Beginning - Where do I put all this money?

So, I am attempting to start a budget that will last and I currently have approx. 20k in savings.  YNAB tells me that this is money to be budgeted. In reality that money is earmarked (in my mind) for a rainy day fund. Should this be a category in my budget and should the 20k be dropped in there? 

15replies Oldest first
  • Oldest first
  • Newest first
  • Active threads
  • Popular
  • That's what I would do, yes.

    Like 1
  • What experienced YNABers do, and what the software is pushing you toward, is breaking up that money. What is the $20,000 for, exactly? Replacing your income for job loss? House emergencies? Car emergencies? How much for each one? 

    The idea is to be able to see concretely how much money you actually have earmarked for various purposes. A generic "rainy day fund" makes it easy to double count. If your HVAC system blows the same day you get pink-slipped, you're going to have some decisions to make. Better to have made those decisions beforehand. 

    Like 5
  • That's very helpful. I think it takes some getting used to changing your mindset.

    Like
    • Hi Steel Blue Violin !

      WordTenor is absolutely right! We think of savings a little differently at YNAB. You'll want to specify exactly what that $20k is for in your budget. You can create a "Rainy Day Fund" category, or a Rainy Day Fund category group and break that money down into other categories like mentioned above.

      Here are a few resources that go over Savings:

      – Here's an article showing you how it all works.
      – Take a look at this 7-minute Whiteboard Wednesday about savings.
      – Attend a free workshop about savings called Reach your Savings Goals!

      Let me know if you still have questions! :)

      Like
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 2 yrs ago
      • 2
      • Reported - view

      Faness at YNAB  I would recommend against making a single Rainy Day Fund category. I think most experienced users would. 

      Like 2
    • WordTenor I am a full and firm supported of breaking down savings into specific categories. Just wanted to point out it can be a work in progress - the article mentioned goes over breaking down those categories. :)

      Like
  • I'm not sure I agree 100%  with the breaking it down into purposes line of thinking. Sure, if it IS earmarked for something specific, then of course. But for example I have savings that may not be used for years and they are not for any specific purpose, so there is a large "long-term savings" category, which is used for things as and when required. I also have funds for more immediate uses too, but the money that won't be used for years doesn't need to be categorised yet, IMO.

    Like 1
  • I don't see how a Rainy Day Fund (savings) should be broken down into other sub categories...
    Doesn't make any sense to me....
    If I have $20k set aside as the OP mentions, I don't want YNAB to allocate that amount to some "budgeted" category.... it's a spare tire - I don't know when, where, or how I will use it - that's the whole point. 

    And I don't want YNAB to include it as part of some grand overall bucket of cash that I can draw on at will....   I'm having a hard time with YNAB because it wants to account for every monthly dollar - with no set aside to be left alone in savings.  Maybe most folks that live paycheck to paycheck need YNAB to run their lives, but some of us are not that strapped, and are just interested in some basic accounting for in/out - 

    Like 1
      • jenmas
      • jenmas
      • 2 yrs ago
      • 2
      • Reported - view

      ps56k Assigning funds to a category does not require you to spend it. I have a 6 Month Loss of Income category in my budget and I hope to never spend a penny from that category and when I retire, I'll just empty out that category and assign the funds to other categories. I also have categories for home maintenance, car repair/maintenance, Dental Drama, Annual Medical Out of Pocket Max, and Next Year's Annual Out of Pocket Max (so it will be fully funded on day 1 of the new plan year). I don't have a pet but if I did, there would be a Vet Emergency Fund with a couple of thousand in it. So yes, the hope is not to have to spend out of any of those categories but realistically, I will. And now I know what position I'm in if I decide to rearrange furniture this weekend and accidentally knock a hole in the drywall because my home maintenance category will tell me I'm covered for the repair. And then next month I'll skimp on some of my discretionary categories in order to top up my depleted repair category.

      Things like taxable investing for retirement are in off budget tracking accounts along with IRAs and 401(k).

      Like 2
  • Revisting the topic -  from a YNAB logistics AND wanting to keep a single Rainy Day fund.

    I just added an existing Money Market account to my YNAB.... it has a starting balance of around $20k...

    So - after I added it today, it shows with it's Starting Balance line item - and Inflow To Be Budgeted...
    I really want to track it - but not have it appear as part of the overall budgeting bucket.
    I tried to Budget and Spend about $18k - to set that amount aside,
    but YNAB still shows things out of wack, as the Report - Income vs Expense is now very wrong.
    I am almost better NOT having the MM account even entered as part of the Budget,
    but merely setup and Tracked by YNAB.....


    Again - it appears that YNAB is very focused on helping folks living on the edge from month to month, but makes it a little difficult for those that have built up a cash buffer - and don't need to budget every dollar.

    Like
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 2
      • Reported - view

      ps56k 

      ps56k said:
      Again - it appears that YNAB is very focused on helping folks living on the edge from month to month, but makes it a little difficult for those that have built up a cash buffer - and don't need to budget every dollar.

       I have that same impression of how web-YNAB is described, advocated, and supported; but that is not all that can be done with YNAB.  My biggest complaint with web-YNAB is that features I used to budget from a position of having enough money have been deliberately disabled and/or forbidden apparently because it is believed that beginning budgeters will hurt themselves with features that are useful to me.

      I can work around some of the disabled features.  I must live with some of them.  But I can still use YNAB to prioritize my money's purposes; when all the jobs that are worthy of being in the budget are fully funded or on track to be fully funded by the due date, any excess money can be thrown out of the budget at investments.  When I was working, this took the form of a monthly transfer to a brokerage account that was recognized as an expense by the budget.  Now that I'm retired, it takes the form of a reduction in the amount of income the budget receives from my investments next month.

      Support does not talk about budgeting this way.  The story is focused on budgeting paycheck to paycheck, to the extent that support for budgeting a complete month in one session was removed from web-YNAB.  (This is not an insurmountable problem, as I can use a workaround to re-create walled months and the single monthly planning session.)  But just because the sound track and all of the examples are focused on people living on the edge does not mean that YNAB cannot be productively used when the budgeter has a buffer and sufficient income that the end of the monthly budgeting process is throwing leftover money at long term investments.

      You just have to be clever enough to recognize that when you are not the market that all the rhetoric is aimed at, you need to adjust how you use the software and selectively ignore advice that is unhelpful for your situation.

      And even with the above less than glowing endorsement of YNAB customer support, I would still tell you that on-budget savings should be put into categories.  Maybe the categories have names like "Unexpected Expenses" or "Income Replacement Fund," but every dollar in the budget needs a job.  If the dollar doesn't have a job, it needs to be thrown out of the budget at long term investments with implied jobs such as retirement income or funding the kids' college.

      Like 2
  • ps56k said:
    I tried to Budget and Spend about $18k - to set that amount aside,

     You set the money aside by allocating to a category (call it Rainy Day Fund, call it Disaster Strikes, call it whatever you want). That's it. You don't do anything else. Creating a false transaction to spend it tells YNAB that you did in fact spend $18K.  You know how you make sure you don't spend any money allocated to your Rainy Day Fund? Don't enter any transactions with the category assigned Rainy Day Fund.

    Like 3
      • ps56k
      • ps56k
      • 2 yrs ago
      • Reported - view

      jenmas  tnx - yeah, after playing with the various combinations, I finally stumbled onto the mix of - Budget but NOT Spend - the "reserve" amount to set aside..... 

      I had done it with my checking account when I initially set it up,
      but it took me awhile of scrolling back thru the budget months
      to see exactly HOW I had actually set the money aside.... ---> Budget but not Spend -

      Like
  • ps56k said:
    Again - it appears that YNAB is very focused on helping folks living on the edge from month to month, but makes it a little difficult for those that have built up a cash buffer - and don't need to budget every dollar.

     When I came to YNAB I was living on the edge, today not so much.  I have money put aside for car and home maintenance.  I have money put aside to replace my computer or phone when they die along with many other "emergency" categories that are funded.  

    When I first started with YNAB, I was able to save up a couple thousand dollars (more than I had ever accumulated in the past) and felt I had gotten off the edge.  Then Murphy (things can go wrong, all at the same time) paid me a visit.  I had  some major repairs for tens of thousands of dollars, then my car died and cost several hundred dollars to repair, then my computer died and had to replace it for another couple thousand dollars, all in two months.  If I had stopped saving when I reached the point of "having more than I ever had in the past" I would not have had enough to take care of everything that happened.  In fact, I didn't, I had to do some creative bookkeeping and with the help of YNAB and a credit card, got through those months.  Now I realize I need more in my various "emergency" accounts than I ever realized.  

    You can argue that you have "enough" if you want to, it's your choice.  I choose to fund all the different areas that "could go wrong" with a little each and every month.  Then, hope I will have enough when Murphy comes to visit again.  

    Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • 3
      • Reported - view

      TryingToGetAhead 

      TryingToGetAhead said:
      You can argue that you have "enough" if you want to, it's your choice. I choose to fund all the different areas that "could go wrong" with a little each and every month. Then, hope I will have enough when Murphy comes to visit again.

       You can be in a position to do both. My Income Replacement Fund is fully funded at 6 months expenses. But I still add 5% annually (so 5/12 of 1% monthly) in order to account for inflation of expenses from year to year. I add $50/month per car to the car maintenance/repairs. Home maintenance and repairs is funded monthly. (medical comes from the HSA, I have a holding category equal to 2.5% of the budget for cashflowing things).

      But I still have money leftover at the end of the month. Some of that goes to charity above our regular giving amounts, some of that goes to paying down the mortgage (optional, as we have a good rate on the mortgage), some of that goes to funding future home improvement projects faster (optional as a compromise with the wife), some of that goes into the kids' UTMA brokerage accounts (to give them a kickstart when they leave the house in 7 and 9 years respectively), but 60% goes into a brokerage account for our long-term future. That 14.6% CAGR since December 2015 isn't too shabby.

      Another option would be to increase contribution to retirement accounts if you have unused space to contribute.

       

      So really, there can come a point where you truly have money that you can't use in your budget, and the best option is to take it out of the budget and put it to work for you.

      Like 3
Like Follow
  • Status Answered
  • 2 yrs agoLast active
  • 15Replies
  • 1837Views
  • 7 Following