How does YNAB want you to apply Rule 4?

First - I'm a buffer guy. Was my favourite thing about the old YNAB method. 

Age of Money hasn't clicked with me like the Buffer did.

But anyways. Here we are.

Now I understand Age of Money. But was not really sure how it was supposed to be implemented. So I've applied the "buffer hack" to nYNAB by creating a Buffer category and throwing this months income into it. Then freeing that money up to be budgeted when the next months rolls around.

But is that what YNAB officially wants you to do to age your money?

If not...what is the official strategy for implementing Rule 4?

All the videos and information I read just say it's good to age your money past 30 days. But it's not as "action oriented" as the old Rule 4 for the Buffer was.

Thanks for your help in trying to understand the new (and improved?) Rule 4!

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  • Ultimately, "aging your money" simply comes down to making sure you don't spend more than you earn. As long as you are consistently doing that, the age of your money should automatically increase. I've generally found that the "age of money" concept is most useful for brand new users who are living paycheck to paycheck, and having a goal to get to 30 (or 60 for heavy credit card users) is motivating. It's a little less useful the more financially stable you are. I think I have an AoM of around 100 days right now, and that doesn't really help me a whole lot.

    In regards to the buffer, nYNAB is a bit more flexible than YNAB4, allowing users to budget money into any future month, not just the next month.

    The officially recommended approach for budgeting money towards future months is simply to switch to that month in the budget and budget the money immediately. Some like a buffer category and keeping everything in the same month, and that works too.

    Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • 8
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      Ben They need to fix Stealing from the Future before I would ever recommend to anyone to follow the official approach of budgeting directly in a future month, because it is no longer "set it and forget it".

      Like 8
  • Okay. This is going to sound totally sacrilegious. I had this totally crazy thought about Rule 4 and the buffer and transitioning to nYNAB from YNAB4.  What if...... bear with me, now.... what if I just temporarily forget about trying to impose the <income for next month> process. Gasp!  What if I give the nYNAB software a good three-month run without imposing any hacks of any kind to make it work like YNAB4?  As I recall, it took me about three months of using YNAB4 to begin to really grasp its potential and begin unlearning my previous thinking.

    When I first began using YNAB4, I tried to force the software to accommodate the laborious way I used to budget (by multiple accounts and handwritten lists). That was far too cumbersome and frustrating, of course to try to impose on YNAB. I finally took a leap of faith and just embraced the software and methodology (letting go of all my previous methods) and it proved itself to be so totally phenomenal and liberating.

    So I got to thinking a week or so back.....I've been working excessive overtime and getting very little sleep so I'm surprised I could think at all....who says that in order to observe Rule 4 you have to budget your funds in the month after it is received? Why can't Rule 4 allow for the physical act of budgeting the funds in the month received but then not spending any of it until next month or later?

    So in my nYNAB transition month of November, instead of taking all of November's income and budgeting it in December, I  went totally rogue and budgeted it all in November. The budget police did not knock on my door and my computer didn't fritzle. So far, so good.  Then when the month turned over to December, all my categories were filled and ready for December spending, but my budgeted column is empty right now. As income comes in in December, I'll just budget it to the empty categories and the funds I will spend in January will be in my categories before the end of December.

    I feel almost giddy at the notion.

    Like 8
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
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      HappyDance How do you make those spending decisions in the current month if you budget them in the month they are received? Budgeting money in the current month intended to be spent next month also has a Stealing from the Future problem, because the zero category balance threshold is no longer zero.

      This is the biggest problem I have with the way YNAB has changed things. Zero is no longer zero. Not in TBB, not in categories. Now it's some arbitrary number that's flexible with the way you choose to budget. Or it shows you zero on the current screen when it's really negative elsewhere in the future.

      The two biggest advantages of Income for next Month were:

      1. Convenience for those receiving multiple income transactions and being able to budget all at once in the next month
      2. Preventing you from using money intended for future spending in the current month.
         
      Like 9
      • Ryan Oakley
      • Side-Hustler
      • oakley
      • 2 yrs ago
      • Reported - view

      nolesrule yes. This.

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 1
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      nolesrule 

      I haven't figured that out just yet.  I will have to live with it to see how it works for me.  Now, I may not have issues with doing it this way because the bulk of my monthly is all deposited in the last two business days of the month.  I get a few other minor deposits throughout the month, and I figure that if I budget those small amounts to savings, true expenses, or irregular spending categories it should all work fine.

      I'm a very repetitive spender and a single, so the only category I have to constantly watch is pocket money a category I use for all my  impulse stuff - it's all really small spending, but it can and does add up to an overspend.

      Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • 6
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      HappyDance I think the operative word to this working for you is "single". There's no way that would work for us. Mrs. nolesrule would not like me saying "See that $200 in category A? You really can only spend it down to $100 this month. The rest is for next month." 😀

      Like 6
      • negrcian
      • negrcian
      • 2 yrs ago
      • Reported - view

      nolesrule In categories like regular monthly bills I do have Target amounts set, that I will let a category build to, but we are normally only using those categories to pay a particular bill, (eg  Water, Electricity).  This lets me use old money to pay bills ( which gives me peace of mind, rather than it sitting in a generic Emergency Fund, which in my house would be raided far to often)

      In a category like Food which has a monthly budget of 4/5 weeks worth of groceries, but also has a weekly limit, this does not work for us, so I have a scheduled sweep zero sum transaction  (in an account called Budget Journals) that moves all the monthly allowance to a reserve food category, and then a scheduled zero sum transaction every Friday, that moves a weeks worth back to the Food category.

      So what works for one category of spending may not work for another, classic Rule#3 behavior - Adjust where needed.  The  sweep zero sum transactions, are removed each month, so the Budget Journal account, only has current month entries.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
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      negrcian Yeah, work-arounds can be done to enhance how you deal with your category balances. I'm just not a fan of workarounds as they create additional complexity which ultimately transalates to extra work. I want Mrs. nolesrule to be able to manage YNAB without me if the need arises.

      Part of my job is writing technical documentation and documenting workflows for the non-technical personnel, and I just don't want to have to do that for Mrs. nolesrule to be able to manage YNAB.

      Like 3
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 2
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      nolesrule 

      I hear you. Even though I'm a single, I still have to fight my inner brat on occasion, so I don't think I will even try to budget two of my discretionary categories until the very end of the month.

      Like 2
      • JollyB
      • jollyb
      • 2 yrs ago
      • Reported - view

      nolesrule Spot on...

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
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       Update on my three-month experiment where I budget in the month the income is received, then move to the next month where all the categories are fully funded ...  I hate it!  It worked just fine from a category-funding and spending-guidance angle. No problems there.  But I find that I cannot stand...correction...I hate living with the orange warnings of underfunded goals the entire month. If there had been an immediate way to turn off the orange warning, I probably would have found budgeting in the current month for spending next month worked just fine.  But I couldn't, so it isn't. And I didn't want to not use goals because of the second pic below.

       

      So I spent quite a bit of time fixing three month's worth of budgeting.  Let me just simply say that revising three months worth of budgeting is not an easy thing to do with unwalled months (understated by a mile).

      I really love the displayed monthly template I've been able to hack together using goals and with the display option of the Toolkit, a gift that keeps on giving.  This view I completely fell in  love with.

       

      And so, there it is, my three-month experiment review.

      Like 3
  • We've been around and around on the subject of AOM as a metric, but less so the rule 4 rewording. If YNAB fixed the AOM metric, so that it accurately accounted for heavy CC usage and made some kind of allowance for rule 2 funds, I could better get behind it.  Face it, AOM is for people with an AOM less than 30, so just track it up to 30 and then say "Congrats, you're living this month, on money you earned a month ago (old rule 4 wording )". Rule 4 hasn't really changed, they were just attempting to make it less scary to new users who are starting out paycheck to paycheck or worse.

    Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
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      Flyin'Brian Right, the problems are the CC calculation and what happens with Rule 2 spending. Rule 2 is about staying even with your expenses, so to lump that in with 'getting ahead" money seems misleading.

      Like 1
  • I have not found a way to use AOM in an actionable way. Right now it hovers around 200 days. But that doesn't give me any guidance on what I should be doing. And increasing AOM does not automatically equal better financial position:  back in early 2016 when I was unemployed for 5.5 months, the AOM kept going up and up because I had no money coming in. Plus I know my AOM is going to go down in March when I replace my HVAC. So that seems bad and I should do something about that! But it's not bad because I saved up to pay for that in full over a year ago and am finally getting up off my duff to get it done before summer. And there is nothing to do to my budget to "make it better" (other than to buy a winning Power Ball ticket 😉).

    Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      jenmas You should finance your HVAC replacement. The longer the term, the better for your AOM. 😉

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      • negrcian
      • negrcian
      • 2 yrs ago
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      jenmas I identified both of those scenario's when AOM first came out, 

      nobodybelieved me then that an increasing AOM with no new income was "fake news" 

      Your HVAC replacement is the Rule2 issue, where it should be excluded from both the total bucket and the spending transaction from that category wouldn't count either.

      Like 1
  • The discussion on this topic is great! :)

    Your Age of Money is the average number of days between when you receive money and when you spend it. So, it completes the sentence, "You're now living on money that you made XX days ago."

    A great way to understand Age of Money better is to visualize each income you receive as a new bucket of money in your budget. As you spend, the money leaves those buckets in sequential order, oldest first. YNAB tracks the age of the bucket that the money for each cash transaction comes out of, and gives you the average age of the last ten as a tool to measure your budgeting progress.

    Creating a buffer category won't cause your money to age any faster or slower, but it can provide a clearer visual if you're trying to see the exact amount all in one place that you're carrying over. You could move to the next month and budget those funds there instead.

    Our Aging Your Money guide gets even further into the "nitty gritty" of the calculation if you want to take a look.

    Like 1
  • I posted this elsewhere, but I'll repeat it here....

    I wonder what my AOM would be if I didn't do the following that, for the most part, decrease the number:

    1. Churn 401k contributions as wash transactions (That's 4-5 income and "spending" transactions per month). - increases frequency of spending
    2. Churn HSA contributions as wash transactions (That's 2-3 income and "spending" transactions per month. - increases frequency of spending
    3. Pay for medical expenses via credit credit card with HSA reimbursement instead of using the HSA debit card - increases frequency of spending transactions
    4. Got a loan for my car instead of paying in cash - takes a big up-front hit rather than a smaller
    5. Use a credit card to make most purchases - pushes off the spending transaction to a single credit card payment... this is the only one that actually increases AOM.
    6. Make extra principle payments on monthly mortgage payments - increases amount of spending transaction
    7. Send money off to 2 Roth IRAs (4-6 transactions annually) - increases number of spending transactions and money leaving budget
    8. Send money off to a brokerage account monthly - increases number of spending transactions and money leaving budget
    9. Consider (some) gift card purchases spent at time of purchase rather than as a transfer that remains on budget - increases number of spending transactions and money leaving budget
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  • For me, it's about the visual. I think it could all be fixed if there was a toggle switch on the "Available" column that could show me either 1) The total actual amount budgeted in the category (this is what the number means in the current YNAB), or 2) The total available to use for this month, based upon my monthly goal.

    For example, let's say today is the 20th day of the month. I have a $50 monthly electric bill, already paid on the 5th of this month and I have a repeating "monthly funding goal" of $50. That means I have $0 in that category for this month, because I've already paid the bill for this month, on the 5th. If today is the 20th, I could use the toggle switch to show there is $0 available in this category for this month. But then I could toggle again to see the actual amount available in the category is $100 because I'm living with an Age of Money over 90 days and have already budgeted in this category for the next two months.

    Like 1
  • Interesting to see this question marked as "answered". I certainty don't feel that it has been answered - when the suggestions on how to implement Rule 4 are through work-arounds (i.e. buffer category to stow money away for next months spending or through future month spending that carries the risk of stealing from the future). I hope the discussion continues and that YNAB...

    Like 9
  • I found this thread while trying to understand how to interpret AoM when it reliably settles in above 30-60 days.

    My budget is safely and consistently over the 30 day AoM mark. It’s definitely reassuring to see it stay there, but it prompts the question, “now what?” At the moment, I’m comfortable with AoM as a relative indicator of stability vs. a direct measure of financial security.

    The approach that’s worked for me is to create and fund long-term aspiration categories. For example, a trip to France in 2020, a replacement car in 2021, a replacement smart phone in November. I set a Target Category Balance by Date for each of my aspirations and do my best to fund them each month. My attitude is that these categories are aspirations and some of them will pan out and others won’t. I don’t put a lot of rules around what makes the cut - it just has to be specific and require more than $100 to make it come true. I also fund a tracking account (off budget) where I’ve accumulated enough cash to cover loss of work, medical crisis, or other unfortunate life event.

    I don’t set a category in my budget to collect funds for future months. Instead, toward the end of each month, I look at the upcoming month’s budget and start moving any excess funds from the current month to the fixed expense categories in the next month. I rarely fund the whole budget by the first of the month. So I live with some orange categories in my budget, but I know I can move money from my aspiration categories if needed.

    I’m pretty committed to reviewing my budget once/week. I spend 30 minutes and it makes me happy. I use that time to make adjustments to the funding in each category. As paychecks come in, the orange categories turn green. If an unexpected expense comes in or I really want to spend money going out to eat, I bite the bullet and I move money out of the aspirational categories that have an available balance.

    This approach works for me and I’ve found the inclusion of aspirations a powerful tool for regulating impulsive spending. The more specific the aspiration, the better. The dollar value could be $100 for a pair of goofy socks or $2,500 to blow at a casino. Watching balances grow is cool, but what happens when I reach my balance goal is delightfully surprising. I don’t  run out and spend it. For example, I’d spent months researching my aspiration to have a high quality kitchen range. The category balance steadily grew and when I met my goal I instinctively said to myself, “I don’t want to spend that much on a range.” Now I have a better problem. What should I do with the money I didn’t spend?

    The “next month” category approach makes lots of sense. I tried to use YNAB to chase that goal, but I consistently found myself stealing from the future category. In retrospect, saving just to be able to fully fund the next month’s budget felt like the budget was an end in itself. Funding and managing my aspirations turned it into something reassuring.

    Like 6
      • briefcase
      • A rack of ties, a travel mug, telephone, briefcase filled with papers
      • briefcase
      • 1 yr ago
      • 4
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      Maroon Boat Glad it's working for you, but as you probably suspect you would not be "buffered" in the classic YNAB sense.  Speaking from personal experience, when we used YNAB4 we found ourselves after several months having saved up almost enough money to cover an entire month.  We decided to re-purpose that money and enable the Income for Next Month in the software, and it was easily one of the best decisions we ever made concerning our finances. 

      When you don't need money the instant that you receive it, for any reason, there's a sense of relief that you get that you didn't even know you needed.  Still even today, we very rarely budget money in the same month that we receive it.  It would feel self-destructive at this point and counter to everything that we've learned from 4 years of YNAB budgeting, regardless of what the current suggestions for Rule 4 are.

      Like 4
    • briefcase Thanks. I appreciate you taking the time to respond. I see your point. I suspect I buried the memory of that feature. I was never in a place to really take advantage of it with the pre-nYNAB versions. I see how losing that feature would be unsettling and disruptive.

      So - I agree - I'd like to see YNAB create a way to support people with that transition. Furthermore, I'd like to see YNAB create a way to "graduate" from AoM to something more financially-focused.

      Like 3
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