Advice Needed on getting Started based on my situation.

Hey There,

I hope all are doing well. I have tried to use YNAB multiple times over the past few years, but I just have a hard time keeping with it. I have watched multiple youtube videos read articles etc..  and one of the common themes is how to "budget when you are broke".

Now, I do not make a lot of money and generally speaking, right now my expenses tend to be greater than my income (which is why I want to budget), but I also have a savings/emergency fund already built up that could technically keep me float for 1 - 2 years if I lose all my income.

 

This is where I have a hard time creating a budget and putting "Every dollar" to use. If I need to buy something or I want to buy something... technically I probably could, but of course, my gold is to make sure my expenses are less than my income.

 

Any tips/advice to get started when you do already have a good emergency fund, but want to use YNAB to track regular spending?

I appreciate all the advice.

Thank you.

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  • Make a category for the emergency fund and budget all of that money there. Then you are only using your current money for spending decisions 

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  • This is exactly where I was when I started. I was a graduate student living on a stipend in a high cost of living area. I had a bunch of money set aside in case stuff hit the fan during graduate school, but the way to keep stuff away from the fan was to keep all my spending within the confines of my tiny stipend. 

    Put all the emergency money in a category. If it really bothers you to see it, hide the category. I was very afraid at the beginning to keep my big fund on budget, and so I didn't. A year later, I undid that whole thing and it took hours. So do what I say and not what I did! 😂 Just put it on budget, and put the entire emergency amount into a "break glass if the budget is well and truly on fire" category and leave it there. 

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  • With your emergency fund in a category, it will be obvious when you have to reallocate from that to support current expenses. That will be incentive to cut costs or increase income. At the least, you can predict when your EF will be gone.

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  • Hey Hot Pink Dragon

    Great questions! So, I think that before you set your budget, it seems like you might need to ask yourself some potentially difficult questions. I say difficult because you may need to face some decisions that will make you uncomfortable or frustrate you.

    1. What is it that is making your expenses exceed your budget? Is it annual items that you haven't budgeted for consistently? Is it lots of little "I want to have that"? Is it basic life expenses such as rent, insurance, groceries etc?

    2. Based on the analysis above, you will need to evaluate what are the options. If it is annual expenses, do you need to relook at how you have set up your budget. If it is lots of little "I want", then again, prioritizing are they are wants or needs and really delving into that. If it is basic life expenses, do you need to look at a side hustle or different job?

    3. Emergency fund - if you have an emergency fund that could sustain you for 1-2 years, you may want to look at leveraging it to help with the day to day budgeting until you get through the more detailed analysis above. Perhaps, after budgeting, you realize that you need $X extra dollars to meet your needs.You could supplement your income with your emergency fund. You would need to determine if and how long that would be sustainable.

    It feels like it defeats the purpose of having emergency fund and not using it when you do need it now. We always joked in the army that if you went to the supply to get pens and there was one red pen left, the supply technician would not give it to you. Why? Because then they would not have a pen. But the purpose of the pen is for me to use it. It feels similar, you have some money that could help you on an interim basis until you figure things out and then replenish it. 

    I know it's tough and I wish you the best.

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  • In addition, to put your emergency fund in a category, you need to actively use your budget for spending guidance. That means you need to look at the category balance before every time you spend! And only spend if you 1. have the money in the category or 2. have to and have already reallocated from another category.

    If you only use YNAB to record your spending after the fact, your spending will not change! Putting money in categories isn't enough on its own, it has to be used to direct the spending.

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  • All of the previous comments have good advice, but I just wanted to add something different. If you are trying to make your expenses less than your income, I'm a fan of Mr. Money Mustache's methods: analyze your spending as a whole, hone in on what you love most and don't waste the rest. He offers lots of tips if you're open to ideas:

    https://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/

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  • Great tips in this thread! After you've budgeted those savings/emergency dollars—you know those are set aside for a specific purpose.

    Using the mobile app to check categories before spending was key for our household to make proactive decisions, and has prevented a fair share of impulse purchases too. 😉

    To help compare expenses you've budgeted for to income, keep an eye on the Inspector (right column) in the web app. You could select your chosen categories, and compare to that Total Budgeted number. If you're using a Budget Template, Underfunded will tell you how much you need to make the template work (and can adjust until it's lower than your monthly income).

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