If you had $5000~ Month Ahead vs Beefed Up Sinking Funds

We have some money we are thinking ttrough what to do with.  We are wondering if it is better to beef up our sinking funds back into a good working zone rather than depleted like they are now for things like auto repairs, Clothing, Dr/Dental visits copays and high deductibles,  Propane tank fills, Internet (every 3 mo), Homeschool Curriculum, gifts, vacation etc.  Or should we use that entire amount to get one month ahead?  The full $5000 would do get us a full month ahead.  Beefing up sinking funds would take about $2,000, so that scenario would only leave $3,000 for getting a portion of a month ahead.  I am new to the concept of a month ahead. We have $1,000 emergency fund currently.  I am trying to figure out how best to prioritize the needs for this money to make the biggest impact on stress reduction and ease of budgeting in future.  We have tax returns coming, an extra check in March that can help fund some of our goals within a month or two, but obviously not counting on that for now.  It feels a little like 6 of one half dozen of the other I realize but I am curious what others think about which takes priority.  Age your money is step #4 vs Step #2 for true expenses/sinking funds.   I am coming from Dave Ramsey mindset and I am learning to think slightly differently with the YNAB principles and getting familiar.

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  • Since you said you're trying to make the biggest impact on stress reduction and ease of budgeting in future, getting a full month ahead would be the most immediate bang for your buck.

    You could always use the extras you have coming in within a month or two to shore up those categories when you get them, knowing that you only have to worry about budgeting once per month from now on. (you still have to keep up with entering transactions and consulting categories to guide purchasing decisions, but you only have to decide on jobs for the money once per month when you're a month ahead.

    Reply Like 2
    • bevocat I have never been a month ahead before, how do we go about seperating out new money and old money?  How do you be sure you are operating only on last month's money do you reconcile the budget to the account weekly?  Or does the new money come into a different account and get transferred when it is time to budget that next month.  I think I am making it more complicated than it needs to be but I don't want our month ahead to dwindle away somehow.  I know NOT to look at bank account for available $ to spend....of course....I know to refer to our budget categories for how much is left etc...but I wasn't sure how it works as you get paychecks....we get paid weekly.

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      JulieDoin'YNAB Well, as @nolesrule  said, probably shouldn't worry about it until you've gotten all your true expenses caught up or you're not really going to be a month ahead.

      Once you get there, what I do is use a category I created called "Next Month's Income". Every bit of income I received in January goes there.  Then when you're ready to flip the month, you move it out of that category into "To Be Budgeted", flip to the next month, and give your dollars their jobs for the month.

      You need the discipline to treat that as an invisible category that you don't "borrow" from for this month's expenses unless personal safety or legal status is threatened.  But that is true for absolutely any system out there.

      Reply Like 4
    • bevocat That makes a lot of sense!  Ok just categorize it as income for next month and leave it be.  Even if it is in the same account if it is earmarked in budget as tied up that will make it clear to me.  I like that.

      Reply Like 3
    • bevocat I never thought about doing it that way! I was always worried because if I just put one paycheck to next month, but then overspent in the current month it would pull it from the next month, and it was mentally exhausting to me. 

      I know this was a big deal, and I’m not trying to stir the pot, but I miss YNAB4 version of sending money to next month, and living on last months income. It was such an easier concept than aging your money.  At least to me. 😂

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      bedebtfreegirl Wish I could take credit for it. It's a workaround that was devised on the old forum three years ago when people were telling support they needed to implement this feature. And yet here we are.

      Reply Like 4
      • Superbone
      • Programmer
      • Superbone
      • 10 days ago
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      bedebtfreegirl Completely agree. But you can simulate it pretty well with a category that you release after all of this month's salary.

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  • Not all of those "sinking funds" are sinking funds. Some are recurring non-monthly expenses. True Expenses (YNAB Rule 2). You should have enough money in the categories now so that you can budget the same amount monthly toward them from regular income and have enough the next time they come due. I would play catch-up on any of those before trying to get a month ahead, because taking care of True Expenses is about keeping even, and you need to do that before getting ahead.

    An example of True Expenses is your Internet every 3 months. You should budget 1/3 of the expense every month. If the payment is due in 3 months, you're fine and can budget monthly. if the payment is due in 2 months, you should already have a month saved up, and can budget the remaining 2/3 in the next 2 months. If it's due next month, you should already have 2/3 available in the category and budget the last 1/3 prior to the due date. Same thing for things like propane refills and Homeschool curriculum. You know about how much they cost and how often you need to do it, so those categories should be partially funded.

    The whole point of True Expenses is to budget for them like they are monthly expenses. But you have to get on pace in order to do it. It can be difficult when you first start using YNAB, but having a windfall is a great way to get on pace.

    Reply Like 5
  • Yes, we are normally great about putting $ in sinking funds for years (they are for our true expenses we call them sinking funds).  Our daughter got married mid December with only a 4 month engagement so we did not have time to save plenty for wedding so we are going into January quite financially strained so many didn't get funded for a couple months.  So we were thinking of getting those caught back up to on target and then the rest go into getting a month ahead.  But then I questioned if it might be easier to be an ENTIRE month ahead and worry about funding the most imposing immediate true expenses as we have $600 here and $1000 there coming in.  

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
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      JulieDoin'YNAB If you get yourself a month ahead without getting caught up on the True Expenses you'll still be doing the catch-up juggle until you're all caught up. That's more stressful, because you're dealing with a bunch of different categories that are coming due at different timeframes.

      If you get yourself caught up on True Expenses first, you won't have to do juggling as your formulate your plan to get a month ahead.

      Reply Like 3
    • nolesrule  Ok thank you!  That does make more sense.  So in the mean time, I put the $3,000 earmarked for partial budgeting a month ahead to a separate budget category like Month Ahead Fund or do I just start budgeting into February with that portion.  For instance since the mortgage is due the first I could go ahead and allocate part of that $3000 to next month's mortgage payment (the biggest payment we have).  Maybe pay all the ones due really early in the month and get ahead on those?  

      Reply Like
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      JulieDoin'YNAB You can do either one, just be aware that if you're budgeting into the next month (which is now March at this point), you run the risk of silently stealing that money from the future if you budget more money into this month (currently February) for some reason. If you keep it in a holding category, it's a very explicit action you are taking if you decide you must eat away at that partial buffer for something that you spend this month.

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    • bevocat I think I prefer to have a category at this point because I got confused real fast when I budgeted into the next month.  Balances weren't making sense.  So I think I will stay in current month and enjoy moving that money into TBB for the next month when it is time.:)  I love YNAB so far, when I get small amounts of $ for odd jobs I enter it right in (if it's cash it goes into my "wallet" account) and that way that small amounts of cash I earn here and there doesn't just trickle away on me like it often does.  It is adding up fast and I am fueled with motivation by the difference YNAB is making so far.  We have budgeted for years with paper and pencil but we were always trying to forecast with Dave's plan and my hubby has irregular income that made it a challenge so we'd budget on our base income and then we had trouble staying focused with the "extra" because we didn't have a good way to keep track of true expense categories etc.  I love being able to set funding goals, and see the helpful tools and motivators on the side margin too.  I got a 60 day trial and I think I am sold enough to take the dive to buy the annual membership.  

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      JulieDoin'YNAB It sounds like you're absolutely on the right track! Stay the course and you'll be successful!

      P.S. I used to budget into future months too and decided I like this way better, so you're in good company (or bad company, not sure... 😉).

      Reply Like 2
    • bevocat Just jumping into this thread. So if you create a holding category to carry into next month. Would you just move the money from the holding category into other categories when the month actually comes?

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      Lavender Door Nope. I don't like that way. I like to wait until the end of the month, then empty out my holding category. Shwoooop-- the money gets sucked up into my To Be Budgeted, and there it sits, all shiny and ready to be assigned to categories when I flip the month over.

      Reply Like
    • bevocat Haha!  I love it!  All shiny!

      Reply Like 1
  • Things with definite timelines (internet, propane, etc.) should get on track first. Doesn't have to be filled now, but put enough in now that the remaining contributions will "fit" into your monthly income.

    Personally, I'd get ahead first. I'd also reallocate that $1k EF to help with that. I know, sacrilege to a Dave Ramsey fan, but the truth is it just sits in that category until you need it. It can just as easily sit in next month's area until you need it -- you're not spending it, after all. More importantly, however, it makes budgeting almost trivial when you can work with month-sized chunks. If you do actually need it, you can pull it back in about 10 seconds. (In that case, you would obviously lose the convenience of being ahead, so you probably want to grow that EF category back up so you can have both.)

    Reply Like 3
      • bevocat
      • Crazy Cat Lady
      • bevocat
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       Having both really helps when you can get there. Then you can be very intentional about funding those less-frequent-than-monthly expenses and the expenses you don't know when they're going to come up but sooner or later your car is going to need tires, you might need to buy a plane ticket for a funeral, you might need to pay a co-pay/co-insurance for something you don't routinely budget for, etc.  It never ends, honestly. But at least when you're a month ahead and you've got your true expenses budgeted and a little emergency fund, you have some measure of peace of mind while you're building up the rest!

      Reply Like 1
  • I'm on the opposite side of this. Once my funds are 30 days ahead, I like to see the extra moved into a savings account physically (well you know on the bank side) and in my budget. I understand what YNAB is trying to do, but it seems for me that would lead to a lot of transfers from category to another when say the car breaks, but the money is in rent because that's 2 months ahead. I'd rather be 30 days ahead on all my categories that represent bills and put the rest in a single category called savings. I can watch the single category grow. I can pull from it when needed (car breaks down, hospital bill) and pay it back when I'm able. I also find it helps me manage money to keep this longer/older money out of my main checking account. Maybe that's a sign of weakness, I don't know. But, when the money is in another account other than checking and I have to move it to spend it, I just spend less. 

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
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      Ben K. A single catetory like that is a great way to double book the funds in your head. Break it out into the categories you plan to use it for. You'll probably find it doesn't go as far as you think, and different emergencies can all happen at the same time. You really should have specific goals for funding different kinds of expenses. Medical has an insurance max out of pocket you can work toward. Car maintenence and repairs tend to cost on average $50 to $100/month in the long term depending on the type of car you have. The rule of thumb for a homeowner is 1-2% of the value of the home per year. You need to make sure you're building up for income interruption.  If you just dump it all in a single category, you don't really know if you're on pace, especially if you use some of it.

      As to money in a savings account, that's a cashflow issue. You only need money you need to spend in the short term in checking. The length of that short-term is up to the individual to decide.

      Reply Like 3
      • Ben Khaki Storm
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      • Khaki_Storm.1
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      nolesrule I appreciate the purist view of not really have a catch all account, but I don't see how I am double booking anything. I agree some things can be better predicted and thus saved for, but you run into the risk of having too many accounts to see the forest for the trees and not having a good idea of how well you are really doing.  Using easy numbers, if I know my average monthly spending overall is $1000 and I have all my categories funded up to 1 month, aka $1000, then I can start saving in a separate category. If that category is at $2,000, then I have 2 months to fall back on, etc. The downside to spreading it all around and relying in the age of money is it becomes less tangible and harder to track. If my categories are like 1.5 months on A, 2 months on B, 1.75 months on C funded, then how far ahead I am really? It's hard to track and visualize. The other bonus, is lets say I get savings up to $6,000 or 6 months of safety. That's huge and it might need it's own home. I understand you'd not invest it in the stock market or anything risky, but you could put $1000 for work for you in a short term CD this month, then $1000 in another CD next month. You still have 4 months in liquid cash and you didn't tie up all $2000 in the same CD, so you could early withdrawal one if needed (lose the interest of course). 

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      • bevocat
      • Crazy Cat Lady
      • bevocat
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      Inaccurate language leads to difficulty in understanding, so let's be precise. You don't have many accounts, you have many categories. You can lump every single dollar you own into a dragon hoard on your bed and then assign out categories money from that. YNAB cares not where your money lives. It cares what jobs you have given your dollars.

      Ben K. said:
      you run into the risk of having too many accounts to see the forest for the trees and not having a good idea of how well you are really doing
      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      Ben K. Also, how do you know when you're 1.75 months ahead? What if you get smacked with an emergency room copay? How many months are you ahead now if you have to take money out of your generic "savings" category?

      Reply Like
      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
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      bevocat You're correct. I've corrected myself so many times today. My old software called them accounts, which equal categories in YNAB.

      Reply Like 1
      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 2 wk ago
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      bevocat emergency savings would be at $1750 when I'm 1.75 months ahead. If I'm hit with a large co-pay, mine for that is $250, then I'd be at $1500 or 1.5 months ahead. 

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
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      Ben K. It's not about having too few or too many categories. It's about having the right number so you have complete visibility. Family of 4, we have 80-something categories these days. Every single one is funded the same amount every month. Unneeded funds are redistributed at the end of each month.

      When you plan properly for your contingencies, there's no such thing as an emergency.

      Reply Like 3
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      nolesrule Today I have 144, and there are two of us accounted for in the budget. For me, they're not too many, because I break out every line item deduction in my payroll statement and each subscription that we pay for, etc. But I completely get that other people don't need that many!

      Edit to add: EWW! I have a gross of categories!

      Reply Like 2
      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 2 wk ago
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      nolesrule We might be saying almost the same thing. I was looking over the guides and found a good section on emergency funds. It's in https://www.youneedabudget.com/guides/age-your-money/ under Multiply Your Security with Emergency Funds. Maybe I didn't word it as well as that section, but what is says is all I was trying to make clear.

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      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
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      bevocat Right now I have 45 categories and 2 adults, 3 teens/adults at home. I've actually looked at them (the categories, not the people) to see if I can reduce them without ending up with a huge misc. category.  I could also still be thinking in my old software limitations. I've not used the reports much in YNAB. Unless the reporting functions allow me to group categories into user defined groupings or something like that, I'd have less control of my budget with more categories because it would be too finite. I've done a little cost accounting (I'm not an accountant) for work from time to time, and it happens in business. If I have every trade journal, magazine, Harvard business review access, split out into separate categories, then I lose track of the larger picture, of "What I am spending to stay in the know?" The same is at least true for my personal budget. At Christmas I could create a category for every person and know exactly what I spent on them. However, does it matter that I spent $5 more on Aunt Ruth and $5 less on Uncle Tim? Or, does it matter more than I stayed under my Christmas budget?

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      Ben K. Ah, but you can totally do a report that includes only your subscriptions. For example, I might want to know what our combined spending was for massages, dental and optical last year. I go into reports, select Categories, click Select None, then tick off only the boxes I'm interested in and I'm golden. Or I can go to this month in the budget, make sure nothing's selected, then tick only those categories and see how much I have spent and budgeted this month, what I spent and budgeted last month, and my average. Then I can see that I budgeted, say, $150 this month but only $140 last month, and have spent less than that on average but that I budget $140 on average. I can slice and dice any way I fancy!

      The reason why for these to be broken out is so that I can use target-by-date goals for their various differing due dates, if that makes sense. Netflix is per month, e.g., whereas Plan-to-Eat is yearly. I certainly don't recommend this way for everyone but it works for me.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 wk ago
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      Ben K. A lump sum emergency fund is a good start, but in my experience, and in those of a lot of other long-time YNABbers too simplistic for the long run. One of the benefits about breaking it out into individual categories is that all of a sudden something that used to be an emergency no longer is. Instead it becomes a planned-for expense. Medical expenses, home repairs, car repairs, traveling cross-country for a funeral... they are inevitable and independent, so you might as well plan for them individually. It gives you better insight into your preparedness.

      Side note... nice to see they are improving the guides, but the whole "Age Your Money" thing just makes me want to smash my head in with a hammer. But I've been ranting on that for the better part of 3+ years.

      Reply Like 4
      • Ben Khaki Storm
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      • Khaki_Storm.1
      • 2 wk ago
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      bevocat I look forward to using the report features. Much different than my old software. You could not get a combined report. 

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      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
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      nolesrule Then perhaps this is a baby step thing. You are up to running marathons and I'm only at a 5K. Ok, a 3K. Would you believe a 1K? Also, if two are running the budget, then they both need to up to the same level, and perhaps that means one of them falls back a little. Just a thought. 

      Reply Like 1
      • bevocat
      • Crazy Cat Lady
      • bevocat
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      Ben K. I've been baby stepping for three years now! Every time an "emergency" expense comes up, I handle it, and it gets a category going forward. Of course, be proactive if you think of something sooner, because it's better to have it and not need it than to need it and not have it!

      Reply Like 1
      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
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      bevocat I agree that most emergencies go away once you start either the 4 YNAB steps or other similar budgeting steps. I'm just saying perhaps I found a comfortable stage and stopped there while you went onto higher level of budgeting. Also, this is a snow day for me, so I'll not be on this much in the future :) 

      Reply Like 1
    • Ben K. 

      Ben K. said:
      I like to see the extra moved into a savings account physically

      I do that as well, but it stays in the category. Anything not needed in the next few weeks tends to get migrated. No point in changing the category -- I still plan to spend $X on car insurance, $Y on my A/C maintenance renewal, etc.

      Location does not influence purpose in my mind. It's like I have $5 for a burger in my back pocket. While walking down the street, I see some sketchy guys, so I move it to my front pocket for better security. That location has additional benefits, but I still plan to spend the money on a burger.

      Reply Like 3
    • Ben K. 

      Ben K. said:
      that would lead to a lot of transfers from category to another when say the car breaks, but the money is in rent because that's 2 months ahead

      Precisely why I don't budget past next month's area. Too many numbers to edit when things change. However, that doesn't have anything to do with being in a different account.

      Not to mention that having that cash in another account doesn't even keep you from spending it! For example, you overspend in Dining Out using your "normal" account. You still have to pay the Rent, but now the account is short. You have no choice but to transfer from "savings". So much for "preventing" you from spending it -- your savings account took the hit anyway.

      The only way to not spend your savings by accident is to check your category balances before you spend. That's your spending plan! At that point, you can reallocate in advance and know exactly the consequences of spending more than was originally available on dinner.

      Reply Like 3
      • Ben Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 2 wk ago
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      dakinemaui I understand all of that, but still I've noticed a pattern. That's all I'm saying. I mean if moving the cookies to the top of the fridge keeps you from eating too many, than do it. That's all. Yes, you can still get to them. 

      Reply Like
    • Ben K. If I move the cookies labeled "Wife's Cookies -- DO NOT TOUCH under penalty of DEATH!" to the top of the fridge... and then I still eat them, I think I deserve all repercussions coming my way. ;-)

      Reply Like 3
  • BTW, I have a link to free homeschool curriculum on my site: https://studyjar.weebly.com/ The site is just a collection of links I've found and use. The free material is very open in format, so making changes, if needed, shouldn't be hard, just copy the assignments to a Word doc and go to town. You're still the teacher and need to ensure the subjects are fully covered to your satisfaction. I've used a handful of the free classes just as they are, but if we used the free material for math, I'd want to add to it.

    Reply Like
  • nolesrule said:
    A lump sum emergency fund is a good start, but in my experience, and in those of a lot of other long-time YNABbers too simplistic for the long run. One of the benefits about breaking it out into individual categories is that all of a sudden something that used to be an emergency no longer is. Instead it becomes a planned-for expense. Medical expenses, home repairs, car repairs, traveling cross-country for a funeral... they are inevitable

     I just want to reinforce that the 2 are not mutually exclusive because someone could read into what you said that you should not have both. You want to work toward having BOTH fully funded. When you first start out you have to rely primarily on the lump sum EF and will probably only have little in an Auto maintenance category that keeps getting wiped out. When you get further down the line you would like to get to say $1000 in Auto maintenance AND have 3-6 months expenses in EF. The EF is something you avoid touching at all costs. I view this EF primarily for cases like getting laid off and unable to find work for nearly 3 months (been there, done that, without said EF and had to borrow money from family and credit cards which was the catalyst that got me back to YNAB 2 yrs ago). Dave Ramsey talks about this as having emergency funds for your emergency fund.

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      • WordTenor
      • Your lieutenant, when there's reckoning to be reckoned.
      • WordTenor
      • 10 days ago
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      dalewking In the scenario nolesrule and you describe, that category gets its own name, usually something like “Income replacement” and its purpose is distinct from “dishwasher broke”. No one is advocating for there not to be an income replacement fund. Rather the suggestion is to conservatively budget so that you can handle “emergencies” regardless of whether you are employed or not. Dave Ramsey’s suggestion is to have one fund for everything. The problem with that is if you make 5K per month, and have three months saved, and the day you lose your job, your HVAc system blows, well, now you have two months. Emergencies don’t care if you have a job or not, so best to be clear about what money is for which kind of problem, including the problem of job loss. 

      Reply Like 7
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
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      WordTenor exactly. You won't find "Emergency Fund" in my budget. Just "Income Replacement" (though I've been contemplating renaming it "Income Interruption") and I have rule-of thumb funded car and home categories that are a mix of maintenance and repair based on long term averages. (No medical because we have tax advantaged accounts to cover those costs).

      In other words, you name the category so it accurately represents the specific job of the money, instead of a general job that would cover specific things. You figure out how much you need to fund on a regular basis for each of those specific jobs.

      For us:

      Home - 1/10 of 1% of the home value per month based on insured coverage (current balance 18 months)

      Car - $50/car per month (current balance 19 months)

      Income Interruption - we're already at our target, so this is in inflation protection mode. 1/12 of 5% of the previous year's end category balance

      Reply Like 3
  • WordTenor said:
    that category gets its own name, usually something like “Income replacement”

    Putting a specific purpose on it like that is just asking Murphy to come up with a new type of emergency you didn't predict. The very nature of the emergency fund is that you cannot predict what the emergency will be so it seems pointless to try to predict.

    But yes, you don't want to rely on it for normal predictable things, you also want to have categories for that which you build up to cover most normal expenses, but that is not where you are when you are say in DR baby step 2. At that stage you should be putting some money in those, but it will probably not be enough to avoid hitting the EF until you get more financially stable.

    WordTenor said:
    No one is advocating for there not to be an income replacement fund

     My reason for replying was that someone could read what was said and think that was what being advocated for.

    WordTenor said:
    Rather the suggestion is to conservatively budget so that you can handle “emergencies” regardless of whether you are employed or not.

     And I am not disagreeing with that. You will not be able to get there when you first start digging out of your financial mess and will have to rely more on a lump sum EF, but I wanted to make sure someone didn't interpret "A lump sum emergency fund is a good start, but in my experience, and in those of a lot of other long-time YNABbers too simplistic for the long run" to mean that one should eventually replace the lump sum EF with categories for things like Auto maintenance or home maintenance.

    WordTenor said:
    Dave Ramsey’s suggestion is to have one fund for everything.

     Not true. Certainly until you get through his baby step #3 you will be relying primarily on a lump sum EF and focussing on getting out of debt rather than building a large balance in auto maintenance. DR would call auto maintenance a sinking fund (which I think is a misnomer) and he is certainly not against them. Getting them FULLY funded is a post baby step #3 task. You don't hear that much about it sine 90% of the people he is talking to are in BS1 or BS2.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
      • 5
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      dalewking This is YNAB, not DaveRamseyNAB.

      Us old-timers have been discussing this issue for several years. Naming something doesn't invite Murphy, it prevents it from becoming Murphy. Stuff i forgot about just isn't an emergency to begin with, it's stuff I forgot about that should have been in my budget in the first place. So you reallocate, have a new category going forward to cover this non-emergency that was only an emergency in your mind because you forgot to budget for it in the first place, and move on.

      There are only a limited number of types of big-ticket "emergencies", and there are rules of thumb on how much you need for them. If you plan accordingly, then even the emergencies aren't emergencies.

      Reply Like 5
  • nolesrule said:
    You won't find "Emergency Fund" in my budget. Just "Income Replacement"

     And I don't see the point of trying to pigeonhole it that way. There are too many other cases where it might be necessary that you could never predict. If I label it EF and never touch it what is the difference. That sounds to me like trying to say a general Home maintenance fund is too simplistic and we should have separate funds for HVAC replacement, another for roof replacement, another for water heater replacement. As soon as you start doing that Murphy will find something else to throw at you/ 

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
      • 2
      • Reported - view

      dalewking But the funding amount is based on long-term rules of thumb that are derived from projected lifetime of components of the house, as well as associated ongoing maintenance.

      My current balance of 18 months of home maintenance repairs is already after having replaced the microwave, refrigerator, washer, dryer and dishwasher and water heater all in the last 3 years. I also got a snowblower, and have sprinkler maintenance in the spring and the fall, among other things. Along with calls for plumbers, appliance repair, and even some DIY projects.

      The rule of thumb amounts have historical precedence that include all of the things you mentioned. A generic emergency fund does not.

      If for some reason, it turns out not to be enough, then you just rearrange your budget.

      BTW... murphy is an idiot and doesn't exist. Don't rely on a "mythological" figure as an excuse to limit your awareness. It's unbecoming.

      Reply Like 2
      • dakinemaui
      • dakinemaui
      • 8 days ago
      • 3
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      dalewking said:
      If I label it EF and never touch it what is the difference

      It's at the point at which you do have to touch it that the difference is apparent. Lumped together, you have little insight into your ability to handle multiple near-simultaneous emergencies.

      Simple example: you have a single EF with $60k in it. Your car is totaled in an accident. Obviously being without transportation is an emergency -- so you use $20k to replace the car. Unfortunately, this EF is ALSO supposed to tide you over in the event you're laid off, so now you can't last as long.

      (Yes, I'm aware you could finance, it's just an example.)

      In contrast, having things split up, you would have, say, $50k in the Income Replacement, and $2k in Car Repair, $3k in Car Replacement, and $5k in Water Heater Replacement. Assuming Income Replacement is top priority, you elect to not take any of that. However, you do feel having a car is more important than being able to handle a broken water heater. That means you buy a car for $10k AND maintain the security of the Income Replacement.

      The point is, YNAB helps you spending stay aligned with your priorities. But those priorities must be defined (i.e., categories) for it to help you.

      Reply Like 3
      • dalewking
      • dalewking
      • 8 days ago
      • Reported - view

      dakinemaui I think we are going to have to agree to disagree.

      First off, no qualms with car repair/maintenance. That should be there as a separate category, although as I said in the beginning it will not be big enough and you want to work to build it up to avoid dipping into EF.

      I have no problem if you want to have the other categories, but if I had them they would be in addition to not instead of an EF, although I think Income replacement separate from EF would be way overkill.

      Reply Like
      • bevocat
      • Crazy Cat Lady
      • bevocat
      • 8 days ago
      • Reported - view

      dalewking And just what is wrong with having an HVAC replacement category, a water heater replacement category, etc.? In the three years I've used YNAB, I've had to replace a refrigerator, a water heater, a garage door opener, two phones and a car. I'm saving for other categories too, but I like knowing how much I paid for a thing and its average life expectancy and then setting a goal for a category for it with a little fudge factor for inflation. I know next time my fridge dies, I am not going to be scrambling trying to cash flow something I didn't explicitly budget for.  At this stage of the game, I'm still playing catch-up, so if I had a generic "home repair" category, using it to replace an appliance means I probably don't have enough for plumbing, foundation, siding and roof repairs.

      And my income replacement fund is still a joke too. Nope, I need everything broken out.

      Reply Like
      • dalewking
      • dalewking
      • 8 days ago
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      bevocat I have no problem with any of those categories. My issue was the idea that those replace a general emergency fund instead of being on top of a general emergency fund. The idea that setting aside money for some finite number of specific emergencies removes the need to set aside money for the infinite number of possible emergencies is just a bad idea IMO.

      Reply Like
      • bevocat
      • Crazy Cat Lady
      • bevocat
      • 8 days ago
      • Reported - view

      dalewking I can't speak for others, but I think what you're not hearing is that the money set aside for the infinite number of possible emergencies is implicit in the explicit categories we fund. If a meteor hits my landspeeder, I can pull money from my vacation, painting, and dishwasher funds (e.g.) to pay for the repairs, acknowledge that these three items have to wait a little longer, and then set about replenishing them alongside a new category for landspeeder meteor damage.

      Reply Like
      • dalewking
      • dalewking
      • 8 days ago
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      bevocat I hear what you are saying, but the fact that you have to do that tells me that you are doing things wrong. You gave those funds a job (e.g. to replace the dishwasher) but you are just fooling yourself because in your mind that is replace the dishwasher or use it for any other emergency.

      I would rather have a fund that is for the vast majority of all those infinite number emergencies and just call it EF. It is there for replacing the dishwasher, income replacement, bail money, landspeeder meteor damage and so on. As things become more financially stable I might want to add additional savings categories to handle some of those specific potential emergencies. For example, I might start by having a Home maintenance fund of several thousand dollars that covers dishwasher replacement and roof replacement. Eventually I might even have specific savings categories like a HVAC replacement fund.

      But in all those cases I would be adding those layers around the base level protection of the EF, not replacing the EF. The reason to do that is to reduce risk by being able to handle multiple simultaneous emergencies. You are reducing the number of jobs that the EF is asked to be able to handle, but because the number of jobs that the EF has to be able to handle is infinite, subtracting a finite number of jobs still leaves infinity.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 8 days ago
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      dalewking 

      dalewking said:
      I would rather have a fund that is for the vast majority of all those infinite number emergencies and just call it EF. It is there for replacing the dishwasher, income replacement, bail money, landspeeder meteor damage and so on. As things become more financially stable I might want to add additional savings categories to handle some of those specific potential emergencies.

       "As things become more financially stable"... this is what I meant about thinking about the transition from a single "Emergency Fund" to breaking it out. No one said that everyone should break it out from the beginning.

      And the point you continue to ignore is that you think it doesn't work at all because no one is accounting for low probability emergencies. The idea, as we've all said, is to adequately fund for the mid/high-probability, and the best way to know you are making progress is to break them out into individual categories for funding. Certain of these high probability categories have basic rules of thumb that when followed will provide an adequate backstop against unfortunate timing.

      Generally speaking, the events that people have a high probability of getting tripped up on are  loss of income, home repair, vehicle repair and medical costs, and possibly last-minute travel emergencies. All of them have general rules of thumb you can follow for adequate funding individually, so it's easy to see if you are funding them adequately by keeping them separate.

      I'm not going to have a category for landspeeder meteor damage or bail money because the odds of my needing money for those things is so small as to be unlikely.

      One cannot account everything, but they can do their best to adequately account for reasonable occurrences.

      Reply Like 1
  • nolesrule said:
    dalewking This is YNAB, not DaveRamseyNAB.

     And nowhere was I advocating that, but it is hard to avoid DR when one discusses EF. The main point was that how you view this will change over your financial journey. One way to describe those phases of the journey is in terms of the baby steps.

    nolesrule said:
    There are only a limited number of types of big-ticket "emergencies"

     No, there are an infinite number of big-ticket emergencies and trying to predict every one of them is futile. It is best to have a last stop gap between you and homelessness. 

    There are certainly known categories where one can expect to have expenses eventually and you want to build up funds to avoid having to dip into the EF. But one could never predict all the possible jobs that EF might be needed for.

    You may have income replacement fund, fully funded home and auto maintenance, but there can always be some curve ball. Coming up with an example off the top of my head (not from experience) your family member gets arrested and you need to come up with $10,000 to bail them out. Should we all be building up a bailing out fund or does it make more sense to just have a general EF that can cover that or cover income interruption?

    Once again I am not advocating on only having a single EF, just that you eventually want both.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
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      dalewking There will always be some potential situation that exceeds the money you have and will require rearranging. You have to make a judgement call. As it is, holding 3-6 months income replacement + home repair + car repair + medical max OOP is already more combined money than "6 month emergency fund".

      You also have to look at probabilities of different emergencies. My siblings are in their 30s, all married and have no criminal history. Needing bail money for them is not something I need to worry about.

      I've also had to deal with several thousand dollars in unexpected expenses over the last few years but did not touch any of my emergency categories to pay for them. The money was raided from other categories which were optional goals of lesser importance. Basically, we didn't upgrade the flooring in our house 2 years ago like we had wanted to. C'est la vie.

      Reply Like
      • WordTenor
      • Your lieutenant, when there's reckoning to be reckoned.
      • WordTenor
      • 9 days ago
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      nolesrule Meanwhile my brother has a long criminal history and is highly likely to need bail money, but “bailing brother out of jail” is a lower priority for me than say, “Going to the movies”, so that is not an expense I am saving for. #whenyoursisterissavage 😂

      Reply Like 10
      • adriana01
      • adriana01
      • 9 days ago
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      There were some threads on the old forum that helped me embrace this concept. I forget exactly how it went, but what I took away from that was:

      -you have stuff you know you have to fund & the timing & amounts. (Annual insurance payments, etc). Budget those at 1/12 (annual), 1/6 (bi-annual), etc the amount so you have the funds built up

      -you have stuff you know you will have to pay, but not the exact amount or time (income replacement, insurance deductibles, home & car maintenance, travel for funerals, etc). Define them clearly & budget for each, building up funds as well as you can

      -you have stuff you want to do, but is optional at this point (home improvements, vacations you are dreaming about, etc). Budget as you can.

      -if, after planning & defining & budgeting as best you can, something unexpected does happen, chances are it either fits into one of the categories you've planned for, or you can add it as a new category & move funds to cover it.

      Which is just a long way of saying that the longer I've been out of credit card debt & building up savings for the things I can plan, the less I have needed generic emergency funds.

      Reply Like 4
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
      • 1
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      Essentially what we're talking about are individual categories for high-probability, high-cost planning. If you're in a secure occupational field you won't need 6 months income replacement, but if you are in a field that may be subject to market conditions, 6 months income might no be enough.

      The categories are discrete enough for awareness purposes, but not so much as to render it overkill. As I said, rule of thumb for car and home are based on precedence and real-world numbers so should be good enough as far as they are concerned.

      Reply Like 1
      • Superbone
      • Programmer
      • Superbone
      • 9 days ago
      • Reported - view

      dalewking and nolesrule  , does it really matter if you call your category Emergency Fund, Income Replacement, or Cooked Goose if they represent the same purpose and all of your known unknowns have categories and are covered?

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 9 days ago
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      Superbone Of course not. My point is about better awareness of amounts and funding levels. It's about turning what people often consider emergencies into True Expenses.

      Reply Like 2
  • nolesrule said:
    My current balance of 18 months of home maintenance repairs is already after having replaced the microwave, refrigerator, washer, dryer and dishwasher and water heater all in the last 3 years. I also got a snowblower, and have sprinkler maintenance in the spring and the fall, among other things. Along with calls for plumbers, appliance repair, and even some DIY projects.

     And nowhere have I advocated against the existence of a home maintenance category. In the beginning of your financial journey it will be small and will keep getting blown away and you will have to rely on the EF a lot more. Eventually you want to get such funds fully funded to cover all normal, expected big repairs.

    My point was that doesn't mean you don't ALSO need a general EF for the infinite number of emergencies you cannot predict. E.g. your dog attacks the neighbor and he sues you and wins and you owe him $5000. You could probably start a thread here to collect some incredible stories of all the emergencies that people have had to go through. Income interruption is only one such possibility.

    Reply Like
  • WordTenor said:
    Um they had better interpret it that way because that’s exactly what we mean

     I think that is folly. You can never have enough such categories to cover every curveball life will throw at you. I want a general EF to cover the unexpected of 3-6 months and on top of that categories like home maintenance that as they build eventually mean I don't have to touch the EF.

    Reply Like 1
  • dalewking said:
    My point was that doesn't mean you don't ALSO need a general EF for the infinite number of emergencies you cannot predict

    Yeah, but once I have fully funded Income Replacement, Home Maintenance, Car Repair, Medical Out of Pocket Max, and Roof Replacement (that and replacement of water heater and HVAC are separate from home maintenance because they are things that are going to need doing), I don't need a Bail My Brother Out of Jail Category (primarily because that's up to him and his wife), but also because I would just skim the money out of categories X, Y, and Z because, per the tenets of YNAB, I rolled with the punches reprioritized the funds in my budget.

    Reply Like 5
  • jenmas said:
    I don't need a Bail My Brother Out of Jail Category (primarily because that's up to him and his wife)

     In my head, I was thinking more like your child or spouse or even yourself. Can you tell I've watched a lot of documentaries on Netflix lately on wrongful convictions?
     

    jenmas said:
    but also because I would just skim the money out of categories X, Y, and Z because, per the tenets of YNAB, I rolled with the punches reprioritized the funds in my budget.

    Or alternatively, you wasted a bunch of effort trying to predict which of the infinite number of emergencies you will face and when you face one you didn't predict and you have to steal from those predictions then you are showing out how pointless it was to try to predict all those instead of having a general EF.

    To reiterate, there are ones you can predict you will eventually face (auto and home maintenance e.g.) and you do need to save for those and you use those and would only dip into the EF for those if they were above what you allocated plus that you can scavenge from tightening the budget. In my opinion those wrap the EF and do not replace it.

    Reply Like
  • Wow!  So many replies.  We ended up paying off 2 denbts that had interest (we opted to pay off our 2 0% debts over time) we got our emergency fund up to $1000 (for now), then we boosted our true expenses up to fully funded ranges (on target for the things we know are coming and some in other categories that we don't know exactly when they are coming just that they eventually will) like auto repairs and medical/dental.  We have about $1800 left to start our month ahead fund.  So we feel good with that.  When we get fully out of debt in a few months we will put more focus on saving higher amounts in all 3 areas (true expenses, emergency fund, and buffering).  The point for us is saving is goooood!

    Reply Like 4
      • MsTJ
      • Working on getting ahead
      • Gray_Nomad_f6eeb59e1a1c
      • 8 days ago
      • 1
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      JulieDoin'YNAB Was wondering if you would ever return to this thread, lots of unrelated responses, as I wanted to speak to you.

      Welcome!  Glad you are making progress.  YNAB has been like an onion, for me.  I get through one layer, only to find the next.  The more you work the program, the more your rewards.  Hoping you find the same success I have.  

      Reply Like 1
    • MsTJ I feel like YNAB is a great fit for us!  So many things are already changing.  

      Reply Like 3
  • nolesrule said:
    I'm not going to have a category for landspeeder meteor damage or bail money because the odds of my needing money for those things is so small as to be unlikely.
    One cannot account everything, but they can do their best to adequately account for reasonable occurrences.

     And the best way to do that is to have a base level EF that can cover all of those instead of trying to replace that with funds that are designated for certain emergencies but in reality are for all emergencies.

    Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 8 days ago
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      dalewking 

      dalewking said:
       And the best way to do that is to have a base level EF that can cover all of those instead of trying to replace that with funds that are designated for certain emergencies but in reality are for all emergencies.

       And you can't determine your base level EF without figuring out the adequate funding amounts individually, so why not just fund them individually.

      My car and house maintenance and repair categories aren't for emergencies. They are for maintenance and repair. For the cars, $50/month/car is adequate to cover everything from oil changes to new tires to fixing the heat in the dead of winter to a major repair over  the life of the vehicles. For the house, 1% (it's a newer house) of the value of the home covers everything from basic maintenance to a new roof over the time I own the house. These are ongoing contributions that don't end when i reach a certain number of months of funding. They are designed to be funded regularly and perpetually to cover everything, because that is the reality of vehicle and home ownership.

      But the truth is that the money for all emergencies is the entirety of my budget if necessary. The logical conclusion of this, based on your argument, would be that I should have a one category budget since all my money is designated for all emergencies. Or we could go a step further and include my brokerage account. Or the 401ks and IRAs. Every penny and every asset I own is eligible for liquidation should the need arise. But that's just not useful.

      Reply Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 8 days ago
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      Of course, everyone can do it however they want. My argument is that the awareness is greater regarding what can actually be handled adequately by splitting it up.

      Reply Like
      • chahan
      • chahan
      • 8 days ago
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      dalewking  Is it possible that your resistance is coming from the place of having to adjust the allocation based on life events? It seems to me that what you are saying is if you reserved money for Auto repair you cannot use that for knee surgery because that was not your plan. 

      That is why you want to have a catch all EF - like a miscellaneous category - so when you have an expense that doesn't neatly fit into one category, you can use that fund without having to move money from other categories.

      The beauty of YNAB is that it lets you have a living budget. Plans change, and that is okay. You do not have to stick to the budget as you made it on day 1. You just need to be  aware of where you are taking money from and adjust your plan as needed. 

      Life happens. Let's say you plan your commute to work. You have a set route that you take and that is your plan. One day, there is construction along one of the streets you take and the road is blocked with detour signs to guide you. You are not going to sit there until the end of construction because that is the route you planned on taking. You adjust and follow the detour - and get to work / home. 

      Having the EF broken up into multiple categories gives you better awareness of where your funds are allocated and whether it is adequate or you need more. If something rare comes up that is not already one of your categories, you adjust and consciously make a decision of reallocating funds from one or more of your categories to take care of the emergency you currently face.   

      Reply Like
  • A general-purpose "Emergency Fund" category is a useful thing.

    But if you're accessing it multiple times per year, it's likely you're under-funding your true expenses. The next time you need access EF money, take some time to reflect on whether the expense was truly unforeseeable, and whether it's likely to ever happen again. If so, then you should carve out some money in your budget so that, next time, it's not an emergency.

    Putting that strategy into practice after 5+ years of budgeting, I've found that I almost never access my general-purpose "Emergency Fund" category anymore.  The only emergency I'm guarding against is job loss. I'll probably rename that category to "Income Replacement" at some point.

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