Reconciliation of budgets and accounts
Hey all, still in the process of getting my head round some (OK, a lot lol) of the concepts in YNAB.
I've read a number of posts where people are saying that it doesn't matter where the money sits account-wise, it's the budget that matters; and that any one of their account balances may not be the same as the amount in the budget.
So how does it work when you are trying to reconcile things and make sure that what you think is correct, is actually correct?
It's probably simple but I'm struggling to get my head around it...
Reconcile has a specific meaning in YNAB. I means clicking the Reconcile button in your account register and making sure that the cleared amount in YNAB matches the cleared amount with your bank, your credit card company, or the actual cash in your wallet if you have a cash account. If my accounts are reconciled and up to date, then the money that is in my budget is in fact, in my budget.
And to follow on @jenmas, when your accounts are reconciled, meaning the cleared amounts match the bank, then your budget is correct. The money might not be in the account where you most need it, in which case you'll move it, but the budget will reflect reality. This is why it is important to cover overspending when it happens: your budget tells you the plan for all of your money. If the plan isn't followed, and also isn't adjusted, then you can't trust your categories. But as long as you do that, you have the money the budget says you have. (And even if you don't correct the overspending, the budget will tell you where the problem is and whether you can trust your balances.)
Thanks guys. Having done some more reading I think I am confusing the way people are referring to budgets and categories.....
So what I should be doing is:
If I have £500 in my budget I need to make sure that I do actually have £500 in my bank account(s) - it doesn't mean that it is just sitting in one account necessarily, it could be in a savings and a current account. But also that £500 might be split into 20 categories and not showing in any *one* place.
Is that right?
Midnight feline said:
make sure that what you think is correct, is actually correct?
There is no "actually correct". Let that sink in for a moment.
Given sufficient account balance, the location of any particular category can change just by changing your mind about where you regard it to be.
The only important thing is to avoid overdraft/account minimum requirements, which is easy if you look at upcoming/scheduled transactions. Oh, and install the Toolkit Extension which will give you a running balance that includes them. If the account balance is (or will be) running low, transfer from any other (cash-based) account.
The article Tomato Tamale linked will hopefully make all of this very clear.
Midnight feline said:
If I have £500 in my budget I need to make sure that I do actually have £500 in my bank account(s)
You don't have to do this, it's baked into YNAB.
Money in Budget == Cash in Accounts.
You can prove it to yourself by looking in the future-most month's area (for simplicity). These will be equal:
- Money in Budget = Money Allocated + Money Not Allocated = Total Available + To Be Budgeted
- Cash in Accounts = sum of cash-based accounts and positive CCs (these are effectively cash, as they hardly need to be paid back)
But yes, you're starting to think about it correctly. It's completely up to you where you regard a category to be. The only time category location actually matters is when you pay, which is easily arranged by merely regarding the category to be in the same account with which you've chosen to pay.
(The only caveat is the account needs to have at least as much money as the outflow, which is hopefully common sense.)