Overspending question

Hello,

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.

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  • 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?

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  • 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!

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  • 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.

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  • 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.

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    • Leslie Mapes I just put this answer on another thread for someone with a TBB above $0.  Perhaps some of these ideas could be useful to you.

      Some things to consider for putting those dollars to work:

      1. How much did you earn in July (don't say on here - just answer to yourself)?  Do you have that amount still in TBB?  If so, consider budgeting that monthly income amount to an Income for Next Month category, then read this for more information on why that's helpful and how to use the workflow.

      2. If you still have money left over, consider such contingency categories as Medical, Home Maintenance, Veterinary, Car Maintenance, Technology Replacement, etc. 

      3. Consider renaming your Emergency Fund to a "Loss of Income" or "Income Replacement" fund.  Many people work towards having 3-6-8 months of expenses saved in case of unemployment.  Your dollars cannot do the many jobs of supporting monthly expenses as well as dealing with appliances breaking, car accidents, medical emergencies, etc.  It's helpful to be specific about setting money aside in specific categories for these things.

      4. Consider creating a "Stuff I Forgot to Budget For" or "Unexpected Expenses" category.  Most new users have expenses jump out of the woodwork for the first year, or just don't know their normal spending patterns (annual fee, prescriptions, groceries), and having a little cushion here allows you to create the appropriate category and fund it without impacting other categories as much.

      5. If you've got all these funded and still have money left over, I think the next step would be to look at other future savings goals, perhaps?

      Note: Be aware that the budgeted cell does not indicate a normalized monthly amount. Rather, it displays the aggregate of all changes to that category that result from you organizing your money (as opposed to transactions - those appear in the Activity column). Putting $1000 into a savings category in July does not mean you have to find $1000 for that category every month.  Instead, you're keeping that $1000 safe by putting it in the category to save it for later.

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      • Cwren
      • Cwren
      • 1 mth ago
      • Reported - view

      Move Light Sound Life Thank you so much for your thoughtful comments and suggestions! I appreciate it. 

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