I am trying to live actually below my means and save a lot. I haven't used YNAB effectively yet because I remain confused about how to address overspending. I'm hoping you kind people can help.
There are months when I overspend in some categories knowing that year-to-date, I will be on or under budget. As in, the next month, I'll be under budget, so in the end it will work out. I also have available unbudgeted cash to transfer to those categories when I overspend.
Here's my question - should I create a "slush" fund with the extra money I have not budgeted to put toward overspending? I hope this makes sense.
Thank you for your help.
It's not certain you will underspend in the future. Recommended practice is to confront the issue now, rather than kick the can down the road, by reallocating from a lower priority category BEFORE spending. If you can't find a lower priority category, then skip the purchase. You need to understand with the consequences of changing the spending plan, and that change should be for the better.
If you are trying to save, why do you have unallocated funds just waiting to be consumed? How can you evaluate the consequences of reallocation to decide whether it's a net improvement?
Many YNABers have a SIFTBF (stuff I forgot to budget for) category. Especially in the beginning when you're guessing at how much you'll need in each category, a larger amount in SIFTBF can give you that flexibility you're looking for. The idea is that though you can WAM from SIFTBF, you also use it to give you clues on how to adjust your budget. If you need to pay your annual Costco membership, but you haven't made a Memberships category, WAM from SIFTBF then make a Memberships category. If you overspend in Auto Repairs, WAM from SIFTBF then adjust to contribute more to Auto Repairs every month. As you go along you'll need less in SIFTBF. I put $200/mo there when I started, now I'm down to $20/mo.
What really turned the tide in overspending for me was getting in the habit of checking the budget FIRST, before spending. It's a process, best of luck!
Cadet Blue Tape said:
I also have available unbudgeted cash to transfer to those categories when I overspend.
By this, do you mean that your TBB is not $0.00? That should never be the case except for right after a paycheck comes in, and you haven't budgeted it out yet. If you have all of your anticipated expenses covered, you need to put what's left either into a "slush fund" as you said (I've got one of those) or the SIFTBF as Owlette mentioned.
Also funding true expenses, and savings can be taken from what's left in your quest to get TBB down to $0.00. I use my slush fund as a way to cover some minor overspends, and in some of the categories that I don't need to have the available balance accumulate, I add what's left at end of month back into the slush fund. It ranges from $50 - $200. If it gets above $200, I usually allocate some extra to a more deserving category.
Hi Owlette Bruce and dakinemaui I really appreciate your responses!
Bruce yes - my TBB is not $0 so that is what I'm trying to get at. I like the idea of a slush fund as I start out because right now I really don't know what my spending is in certain categories. Any other tips of this nature are welcome! Thank you.