Making annual goals for discretionary expenses to control annual spending

Hello YNAB community! Long time lurker, first time poster here. I've been using YNAB since 2018 and its definitely helped me a lot. However, I always wanted that "planning" ahead of time aspect to have an idea of where my money would go once it came in so I could budget it appropriately to meet goals. So, I really loved when the goals were updated to be more flexible and allow for creating a useful template.

Anyway, at the beginning of the year I take time to reflect and think about, ideally, how much money I want to spend in various categories during the year, specifically so I can accelerate student-loan debt paydown. For example, this year I decided that I only wanted to spend $300 on new items for the household.  In the past, I would have taken $300 and divided it by 12 to get a monthly target ( so $25 a month), but what happened was in March, I found an item I needed that costs more than the $75 I had saved -- it costs $105. OK no problem. Use Rule #3 .Roll with the punches. This is a priority for me now, I'll take from my clothing category for the month. BUT, then looking forward to the rest of the year, if I still wanted to only stick to $300 for household Items, I'd have to do some calculator math and adjust the goal. I'd also have to adjust the goal for clothing. And this would have to happen if ever I needed to WAM.  Alternatively, I could  just accept the spending and move on, which I do not want to do. I'd rather spend less later, because there's really not many items that I am planning to buy this year for household. Just happened a little earlier than I expected.  

What I discovered, was that if I went back to January and set an annual spending goal for the annual amount for all of these discretionary categories, then YNAB would do the math for me. I would still need to WAM in the month the spending happened, but the next month YNAB would set a smaller amount for the household goal to be fully funded and a larger amount for the clothing goal. Win! So, I updated all of my discretionary spend goals in the same way. If I get to the point where I've gone over the annual target later in the year, I'll accept it at that point, but for now I think I have a better chance of adjusting and holding myself accountable. 

Does anyone else do this? 

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  • Lots of people do it.

    Personally, I think it's exactly backwards most of the time. By design, the category will receive LOWER budget entries in successive months. Hopefully it's obvious that Rule 3 exists in order to funnel money to more important categories with the benefit of hindsight. And yet in this case, that category was just demonstrated to be MORE important than originally thought... and now you're going to short it??

    I would simply reallocate from somewhere less important and consider the matter closed. I would not track "paybacks" to whatever took the hit -- it was LESS IMPORTANT, right? I would continue to fund Furniture at the $25/month level, and I might even consider INCREASING it -- again, hindsight already told  me I was wrong in my initial allocations.

    Rule 3 is not about doggedly sticking to your guns with budget entries you made in the past -- especially ones you made nearly a year ago (as will happen with your yearly spending allowance approach). No one can predict the future with complete certainty and priorities change over time. Embrace those principles, reallocate as needed (ideally in advance of overspending), and you will develop a better understanding of your true priorities.

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      • dakinemaui
      • dakinemaui
      • 1 mth ago
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      • Reported - view

      FWIW, I think the Spend By goal is tailor made for something like a Vacation where you need to buy tickets in advance of the target month. Indeed, that was the typical scenario put forth as justification for such a feature. Outside of such cases, however, I feel it often contradicts one of core principles that makes YNAB so effective.

      The furniture example may, in fact, be less important after this purchase, so it's perfectly fine to reduce it going forward. I just think too often people don't even consider what the current priority might be and just go with what their months-old prediction of priority was.

      As always, YMMV.

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    • dakinemaui Thanks for your response! I understand what you're saying about being very rigid and not accepting that priorities have changed, and for certain areas (groceries, eating out) I typically had been ok with just accepting it and not bothering to adjust, but the household/furniture is really for me a collection of vacation-type goals (several items I hope to purchase) lumped into one category together vs. just a random number pulled out of the air or a number based on last years spending. In January, I thought about what I want my money to do this year, not just what it did last year. Now, I could have separate categories for each item, but I just don't want to.

      In my personal case, even though I was ok pulling from clothing last month because I did not need the money last month, in the grand scheme it's still a priority for me this year: I am losing weight (yay!) and would like to  update some pieces in my wardrobe. I've never been one to buy clothing every month, but it's also hard to predict that say by "June" I will buy clothes because I might buy a smaller thing or two at an earlier date and I probably won't buy my whole wardrobe at once.  At the same time, I want to shoot for an upper annual limit. So, when I have to WAM  I acknowledge "I am moving this money from category X to category Y this month because I don't need the money in category X right now, but if I don't refill category X next month, then I am affecting how much I will have available for that bigger purchase I have been planning for in the future and I will have to move money at that time from somewhere else." The annual spend by goal makes it east for me to know how much I need to fund to stay on track. 

      I hope this is still in-line with the spirit of the rules. 

    • Magenta Piano paying back category X happens naturally since you base contributions on the remaining amount needed and the desired timeline. Since X takes more than it used to, there is less to go elsewhere. That means the deficit migrates to the lowest priority category.

      As long as that is happening, that's a good thing.

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