Budgeting

Blond37Blond37 Posts: 111Member
edited February 2012 in Desktop
i just want to confirm that, well confirm and ask questions: when i do the budget i should have $0.oo left.. (give every dollar a job right?)

but if i do that and follow the budget i won't have any $ at the end of the month..?

i should NOT however go negative in the budget?
Post edited by Unknown User on

Comments

  • kmorgan221kmorgan221 Posts: 523Member, Beta Tester
    Short answer: You will have zero left to budget. That does not mean you will have zero left in your bank account.

    Longer answer: If you give every dollar a job, then you'll have zero dollars left to budget. But as I said, that does not necessarily mean you'll have zero in your checking account. Let's say of everything you budgeted, you budgeted $100 in Gas for the month. During the month you only buy $75 worth of Gas. You'll start next month with $25 in the Gas budget. That $25 will still be in your bank account, but it will already have a job.

    The important thing is to spend based on your category balances, not your account balances.
  • Budget_NinjaBudget_Ninja Posts: 4,657Member, Beta Tester
    At first you might want to leave money unbudgeted at the end of the month. This builds up you next month funds. The idea is that eventually every thing you make this month won't get touched until next month and your not living paycheck to paycheck any more! Once you have this buffer built in then yes YNAB is a zero based budget system, give every dollar a job so that you have $0 left to budget.

    Although you have $0 left to budget you'll still likely have money at the end of the month. Many categories you'll want to budget money to in this month, but you might not use this month. Example would be Christmas, this year your going to be prepared and save $25 each month - budgeting that in the Christmas Category. You won't spend that in February so it will sit until December when you go out and spend the money for gifts. You will likely have many accounts like this. In addition to this the above buffer building is going to help ensure you have a MONTHS buffer sitting between you and no money.

    Avoid over budgeting, that is garbage planning. However you may find that you occasionally overspend. While definitely not ideal, don't beat your self up over it - YNAB is going to make you catch up on the overspending in the next month by taking away some of the income you had available.

    kmorgan221 states it pretty well, but sometimes it helps to read it from someone else as well.
  • DonGatelyDonGately Posts: 637Member, Beta Tester
    Blond37 wrote:
    i just want to confirm that, well confirm and ask questions: when i do the budget i should have $0.oo left.. (give every dollar a job right?)

    but if i do that and follow the budget i won't have any $ at the end of the month..?

    i should NOT however go negative in the budget?

    If you're budgeting dollars to rainy day categories even though you budget to zero you should have money left in rainy day categories at the end of the month unless it's a month where those bills are due. For example, if you have an annual auto insurance premium of $1200 you should be budgting $100 per month so at the end of twelve months you'd have the money needed to pay the premium when it comes due. Of course if it's due six months from now you'd have to budget $200 per month etc, etc.

    As each month passes the category balance should build since you're letting those dollars sit until they're needed.

    Going negative in the budget is certainly something to be avoided but sometimes it simply can't be helped however building balances can in meeting an occassional negative month.

    Another example, say six months go by and you've built a balance of $600 in that auto insurance category and the premium isn' t due for another six months. In May your overall budget shows a negative $100. The fact you have balances built up will help avoid a cash flow problem though you still want to work in future months to get back in balances. This exact thing happened to us just yesterday when we had an unexpected vet bill that exceeded the current category balance for vets but we were able to juggle funds by simply not budgeting anything this month to our entertainment category that had a large balance and budgeting a little less to our vacation category that also had an adequate balance.

    Hope that sheds more light than heat.
  • jessiebirdjessiebird Posts: 3,669Member, Beta Tester
    Pretty much what everybody said.

    When you get paid, you budget your income to categories until you have zero available to budget. That might mean $100 for the electric bill, $50 for the phone bill, and other bills that are due this month. And maybe you budget other money to Christmas or vacation or whatever.

    So some of that money you budgeted will in fact be gone at the end of the month, when you've paid your $100 electric bill and $50 phone bill, and some will be left over for when you need it at Christmas or when you go on vacation.

    But budgeting to zero does not mean spending to zero. Budgeting to zero just means putting every dollar where it will be safe until you need it.
  • daftsporedaftspore Posts: 25Member
    Blond37,

    I am in my 2nd month of using YNAB (about 37 days worth). Hardest category for me to budget was groceries. The 2nd month has meant I based this on the month before and added 20%.

    What I am also doing in my second month as I reckon if you perceive you can't manage month to month at first (Trust me you will find around £200 or $ that you did not realise you had when you give every dollar a job) is have a cash category that I am putting excess money into and moving things around slightly as required. I personally can see a 10% shift between petrol\groceries and train tickets so that is where I am reassiging my cash buffer. Not sure if this is strictly the correct way to do things but it works for me.

    Next month I don't think I will need this buffer as I will be in a position to guesstimate better and the money I have accrued will make it easier.

    So Far I have cleared about £400 worth of debt which if you asked me pre-YNAB I would have not thought possible.
  • DonGatelyDonGately Posts: 637Member, Beta Tester
    Nice work Blond37. Clearing 400 pounds of debt the first month is great!

    It sounds like your cash category is similar to our miscellaneous category where it's used to either shift dollars to other needs or to absorb expenses there's no other category for. Our experience has been that the number of dollars needed for this went down as we got a better handle on spending.
  • RonluvsdabearsRonluvsdabears Posts: 5Member
    Hi all,

    I'm new to YNAB and I'm excited about finally getting my finances in order. I also am having a hard time understanding something about the category balance. If I budget $100 for gas and only use $75, then my category balance is $25. Does that mean I will only budget $75 toward gas from my next paycheck since I still have $25 left in that category? Or am I supposed to move that $25 out and put it toward something else like my rainy day fund or my buffer?

    BTW, I have been all over the forum and I love it! Have found all kinds of good information from other members of the YNAB tribe.
  • Turf_HackerTurf_Hacker Posts: 5,799Member, Moderator, YNAB Team, Beta Tester
    How you handle this is up to you. Either way you mentioned works, just pick the one that makes the most sense to you (and matches up with your goals). If you're trying to build a buffer and start living on last month's income (or if you have some rainy day categories you want to fund), you may want to zero the category balance by reducing the amount budgeted this month and redirect the money. Totally up to you.
  • RonluvsdabearsRonluvsdabears Posts: 5Member
    Turf_Hacker,

    Thanks for the reply and both those suggestions make sense. I don't want to sound stupid (and seeing that you're from Minn and I'm a Bears fan, I'm sure you think I am already :D ), it seems I can just budget in the amount needed to bring the budged amount back up to where I need it and use the money I didn't towards my buffer. Or am I thinking about that the wrong way?
  • Turf_HackerTurf_Hacker Posts: 5,799Member, Moderator, YNAB Team, Beta Tester
    It's a now vs later difference. If you reduce the amount budgeted this month to what you actually spent, you can apply the difference to your starting buffer for next month (if you did this in February, it would affect your starting buffer for March). If you reduce the amount you budget next month such that it brings the category balance up to the desired total, you'll budget less overall and be able to apply that difference to your starting buffer for the month after next. If you underspent in February and reduced your amount budgeted in March by that amount, you will have extra towards your starting buffer for April.

    Either way works, the only difference is which month's buffer it helps build.

    And no, I can't really understand why anybody would like the Bears (even though they did a lot better than the Vikings)... :D
  • Blond37Blond37 Posts: 111Member
    DonGately wrote:
    Nice work Blond37. Clearing 400 pounds of debt the first month is great!

    It sounds like your cash category is similar to our miscellaneous category where it's used to either shift dollars to other needs or to absorb expenses there's no other category for. Our experience has been that the number of dollars needed for this went down as we got a better handle on spending.


    you directed this to the wrong person
Sign In or Register to comment.