Budget amounts as averages
My last newbie question for tonight, I hope! :)
I have transferred all of last year's spending from Wave into YNAB, using mostly the same categories and just dividing the yearly amount from Wave by 12 and using that as a monthly budget amount. Of course, I have already run into a situation where this month's spending is slightly higher than the budgeted amount. I have every reason to think it'll be lower than the budgeted amount next month. What's the best practice here? Can I leave it slightly overspent, knowing it'll be underspent next month, or do I need to bump it up anyway?
Hi janineanne !
Welcome to YNAB! :)
The reason we don’t recommend you keep negative red Available amounts is because with Cash Overspending, you have already spent the money and taken it from a different category. You can choose to let the red amounts stand for a few days, since you know you're going to cover it, but you don't want to let that overspending sit until the month rolls over.
It's a good thing to remember and to acknowledge: red in your budget means you’ve spent money that was set aside for other categories. To keep your budget honest and up to date, move money to cover that overspending as soon as you can.
You can choose to let the red amounts stand for a few days, since you know you're going to cover it
Or you can cover from a lower priority category immediately. If you feel that lower priority category needs more money when you get more, feel free to put it there at that time. In my experience, I find I don't need to do that, since I have more important desires for my money. (Remember, that was, in fact, the LEAST important thing that had money left.)
Or you can cover from a lower priority category immediately. If you feel that lower priority category needs more money when you get more, feel free to put it there at that time.
I cover this now as well. It seems to align with the idea of having money in envelopes, and spending what's in that specific envelope. I'm just starting with YNAB and trying to be very conscious about my budget and the actual amount of money I have. This may just be personal preference but I am actively trying to avoid any of my past pitfalls, and for me saying I'll put money back in the future is one of them (for me at least, not meant to say everyone does).
If I've given every dollar a job and I'm working with X dollars right now, then any red to me means I've given that red amount more than one job. If I was doing this with actual cash in physical envelopes, I wouldn't even have been able to do it, I would have had to take the money from one of the other envelops at the time. So for me, if I find a transaction that was from one of my accounts (which is a pile) that sends a category over, I do the same exercise once I'm aware of it.
One of two things is going to happen then; either I'm going to have that money somewhere else that I can cover it, or I'm not which is bad, but at least I'm going to realize immediately that I am incurring debt. Perhaps this is more crucial until I age my money more, but even then I will do it just to make sure that I'm not missing something.
The other reason I don't want to maintain any red, is that at the end of the month, that negative available does not carry over in the category to the next month. And that is correct behavior, since that overspending is reflected in having less TBB (To Be Budgeted) for this new month. But in terms of that specific category, if I budget my normal 50 this month it's not going to automatically change it to 40 available if I had -10 in the previous month. That overspending was last month, I'd have to remember to manually only allot 40. If I covered it with some other category in the previous month, this would be clearer. Especially if the category I borrowed it from had a targeted amount by date goal, as it would be yellow until I made up the amount.