
I have never lived or budgeted paycheck-to-paycheck and have been more or less oblivious to which date my paycheck gets direct deposited and which date bills get auto-payed. I just have a general average budget in a spreadsheet and reconcile at the end of every month. I’m trying YNAB because I’d like to know more easily how much I have left today in a category like “eating out,” and also how much I could really spend from savings on a big purchase without tapping my security x-months-income fund. Things get confusing with rolling income and expenses and credit cards on auto-pay. So hopefully YNAB will help, if I can get it figured out. Are there examples somewhere of budgets properly done over time? Is there some place I go for “how to budget” beyond the basic setup and the short page on the four rules?
Or rather than having a budgeted category of $xxx for “emergency,” should I actually just have 3 or 6 times the monthly amount in each category?
Most experienced users recommend that you budget the entirety of next month on the last day of this month using money you received this month. Temporarily stash your paychecks in a holding category as they arrive during the months and release them when you're ready to budget next month.
With goals/scheduled transactions/Quick Budget options, you should be able to budget so of next month with a few clicks.
(You can also budget a given check immediately in next month's area. I find this more tedious, though, if you have multiple income events per month.)
The first month is always unusual since you have to make a plan for all the money you have now. Moving forward, you mainly worry about allocating new money each month.
dakinemaui ‘s advice will give you the overview you missed before of what’s in categories. And make the proces simple.
As you had a monthly budget before YNAB, why not use those amounts to start with and adjust next month and the month after that according to what you actually spend?
You talk about a holding category. Holding income from one month to the next makes sense. But all other money should get jobs. As you have some money in the bank, jobs could also be a fully funded roof repair fund, money for an unexpected vet bill or a loss of income fund for 6 months.
When I started, at one point I filled all categories, like groceries and mortgage, for some months to come, only to discover it gave me less insight. Having money for next month and giving all other money other jobs does give me clarity.
To decide which categories you want to fund only for this month and which ones you want to fill up a bit in advance (true expenses are usually different from one month to the next), a budget template might be of help.
You asked for “how to budget” lessons. I think the new video course (https://www.youneedabudget.com/video-courses/starting-your-ynab-budget/lesson-2/unit-4/#course-player) is very well done.
Aquamarine Case said:
“Pay February’s bills” is definitely a job.
Some people prefer to jump ahead into future months and assign money to specific categories. E.g. you could start using January inflows to budget for (say) "February: Groceries". It's actually the officially documented approach.
But there are some downsides to budgeting in the future. First, budgeting each scrap of income as it arrives can be quite tedious, especially if you receive a bunch of inflows each month. It can feel very much like living paycheck-to-paycheck!
Worse still, there's a significant UX defect known in the community as "Stealing from the Future." If you assign money to future months, but you later increase your budget amounts in the current month, YNAB will silently "steal" that money from the future month. You won't see any warning in the current month -- you have to jump ahead to the future month budget to discover that you are, in fact, over-budgeted. You may not notice this right away, and you may have even made spending decisions based on this misleading UX.
Fortunately, the approach of storing money in a holding category (e.g. "this month's income") addresses both of these issues, and it's why its favored by a lot of experienced YNAB users.