Budgeting Your Savings

So I came across this article today: 


In short, the article suggests you budget your savings too. I never even thought to do that! At first, I had my savings included as part of my budget, but decided I didn't want that included in my everyday budget, so I moved it to tracking. Now this article suggests to allocate savings funds just like I do with my checking account. I would have never thought to do that! 

Is this something you do in your budget? I have been told to keep 3-6 months of emergency funds in the bank, so I guess I just considered it for short or long-term "emergencies" that popped up. What do you folks do? What have you found that works best? 

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  • That's kinda the whole point of YNAB :).  We consider saving pretty much just delayed spending.  If your 3-6 months savings account is for Income Replacement should you heaven forbid, lose your job, you make a category and give those dollars that job.  You should put all your checking and savings accounts on budget and give those dollars jobs (rule #1!).  

    Every other bit of saving, whether it be for a roof repair, an annual subscription, a vacation, or a down payment, all goes into its own category, irrespective of where exactly the money is held.  Everyone else will chime in with links and other helpful tips, I'm sure :).

    But in short, yes, allocate all savings in YNAB just like Checking.  We ALL do!

    Like 8
  • Also, it sounds like you'd really benefit from some of the free classes offered on the website.  You're obviously very motivated to make YNAB work for you at its fullest, and learning to embrace the whole method and the software's powers will be invaluable to you going forward.  Great job on getting started on your budgeting journey!!

    Like 2
    • Annieland thank you! I have taken a few classes when I first started out a few months ago, but there were more on getting started with YNAB. I probably could take some more workshops on savings and credit cards. That's a good idea.

      Like 1
  • A lot of seasoned YNAB users will not have "an" emergency fund. They will have a category for each type of emergency: Income replacement, big household items (air conditioning, heating, water heater...), car repairs, medical care, etc. It's a pain to do with bank accounts, but a breeze with YNAB.

    Like 4
  • Yep, I define a purpose (category) for every dollar I have (outside of retirement accounts and investments), even the ones in a savings account. The budget is the plan for my money, and it's ALL savings. It's just that the timeline varies as to when a particular bit of that money leaves my possession. Some will only be saved for another day (buying groceries tomorrow) or only for another couple weeks (i.e., the mortgage), but some will be saved for about 15 years if all goes according to plan (new roof fund).

    Where dollars are physically located (which account) is a completely separate consideration from what I intend to buy (which category). I keep enough in checking to support outflows in the next few weeks (scheduled transactions and the running balance make this trivial). The rest I transfer to an account with a better interest rate. Note, I did NOT say I keep categories X, Y, and Z in the savings account -- that is a limited mindset.

    Instead, it's better to realize that categories don't live in specific accounts, dollars do. I might be saving for a christmas gift and have $500 in the category. Is that money in the savings or checking account? That question doesn't actually make sense. All I need to know is that I can spend up to $500 from ANY budget account with at least $500 in it.

    Check this out for further details about how purpose and location are independent concepts:
    The Relationship Between Your Budget & Your Accounts

    Like 3
    • dakinemaui said:
      I might be saving for a christmas gift and have $500 in the category. Is that money in the savings or checking account? That question doesn't actually make sense. All I need to know is that I can spend up to $500 from ANY budget account with at least $500 in it.

       The only time it does make sense though is to check if there is enough money in the particular account when i need to make the payment. For example, let's say I am at the end of the month and I want to spend that $500. But my chequing account only has $250 available due to other scheduled transactions. I might need to transfer $250 to my chequing account from savings to cover it. 

      In this case, it is a cash flow issue and not a category. I have enough in my category but I don't have it readily available due to other factors. I can see this scenario for new users or those who are still not fully buffered or dollars are still tight. 

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      • dakinemaui
      • dakinemaui
      • 1 mth ago
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      Navy Blue Pegasus I think this is more of a consideration for people NOT on the edge who are trying to maximize the interest earned.

      If money is tight, it should really all be in the checking account. The penalty for a mistake will crush any interest they have earned.

      Like 4
    • dakinemaui True. I was thinking of people where money is tight so they are trying to earn interest (as little as it may be) to help increase their money. Might not be the most logical but it happens.

  • Yup, just chiming in too, maybe nothing new to say, but this is a concept that  many new to the YNAB system find confusing.  In fact, it depends on how you lay out your categories, but I have all my important/immediate needs toward the top of the budget, (since they're most likely the most active, and I don't have to go searching for them to categorize, or to check their available balance in the budget) and all my long term savings are down toward the bottom, because they just sit there holding (and accumulating) money, but really not much activity happens in them.  Other than the occasional expense for the specific reason that they exist, such as every 6 months, my car insurance comes out, and then I spend the next 6 months building that fund up again.

    As has already been stated, the fact that you're reading about it, and eager to learn the best practices is evidence that you're doing well, and will accomplish great things with this system.

    Good luck, and keep coming back to the forum with more questions, and as you learn, you'll find you can share some of your "expertise" that you've picked up along the way.  (I say expertise in quotes only because at this point, you may not feel you have any, but you will, and it will be valuable to somebody else in the future for you to share that with others.)

    Like 4
    • Bruce Aw, thank you! 

  • Navy Blue Pegasus said:
    it is a cash flow issue and not a category. 

     With multiple cash-based accounts on budget, spending decisions have 2 steps:

    1. Can I afford this? Check the category Available. Reallocate from a lower priority category if insufficient. (Rule 3)

    2. Can I pay with this account? Check the account balance. Transfer from any other account if insufficient (or use a different payment method).

    In practice, using a paid-in-full credit card reduces the frequency that #2 comes into play.

    Like 8
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      • monkeychicken
      • 4 wk ago
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      dakinemaui I agree with the paid-in-full credit card practice. I never really used a credit card before YNAB, but now it is the single most used payment method I have. The fact nearly everything goes through it means the balance of my current account really only has to cover the scheduled transactions coming from that account.

      Like 2
  • Orange Piranha  Yes. Definitely. And it’s a game changer.  It means when you think ‘sure, I can buy X, I have savings’ you can think ‘yes, but that’s to fund my trip to Y’s wedding or repair the bathroom floor’.  Would I rather have a new pair of shoes or a new floor? 

    I don’t have enough saved yet for all my savings needs so I have some still called emergency funds which as others have mentioned is really unallocated savings for specific categories ie. true expenses.  I also have my non monthly bills as specific categories and a few most likely areas where I need savings (vet care, doctor/dentist/osteo).

     This week I needed to pay a medical bill and had exhausted the doctor/dentist etc the week before (new unexpected health issue) so I moved some from the vet care area as both animals have been recently for check ups. Next week’s follow up visit will come from the ‘emergency’ fund ie, a true expense I’m short on savings to pay. Much better than using my credit card! 

    Like 1
    • Yes I can thanks for sharing! 

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