I use the holding category and love it. I actually put my current months paychecks into next months holding category so I'm not tempted to use it in the current month. When the next month comes I put my holding category money into Ready to assign and then assign it to my spending/savings categories.
All paychecks received this month I assign to next month as soon as they hit, and put them in our Loose Change (money bag emoji) holding category, out of sight. Then it's like Christmas 12 times a year when the first of the month comes, I move the Loose Change to Ready to Assign, and Budgeting Bliss!! I don't go any more months into the future. Until a few months ago, I was dialed in, rigid, like Ben, but then watched Ernie and his Budget with Me videos and decided to go a little crazy and actually assign some categories more or less depending on what the upcoming month was going to look like and use different target types, just to spend more time playing in the budget on the first! 🤓 12 years in YNAB, always making adjustments to keep it fun and nerd out! (Pause a Target ✅, Arbitrary Rules rule, deeming this the most nerdy Budget Nerds yet)!
My husband and I have variable income. My profession definitely has times of the year that are slower than others. I budget into future months and am 2 1/2 months ahead right now. I like knowing that if we couldn’t work for some reason, we have enough money to get us through the next couple months.
The entire need for spending not updating the true need until the 1st explains so much! Now I will use the overfunded option to review at the 1st of the month!
I use the under-funded button, but I use it for each category individually. It makes me more accountable for where my money is going. I, also do where I jump ahead if it is something that is due the next month so I do not see it in the current month. I do not use a holding category except for 2-3 instances for things, but not for the entire paycheck amount.
I’m with Ben about using the “underfunded” button. I get paid once a month at the end of the month (teacher). I have categories in groups by funding priority. I select the first few groups and fund them the. Check what’s left. The lower the group, the lower the priority for funding. I’m also like Ernie in that I don’t find every category every month, especially those lowest on the list. I rent rooms through Airbnb so that’s my supplemental income for those lowest categories.
I have a holding category but I put the money in NEXT month's holding category, not the month it was received. I found if I put it in the current month someone (not naming names, but it could be hubby) sees that balance as available funds for WAM. Then at the beginning of each month hubby and I get together and assign all the money in the holding category. When I get a reimbursement from my HSA I fund my medical expense category as far ahead as the amount allows me.
I'm Team Ben all the way! I enjoy budgeting with each direct deposit into the month that I want it to be used. I'm 2 months ahead in YNAB and then have another 4 months in a savings account as an income emergency fund.
I decided after episode 100 I would come back and watch the catalog for stuff I was interested in. I'm coming back to this episode after I started budgeting a month ahead the last few months. I started budgeting a month a head and its made it so much easier. Used to spend the month waiting for the second paycheck so we could have fun money. Now we reduced our emergency fund so we can be a month a head and its been so much better. I cannot imagine going any farther ahead though because I agree it would start to get weird with not knowing what truly will be available. I always go into the budget on the first and reduce overfunding where it is and isn't needed.
My income is variable, and I generally make some money every day I work (I'm a massage therapist in practice for myself). Just started using YNAB but the ability to budget for the upcoming things is gold. I'm excited to have my money age and "grow up"
I budget like Ben. I used to go through the categories each month but now I’m comfortable with my targets and I don’t need to look at each one individually. I don’t mind a category building a little (groceries - if I don’t spend it all one month I usually spend it the next month). As for vehicle fuel we burn much less in the winter than I budget for but use up the extra funds in the summer. I keep track of my balances and tweak them if needed.
I'm currently doing a little bit of both! I like having at least one month ahead funded, it helps me make sure I'm really assigning money to the bills that will need to be paid. When I only had my future expenses category it felt like the money didn't have a purpose and I was more tempted to take money away from it, or I wasn't sure if I was really covering all my expenses (even tho I was doing the math, I still felt insecure, my brain needs to see that money in action lol) But I also keep a "future expenses" category cause funding more than two months does get a bit confusing 😅
This was so useful: even though I have been using YNAB for 5 years, I always thought that putting money in the future months' categories increased this month's total. Since I cannot trust myself to spend only my weekly target groceries budget if there is more money in there (!!), I always used a holding category. Mind blown! 🤯 Thanks Ben & Ernie, every day is a school day!
I've tried both ways, and I have preferred budgeting directly into next month. Then I try not to look at next month so I won't be tempted by it ! I am intrigued by the idea that someone in the comment section mentioned about budgeting the money for next month in a "next month category" in THAT month. I really like the act of budgeting with YNAB because I feel so much more in control of my money and my life. I manually enter everything, and I don't set targets within the budget, although I do have a master budget that lists what I need in all of my "future needs" or "sinking funds" and when those things will come due. That has been the game changer for me with YNAB! I may try the "next month" thing in September since August is funded.
Still use version 4 I got on a Steam sale for $14.00. It allowed me to drop a huge down payment on my previous car (used) and pay cash for my current 2023 car. I get excited talking to a lot of young people at work about YNAB. It was a life changer for me.
I love y'alls different takes! Personally manual all the way. Throwback to recent chats, I have not yet committed to the month ahead vs emergency/true expense funding. On the brink of taking Ben's advice and just trying it lol, reassign back if I don't like it. I'm thinking maybe hybrid, fund my absolute essentials a month ahead and still feel like I'm making decisions about current priorities for the rest. Ben, I know you put the time and magic in to the targets but I don't know how you do it, I Love watching those dollars go to each category one at a time 🤪
"I Love watching those dollars go to each category one at a time" I totally understand! I'm going to try it for awhile and see if I can recapture some of that magic.
I don't quite do either of those, although I have tried both. Because my bills are spread out all through the month my categories are named and include the date and amount of each bill in the title so I know instantly if they have enough in. As time went on I got ahead by keeping them all full, even the ones that have already been paid this month. Now I keep them all with 2x the required amount - so this month and next month as well. Now my bills (and sinking funds, and other expenses) are at least 2 months ahead. It took a while but was worth the effort. It's like a holding category but I can see how it relates to each single bill. It's also like going a month ahead because the money is categorised ready for upcoming bills. This just works for me.
The hybrid methodology mentioned at 38:49 is what I've been doing. I am pretty new, only started YNAB in January, so I'm not 100% budgeting a month ahead yet (still have several categories that I'm trying to break the living week to week curse). However, for categories that are tied to loans, I budget in the future months. It helps that these also happen to be tied to separate banks than our main checking & savings, so everything in these particular accounts is only for their particular loans (because of who provided the financing) & I'm approx. two months ahead on all those. But I also have a holding category in the current month that I use when I'm getting close to the end of the month & I want to just let that roll over in lump sum to distribute when the new month arrives because of the variable nature of so many categories. Never thought I'd consider myself a budget nerd, but I totally am! Thankful for your videos... I am not alone!
I use a holding method of sorts, but I hold it in the future month so I can't see it! No temptation to spend it since it's future money, even if it's not budgeted out to categories yet!
I prefer the holding catagory. Mostly because if I can't see it, it doesn't exist. Then the numbers don't match up in the budget, I take all money out and reallocate it before remembering 'oh, it's in the next month.' I've tried several times to put it in the next month and every time I forget that it is in the next month. Yay ADHD!
I may not fit as a budget nerd but I miss the assigning if I use a holding category. I can’t wait all the way to the start of the month. Part II- I already stole money from next month for my vacation. YNAB says it’s my prerogative.
I’m Team Ben on this one. My income is variable, so I’m currently budgeted out four months with a goal of six. In August, I’ll get to five! The holding category would just be too cumbersome. I don’t mind scrolling months ahead to see my underfunded numbers. And here’s a tip: did you know you don’t have to scroll back to the current month? Just click the budget icon in the bottom-left on the app. It always shows the correct month.
I'm fully funded two months ahead. I know this is verboten in the rules, but I have predictable income and assign the full expected amount ahead of time, so I can think through what's coming up in that month and what my priorities are. It's temporarily in the red, but by the time the 1st of the month comes, everything is fully funded. I adjust as my paychecks come in if needed, and review again when the month begins if any has come up in the mean time, or even unassign everything and start over. I don't use goals for all my categories, so the Assigned in Month line is my way to see total monthly needs. It works for me and scratches my itch for planning ahead and forecasting savings amounts etc.
I love pros and cons so I extra loved this video. Next month is my first three month paycheck and as tempting as it is to put it towards debt I’m going to budget a month ahead. #YNABWIN my partner is budgeting with me, and when we sit together I can see the links on his transactions showing me he’s inputting most of them, so proud! He’s been telling people about YNAB and it makes me happy
We use the bonus money annually to fund optional categories for the whole year ( means we can flex yearly depending on what it is). Then I have a goal template for the monthly income and bills that matches. I budget directly a month ahead and fund goals manually so I actually think through what is needed for that month, before it gets here.
Trying the holding category, in the month ahead, and I realize that one additional advantage of the holding category is that I can see exactly how much I can transfer into a savings account until I need it in checking.
After much deliberation and thought, I’ve decided to try Ernie’s method. I created an Income category in my Holding group and assigned my money there in the next month’s.
How about a compromise of putting July's paychecks in the future funding category in Aug? This way you are not staring at those dollars all month and on the 1st you can move it back to RTA. Then take 10 seconds to 45 minutes to budget.
As someone who will be newly a month ahead, I decided that I will assign the paychecks as I go. I think it would be TOO hard to just put the money in a holding category and wait weeks to assign (already look at my budget too much). I will have one holding category for those categories that I may be able “save” some money when the money needed is recalculated at the beginning of the month (gas, groceries, etc.). I may choose to assign the full amount or just top up to get to the funded number. All “savings” will be added to my debt snowball. I’m still need to shore up some true expenses that I don’t want to fund monthly while I’m in debt payoff mode. I hate seeing yellow. If I had to move money from a category to cover an expense, I leave it over spended until the top of the new month and go back, move the money, and go back to the current new month so I don’t have to see that I defunded a category the previous month. 😬😂
I'm used to pre-assigning the Fixed expenses that also need to be paid each month, as a reminder for myself to make the payments. The reason I do this is because the host on the YNAB UA-cam channel told me that I can arbitrarily make assignments, as long as I regularly reconcile to maintain the accuracy of the bank account balance, the Budget amount will not be wrong. I should no longer use this method, even if many categories show overspending, I still need to keep the Ready to assign value exactly at 0. Additionally, sometimes when I see "All money assigned", if I try to assign another amount, it will not immediately show a negative value, still displaying "All money assigned". Another situation is that I had a deposit posted into my bank account, but the "Ready to assign" amount did not immediately become a positive number. Only when I try to assign a fairly large amount, the available amount for assign will change.
I remember when they got rid of the incoming category - at least I think that's what it was. I think it was when we went from software to web-based. It messed up how I was used to do things. I think it was when they moved to the age of money thing. ANYWAY - What I ended up switching to at that point was the holding category, but I would actually split the income coming so that it goes into the next month category and the tithe category. The tithe category could be used right away, but the next month, I'll "release" at the beginning of the next month into the next month and budget it all at once. (YNAB user/One month ahead person for about 15 years now.)
I have a "bucket" for next month startup. I use this method because I don't know how much will carry over until the current month ends. This impacts which areas need more funding for startup.
I definately budget ahead using the next month as opposed to a holding category. On the first of the month, I use the "reset assigned amounts" followed by "reduce overfunding" functions. This puts all the assigned (and over assigned) money back to ready to assign and resets the "available amounts" based on my targets. I can then go through category by category without ever having a separate "holding" category. Just a different way to "release" the money than a holding category but since it's based on my current targets, tends to be more accurate. I find the holding category tends to be off regularly as my targets tend to be very dynamic (e.g., Chewy fluctuates a lot). Pros: Typically, because some money does roll over in a some categories, this naturally gives me a buffer/margin for that month regardless of how far ahead I am. Yet I feel like I have a better understanding on how far ahead on my bills I am (in case of say another government shut down). The money remains "hidden" in the next month so I'm not tempted to touch it. Yet I still get the awareness of going category by category at the start of the month. Cons: Does mean sometimes I'm overassigning in the months ahead which is less efficient. However, I think that natural "buffer" does me more good than bad - it's certainly easier to reassign then an underfunded holding category..
If Ernie has Budget With Me sessions, then Ben could have Set Targets With Me sessions. Sometimes I wish I could see more hypothetical target setting videos. I've greatly appreciated the ones I have seen so far.
Oh, I like that idea! Not exactly the same, but Ben and I do have a Targets episode coming out this week, and I think (if I remember correctly 🤣) there are a lot of hypothetical scenarios in there. ~Ernie
I started using a holding category last year when my employer switched from monthly pay periods to biweekly. I had been paid monthly for as long as I've used YNAB (since around 2007!) so didn't really want to change my monthly budgeting process. Never been tempted to spend it since I view it as future money and it definitely tells me how much I have available for the month. I'm on Team Holding Category!
I love the idea of a hybrid method. I currently end up parking the excess funds into a savings category. And then if I need it, it moves out of that savings category and into the actual expense categories.
Ben - I trust the underfunded button just like you for next month's budget! I do my budget in seconds.. (Underfunded + click = "DONE") Then, adjust as needed. I also do have a holding bucket for unplanned expenses just in case. 🙂 Good video! Thanks guys!
I just budget ahead. Working on getting 2 months ahead. At the beginning of the month I check my goals (and readjust if necessary), get rid of any overfunding, take care of any underfunding (if the overfunding isn't enough I go to the last month I'm fillen, empty that month, get rid of the underfudning in the current month and then I start filling op the month way ahead.
I’ve been budgeting for the future as the paychecks come in, and I’m getting into “stealing from the future” types of problems (finding out [only later] that “ready to assign” next month goes negative after I move available money around). Gonna try out these holding categories methods to see how I change!
You guys are blowing my mind. I have been using YNAB for 10+ years, following the rules diligently and what you are doing is bending/breaking at least 2 rules. Holding category seems like a bogus job and manipulating targets ignores the moving money between categories to cover overspending. I get it but bending the rules is killing my type A tendencies.
After seeing HIFH regarding emergency funds, I've adopted the practice of just scheduling funds in the adjacent month. This just makes it easier for the month ahead and having an emergency funds bucket just sitting there not really knowing how/when to add to it. I still having savings categories that pretty much reflect the account balance of those accounts, but they don't have large amounts because with the month ahead strategy, that is the saving account. By scheduling one-month ahead, I've also created overfunded categories which puts me even more at ease. As of this month I have a fully funded month with $496 over funded and when I get paid this month, I'll be budgeting the next month. I do mix of underfunded and manually typing. I'm semi-monthly so the first check with be typed out for categories >$100 and the second check will be auto-assign/underfunded.
Ben, please do a YNAB Budget With Me | Ben's Budget video!! Even if you don't use your real numbers it would be so interesting. I believe you have said you don't use credit cards and you have like one checking/spending account. I think it would be so inspiring to so many people! Thanks Ben and Ernie!
I go category by category and use the Underfunded button. But then I look at each item in the category to make sure nothing has been missed. Money that is left over after everything has been funded (due to underspending in some categories the previous month) is then put into my Emergency Fund. I currently can fund 1 month of spending from my Emergency Fund and am looking forward to seeing it grow.
I definitely fall between the two- I use the underfunded button for something things that never change, but I do sometimes change the amounts in some categories vs others to roll with the punches. So those varying ones need to be considered on a monthly basis to be the most accurate. Thanks you guys!
I do something completely different to work with my own brain... overfunded all the bills until one day, I sat down on bill pay day... and the statement had not even been generated. I just relied on rollover until fully funded on the first. Might not be the "right" way, but its my way. I have full control of my finances, and I do think that is what YNAB is for!!
I use a bit of both. I know I'm just going to fill the category I hit that underfunded button. Larger categories that get filled over two paychecks are typed.
I get paid every 2 weeks. I created a recurring transaction for my paycheck and split my paycheck out to all the categories. It's automated and I come in and review the overfunded stuff. So my payroll day budget doesn't necessary even need to happen as it already done other than approving the payroll transaction. This works only because my paycheck is stable. The issue is variable categories like groceries, or household expenses are not consistent and I sometimes have to add $ to them, or they will build up an excess amount that I periodically go an skim it off and add it to longer term categories like auto repairs, or other stuff that have longer term targets. The part I don't understand is how the AGE OF MONEY sits at 131 days and I'm not funded into the future at all.
One other pro for the holding categories. Because my wife and I try to budget together, it reduces those budget meetings to once a month vs every paycheck (every week).
Thank you for the 2 views. I am coming from YNAB 3 and 4 and just started using Web based YNAB in January 2024. I'd like to know what method the software was actually designed to used? Ben's or Ernie's method? Thanks.
We are doing somewhat of a hybrid. For most expenses we fund in future months. For our 'fun' categories, we put in a holding category and decide at the beginning of the month how to allocate.
I’m only half a month ahead and was scheduling into the next month but just changed it to a holding account today. I like the holding account so I can know how close I am to reaching the full amount for the month ahead.
If you're working toward getting a month ahead, that is another really good benefit. You can see how close you are to your goal more clearly that way. ~BenB
I am very new to YNAB. All of this has been very informative but I do have a question. Can someone tell me what "category" i would place this "future "Funds or "next Months" funds into? I'm a bit loss here. For example, right now it is Sept 2023 and I will get 3 paychecks this month. How do I allocate that "extra" paycheck into a Future / Next Month Fund as they are talking about in this video? Thanks for any guidance. I appreciate it!
I'm not entirely clear on the benefit of a separate holding category vs. "Ready To Assign". I let my paychecks accumulate in "Ready To Assign", and once I've gotten all of my paychecks for a month, I budget for the next month via auto-assign. What am I missing? For context: I get paid a consistent amount every two weeks.
speaking from personal experience here, I can't keep dollars in ready to assign because it makes feel like I'm "ready to spend" 🤣 Once I get those puppies in their rightful place I have way more discipline. I used to do that sometimes though, and even if it was just for a week I could witness the spending pick up a bit. You may have more discipline, but that's where I find value 🙃
I have an overall Next Month category which gets $10 a week (it’s gonna be a long process 😆) but in my Monthly Bills grouping and my Debt grouping I also have holding categories because while we aren’t a month ahead we are about 2 weeks ahead on those 2 groups (most important ones to fund fully) so I guess I have a hybrid hybrid method going on.
Please, do a video talking discussing how Ben gets his targets so accurate that he can hit underfunded to fund an entire month!!! (I have a hunch a spreadsheet might be part of the equation ;-)
If I couldn't specifically asign my money to future month's bills specifically I wouldn't use YNAB tbh. I love that I can't see how much money I have because it makes me feel broke, which helps me not spend.
We have always been taught not to budget before receiving the money, that funding requires actual income, which is YNAB's highest principle. But why can we now budget months ahead?
You're still only funding those future months with money you actually have, so nothing changes there. You're just trying to get a month ahead of your expenses so you can put more time between earning and spending. That gives you more stability and flexibility. ~Errnie
There have been a few comments about budgeting ahead with paychecks every 2 weeks. I recently went from once a month paychecks to fortnightly paychecks after having spent years budgeting everything at the first of the month. I had also created a spreadsheet to set my goals to match my paychecks. At my income level I have to budget too tightly to build in a margin. I would like for third paychecks to be "extra" but I really need that amount to get by each month. I've adapted my system to the fortnightly paychecks by using some of Ben's method and some of Ernie's. I calculated what a hypothetical monthly paycheck would be (paycheck amount * 26/12). I set up a holding category and added an extra paycheck amount to it to cover the additional 1/6 paycheck those occasional third paychecks represent. I did this from a home sale, though this could be saved for or this process could be started after a 3-paycheck month. My paychecks go into the holding category as well, the way Ernie does it. Then at the beginning of each month I transfer my hypothetical monthly paycheck amount to "ready to be budgeted," then use Ben's 10-second budgeting technique, auto-assigning all "underfunded" categories. It took some time to figure out and set up, but on a monthly basis it's quite easy.
Oh, just found you guys! So fun. So scary the way the one guy goes 2 months ahead and just clicks underfunded and only some things get funded because it’s not enough. I’m scared to do that. What happens? Does Ready To Assign turn negative? Terrifying. But I do use the one click underfunded, but only for the months that I have enough to cover the whole month, which is just one month ahead.
" What happens? Does Ready To Assign turn negative?" Good question. No, it doesn't turn negative. YNAB will automatically assign money until you hit zero, prioritizing categories based on targets. ~BenB
Glad you guys covered this topic. I have tried a little of both and am leaning toward the holding category. Related but not the same, I have a question about reports. My income is variable. I am also not a full month ahead but getting there. Because, for example, June's income is down as compared to May's and most of June was funded by May income, when I look at income:Expenses report for June, it appears I am in the red and have budgeted more than my income in June. This issue just seems to defeat the purpose of running this kind of report and isn't really that helpful. Any tips or tricks to remedy this issue? Am I just missing something? Thanks!
I get what you're saying. When you carry money over from month to month like YNAB does, you are regularly spending money you made in a previous month. This can cause the IvE report to look negative from time to time. As long as you're following Rule 1 and always paying back overspent categories, you can know you're not spending more money than you currently have. Maybe monitoring the Net Worth report would give you a better sense of this. Hope that helps! ~Ernie
I have never used the auto assign button. Always go in and do it manually. And no way I could use a holding category, put the money into the next month, out of sight out of mind!
When i couldnt fill all my categories every month, and when my income varied, I found budgeting into next month worked best. It relieved anxiety to know that the important categories were filled, and it kept me feeling the (real) scarcity because I knew what wasn't yet funded. I tried the next month category and I was really anxious -- I kept having to check my calendar for when the next pay would come in do mental math to reassure myself about its adequacy; I worried the whole month. So budgeting into next month was best. But now I use a next month category. My income is more than before and it is always the same. Two pays and that's what next month needs. Nothing to worry about. I dont feel tempted to steal from it. I am surprised you never mentioned the problem of stealing form the future. I lost a big chunk of my first month ahead this way. learned toI always keep1c in TBA as an alert for stealing from the future. Has ynab changed how it is working so that is no longer a problem? When you income is comfortable it doesn't make any difference which method. You two are pretty comfortable now; its a long time I think since getting form one end of the month to another was a struggle for you. When income is really tight and difficult, one method will feel better than the other, and that is the method to choose. We are all different in what makes us anxious and what reassures, so there isn't a single right answer to this question.
You're absolutely right-you have to do what works best for you in that season of life! And stealing from the future can still be a problem, but now YNAB alerts you when it's happening. ~Ernie
Could you please explain at some point this “extra paycheck “ thing? I get paid every other week, and the extra paycheck doesn’t seem all that extra. I have everything geared toward being paid evert other week. What am I doing wrong? Thanks!
Some people budget monthly counting on the 2 paychecks a month. So when the 3rd/extra paycheck comes it is a bonus. So they are counting on 24 paychecks a year (12x2). Where you are counting on every single pay check- 26 checks a year. It is just a difference in how you look at and budget your income.
I had a question (and maybe this isn’t just a budgeting question), but I’ve noticed you guys (especially Ben 😂), put a LOT of thought into things before you take action (coughcoughnewfridgecough) maybe to a fault? Definitely not pointing fingers here - I tend to WAY overthink everything and delay action out of anxiety and self-preservation. But I was curious: in what ways has delaying action actually been less advantageous than making a quick decision? Or more extreme, what are instances where delaying action actually hurt you or set you back financially?
A very valid question! I must not be sharing as much as I could or maybe I'm not communicating it well, but I've always thought of myself as someone who makes quick decisions. I would say, generally, I'll make a decision within a week or two, or maybe a month tops. And I don't think this has hurt me financially-at least not significantly because I've been sitting here thinking for 5 minutes and can't come up with a single example! ~Ernie
Have you seen this guide yet? support.ynab.com/en_us/targets-in-ynab-a-guide-rk5kkI9ks It should help! Otherwise, we talk about Targets in our Getting Started Live Q&As if you ever wanted to join one! www.ynab.com/free-workshops/ ~Ernie
The reality is you just have experiment and figure out what works best for you. I have tried all the ways in different combinations: budget into the next month, use a holding category, go line by line, use the underfunded button. After all that, I ultimately decidedly on budgeting directly into the next month and doing it line by line. I disliked having a holding category and disliked using the underfunded button. But that's how my brain works! P.S. I totally disagree with you about changing targets to get rid of yellow. I tell people to embrace the yellow because that represents the decision you had to make at the time 🤷♀️ But again, just my brain! :)
I am a worse Ernie. Most of my savings don't have targets. They get five dollars except what I am focusing on. Then that gets a larger amount. Some that having a revolving amount, work taxes, personal property tax, water and sewer, retinol etc) do have targets
That difference between money available and total “underfunded” at the beginning of the month needs to be more prominent on the app. My most disliked feature that YNAB lacks since leaving mint recently. I can build a budget that I can’t actually afford and not realize it until later unless I do a calculation by hand.
Aren't the different goals going to impact your underfunded number as well? What if you spend some Christmas money after you have fully funded your saving balance goal?
If you use a Needed for Spending target type for something like Christmas, your spending throughout the year will not affect your monthly target amount. That's the benefit of Needed for Spending vs. Savings Balance for something like Christmas. A good rule of thumb is if you're going to spend while you save, go for Needed for Spending. If you're going to spend everything you've saved all at once, go with a Savings Balance target. ~BenB
You will get an alert that the category in the current month is overspent and another alert under the Assigned in the Future tab that your next month's Ready to Assign is negative. ~Ernie
Hey, You guys mentioned 3rd paychecks in this video. I would love you to talk about that in more detail. - I put this comment in the Facebook groups but I thought I would add it here to get this communities take on it. Help! I'm trying to figure out how this magical 3rd pay day ends up being extra money. Can anyone explain if this would even work for us. Currently I get paid fortnightly (2 occasionally 3 times per month) , my husband monthly on the same day and we pay our mortgage fortnightly (same week as my pay day) Would budgeting for this monthly based on ((Week x 52)/12) for this and other weekly expenses or is this just shuffling the deck. I'm trying to make those 5 week months not feel so difficult to budget for. This is one of my big worries about if we get a month ahead is that we would hit one of these 5 week months and no longer be a month ahead. We do have an age of money of 85 days so it would be possible for us to shuffle money around and get a month ahead theoretically. Hope this makes sense.
The magical 3rd paycheck only ends up being extra money if the first two cover everything else. And it helps if you're a month ahead. For example, June was a 3-paycheck month for my wife. However, in June we were spending the money we made in May (2 paychecks each). And the July budget didn't need that 3rd June paycheck because it's built on the 4 paychecks we always receive. Some things you could try-set aside a little extra each month for your mortgage so that when you have a 3-payment month, the money is already there instead of having to take it from the 3rd paycheck. And if you have other weekly expenses, you could go the route of assigning less to other categories instead of using that 3rd paycheck to fund that extra week. Hope that helps! Also, it took us a long time before 3rd paychecks felt like "extra". And there is nothing wrong with having to use that 3rd paycheck for the current month's expenses! ~Ernie
Am I the only one who just assigns next month's money right into each category in the current month? Eg. my Student Loans category - each month starts off at $700 available (leftover from last month). I make a $700 payment and assign another $700 to the category, which sits there for next month. I've been budgeting like this since YNAB 4. I wonder if there are any cons with that method that I've been missing?
I just took a look in my budget, and the underfunded button is only appearing when the category has a target or scheduled transaction and there's not enough money in the category to fulfill one of those. ~Ernie
I dream of the day i can reach a month ahead. I tend to hover around 10 days age of money and haven’t been able to make much progress. I will continue to try.
I get paid monthly and I have managed to save 5 months of salary to cover an unexpected job loss. Would you consider getting one month ahead to be seperate from this money?
Do whatever makes the most sense for you! For me, I always want to be a month ahead-even if my wife and I lost our jobs, so my job loss fund is separate from being a month ahead. ~Ernie
Thanks Ernie. That makes sense. I had tried to move everything into the next few months but I was struggling to get clarity somehow. I think I will do a combination and leave 3 months in the job loss fund and move 2 months ahead in the monthly budget.
Ah be careful with that! I did that through the pandemic because I wasn't spending money, and now all those expenses I was saving for (eg trips) are coming up and I don't want to take the money out of the investment, so I feel YNAB broke because I don't have the cash to hand! Looking ahead, anything that will be spent will now live in a savings account!
I rather put the info months ahead. Make some feel more motivate the father forward it goes. If I see it n my current month I will feel like I got plenty of money to spend this month
I think this might come down to: a) variable versus predictable income and b) how far you budget into the future. We have variable and unpredictable income. I am currently budgeting into September and it's almost fully funded. I budget the same amount of money every month, which I base off of an average of the last few years of income. Like Ben, I have my targets and recurring transactions honed in and I typically just hit the "Underfunded" button until I hit that cap. I actually prefer to be 3 to 4 months ahead, so if I used a "Holding" category, I could have tens of thousands of dollars just sitting there, essentially unassigned. When the month rolls over, I may (or may not) have extra money in the needed for spending categories that I've fully funded and that have some left over from the previous month. It's like a little bonus that I can use to cover anything underfunded or to add to the "Wiggle Room" category. The main reason I see people argue against budgeting into the future is that they steal from the future. I don't typically have an issue with it, because I cover overspending in the current month. However, that indicator at the bottom of the Budget Inspector needs to be at the top in the current month. While watching this episode, I tried the holding category. I pulled all money out of August and September and put it in a Holding Category in July. It just felt wrong. Since I've got some underfunded categories in July due to some vacation WAMing, it was really, really tempting to just cover those underfunded categories with that huge lump sum sitting there, essentially unassigned. So, Ben, don't do it! And Ernie, if you roll forward and hit the Auto Assign, you'll have those dollars there when the month rolls over. All you have to do is "Reset Assigned Amounts" and you can assign last month's money line by line. It's the best of both worlds!!
I use the holding category and love it. I actually put my current months paychecks into next months holding category so I'm not tempted to use it in the current month. When the next month comes I put my holding category money into Ready to assign and then assign it to my spending/savings categories.
I’m trying the same.
Good idea ... I use the holding category but putting in the next month is a pro tip (and helps to avoid temptations)
Me too! Plus it’s always a nice “surprise” to see that money again in a future month.
All paychecks received this month I assign to next month as soon as they hit, and put them in our Loose Change (money bag emoji) holding category, out of sight. Then it's like Christmas 12 times a year when the first of the month comes, I move the Loose Change to Ready to Assign, and Budgeting Bliss!! I don't go any more months into the future. Until a few months ago, I was dialed in, rigid, like Ben, but then watched Ernie and his Budget with Me videos and decided to go a little crazy and actually assign some categories more or less depending on what the upcoming month was going to look like and use different target types, just to spend more time playing in the budget on the first! 🤓 12 years in YNAB, always making adjustments to keep it fun and nerd out! (Pause a Target ✅, Arbitrary Rules rule, deeming this the most nerdy Budget Nerds yet)!
I agree, all these adjustments I make keep budgeting fun and engaging! ~Ernie
I love seeing that my next month is fully funded early. It is even better when I see $ 2 months ahead. Makes me feel safe.
Just started using YNAB three months ago and I just hit 30 days of aging my money. Hopefully this is a game changer like everyone says.
My husband and I have variable income. My profession definitely has times of the year that are slower than others. I budget into future months and am 2 1/2 months ahead right now. I like knowing that if we couldn’t work for some reason, we have enough money to get us through the next couple months.
Great idea 2.5 mo. ahead!!❤
The entire need for spending not updating the true need until the 1st explains so much! Now I will use the overfunded option to review at the 1st of the month!
So glad that helped you! ~BenB
Ernie and Ben are so great I've watched all their videos twice!😂❤
I use the under-funded button, but I use it for each category individually. It makes me more accountable for where my money is going. I, also do where I jump ahead if it is something that is due the next month so I do not see it in the current month. I do not use a holding category except for 2-3 instances for things, but not for the entire paycheck amount.
I’m with Ben about using the “underfunded” button. I get paid once a month at the end of the month (teacher). I have categories in groups by funding priority. I select the first few groups and fund them the. Check what’s left. The lower the group, the lower the priority for funding. I’m also like Ernie in that I don’t find every category every month, especially those lowest on the list. I rent rooms through Airbnb so that’s my supplemental income for those lowest categories.
Us too❤ Love Airbnb!
This was such a great topic! I'm so glad I'm not the only budget nerd out there lol
You're not alone! 😊 ~BenB
Started my first big girl job & I think I’ll finally be able to be a month ahead!!
Congrats on the new job! ~Ernie
I have a holding category but I put the money in NEXT month's holding category, not the month it was received. I found if I put it in the current month someone (not naming names, but it could be hubby) sees that balance as available funds for WAM. Then at the beginning of each month hubby and I get together and assign all the money in the holding category.
When I get a reimbursement from my HSA I fund my medical expense category as far ahead as the amount allows me.
I'm Team Ben all the way! I enjoy budgeting with each direct deposit into the month that I want it to be used. I'm 2 months ahead in YNAB and then have another 4 months in a savings account as an income emergency fund.
I decided after episode 100 I would come back and watch the catalog for stuff I was interested in. I'm coming back to this episode after I started budgeting a month ahead the last few months. I started budgeting a month a head and its made it so much easier. Used to spend the month waiting for the second paycheck so we could have fun money. Now we reduced our emergency fund so we can be a month a head and its been so much better. I cannot imagine going any farther ahead though because I agree it would start to get weird with not knowing what truly will be available. I always go into the budget on the first and reduce overfunding where it is and isn't needed.
My income is variable, and I generally make some money every day I work (I'm a massage therapist in practice for myself). Just started using YNAB but the ability to budget for the upcoming things is gold. I'm excited to have my money age and "grow up"
I budget like Ben. I used to go through the categories each month but now I’m comfortable with my targets and I don’t need to look at each one individually. I don’t mind a category building a little (groceries - if I don’t spend it all one month I usually spend it the next month). As for vehicle fuel we burn much less in the winter than I budget for but use up the extra funds in the summer. I keep track of my balances and tweak them if needed.
It's pretty cool to see this a year later and know that the snooze target feature solves a big issue - I love the snooze target feature!
I'm currently doing a little bit of both!
I like having at least one month ahead funded, it helps me make sure I'm really assigning money to the bills that will need to be paid. When I only had my future expenses category it felt like the money didn't have a purpose and I was more tempted to take money away from it, or I wasn't sure if I was really covering all my expenses (even tho I was doing the math, I still felt insecure, my brain needs to see that money in action lol)
But I also keep a "future expenses" category cause funding more than two months does get a bit confusing 😅
This was so useful: even though I have been using YNAB for 5 years, I always thought that putting money in the future months' categories increased this month's total. Since I cannot trust myself to spend only my weekly target groceries budget if there is more money in there (!!), I always used a holding category. Mind blown! 🤯 Thanks Ben & Ernie, every day is a school day!
I've tried both ways, and I have preferred budgeting directly into next month. Then I try not to look at next month so I won't be tempted by it ! I am intrigued by the idea that someone in the comment section mentioned about budgeting the money for next month in a "next month category" in THAT month. I really like the act of budgeting with YNAB because I feel so much more in control of my money and my life. I manually enter everything, and I don't set targets within the budget, although I do have a master budget that lists what I need in all of my "future needs" or "sinking funds" and when those things will come due. That has been the game changer for me with YNAB! I may try the "next month" thing in September since August is funded.
Still use version 4 I got on a Steam sale for $14.00. It allowed me to drop a huge down payment on my previous car (used) and pay cash for my current 2023 car. I get excited talking to a lot of young people at work about YNAB. It was a life changer for me.
Steam sale of YNAB?
I love y'alls different takes! Personally manual all the way. Throwback to recent chats, I have not yet committed to the month ahead vs emergency/true expense funding. On the brink of taking Ben's advice and just trying it lol, reassign back if I don't like it. I'm thinking maybe hybrid, fund my absolute essentials a month ahead and still feel like I'm making decisions about current priorities for the rest. Ben, I know you put the time and magic in to the targets but I don't know how you do it, I Love watching those dollars go to each category one at a time 🤪
"I Love watching those dollars go to each category one at a time"
I totally understand! I'm going to try it for awhile and see if I can recapture some of that magic.
I don't quite do either of those, although I have tried both. Because my bills are spread out all through the month my categories are named and include the date and amount of each bill in the title so I know instantly if they have enough in. As time went on I got ahead by keeping them all full, even the ones that have already been paid this month. Now I keep them all with 2x the required amount - so this month and next month as well. Now my bills (and sinking funds, and other expenses) are at least 2 months ahead. It took a while but was worth the effort. It's like a holding category but I can see how it relates to each single bill. It's also like going a month ahead because the money is categorised ready for upcoming bills. This just works for me.
The hybrid methodology mentioned at 38:49 is what I've been doing. I am pretty new, only started YNAB in January, so I'm not 100% budgeting a month ahead yet (still have several categories that I'm trying to break the living week to week curse). However, for categories that are tied to loans, I budget in the future months. It helps that these also happen to be tied to separate banks than our main checking & savings, so everything in these particular accounts is only for their particular loans (because of who provided the financing) & I'm approx. two months ahead on all those. But I also have a holding category in the current month that I use when I'm getting close to the end of the month & I want to just let that roll over in lump sum to distribute when the new month arrives because of the variable nature of so many categories.
Never thought I'd consider myself a budget nerd, but I totally am! Thankful for your videos... I am not alone!
I use a holding method of sorts, but I hold it in the future month so I can't see it! No temptation to spend it since it's future money, even if it's not budgeted out to categories yet!
I prefer the holding catagory. Mostly because if I can't see it, it doesn't exist. Then the numbers don't match up in the budget, I take all money out and reallocate it before remembering 'oh, it's in the next month.' I've tried several times to put it in the next month and every time I forget that it is in the next month. Yay ADHD!
I may not fit as a budget nerd but I miss the assigning if I use a holding category. I can’t wait all the way to the start of the month.
Part II- I already stole money from next month for my vacation. YNAB says it’s my prerogative.
It IS your prerogative! ~BenB
I’m Team Ben on this one. My income is variable, so I’m currently budgeted out four months with a goal of six. In August, I’ll get to five! The holding category would just be too cumbersome. I don’t mind scrolling months ahead to see my underfunded numbers. And here’s a tip: did you know you don’t have to scroll back to the current month? Just click the budget icon in the bottom-left on the app. It always shows the correct month.
I'm fully funded two months ahead. I know this is verboten in the rules, but I have predictable income and assign the full expected amount ahead of time, so I can think through what's coming up in that month and what my priorities are. It's temporarily in the red, but by the time the 1st of the month comes, everything is fully funded. I adjust as my paychecks come in if needed, and review again when the month begins if any has come up in the mean time, or even unassign everything and start over. I don't use goals for all my categories, so the Assigned in Month line is my way to see total monthly needs. It works for me and scratches my itch for planning ahead and forecasting savings amounts etc.
I love pros and cons so I extra loved this video. Next month is my first three month paycheck and as tempting as it is to put it towards debt I’m going to budget a month ahead.
#YNABWIN my partner is budgeting with me, and when we sit together I can see the links on his transactions showing me he’s inputting most of them, so proud! He’s been telling people about YNAB and it makes me happy
We use the bonus money annually to fund optional categories for the whole year ( means we can flex yearly depending on what it is). Then I have a goal template for the monthly income and bills that matches. I budget directly a month ahead and fund goals manually so I actually think through what is needed for that month, before it gets here.
Trying the holding category, in the month ahead, and I realize that one additional advantage of the holding category is that I can see exactly how much I can transfer into a savings account until I need it in checking.
After much deliberation and thought, I’ve decided to try Ernie’s method. I created an Income category in my Holding group and assigned my money there in the next month’s.
How about a compromise of putting July's paychecks in the future funding category in Aug? This way you are not staring at those dollars all month and on the 1st you can move it back to RTA. Then take 10 seconds to 45 minutes to budget.
As someone who will be newly a month ahead, I decided that I will assign the paychecks as I go. I think it would be TOO hard to just put the money in a holding category and wait weeks to assign (already look at my budget too much). I will have one holding category for those categories that I may be able “save” some money when the money needed is recalculated at the beginning of the month (gas, groceries, etc.). I may choose to assign the full amount or just top up to get to the funded number. All “savings” will be added to my debt snowball. I’m still need to shore up some true expenses that I don’t want to fund monthly while I’m in debt payoff mode.
I hate seeing yellow. If I had to move money from a category to cover an expense, I leave it over spended until the top of the new month and go back, move the money, and go back to the current new month so I don’t have to see that I defunded a category the previous month. 😬😂
I'm used to pre-assigning the Fixed expenses that also need to be paid each month, as a reminder for myself to make the payments.
The reason I do this is because the host on the YNAB UA-cam channel told me that I can arbitrarily make assignments, as long as I regularly reconcile to maintain the accuracy of the bank account balance, the Budget amount will not be wrong.
I should no longer use this method, even if many categories show overspending, I still need to keep the Ready to assign value exactly at 0.
Additionally, sometimes when I see "All money assigned", if I try to assign another amount, it will not immediately show a negative value, still displaying "All money assigned".
Another situation is that I had a deposit posted into my bank account, but the "Ready to assign" amount did not immediately become a positive number.
Only when I try to assign a fairly large amount, the available amount for assign will change.
I remember when they got rid of the incoming category - at least I think that's what it was. I think it was when we went from software to web-based. It messed up how I was used to do things. I think it was when they moved to the age of money thing. ANYWAY - What I ended up switching to at that point was the holding category, but I would actually split the income coming so that it goes into the next month category and the tithe category. The tithe category could be used right away, but the next month, I'll "release" at the beginning of the next month into the next month and budget it all at once. (YNAB user/One month ahead person for about 15 years now.)
I have a "bucket" for next month startup. I use this method because I don't know how much will carry over until the current month ends. This impacts which areas need more funding for startup.
I definately budget ahead using the next month as opposed to a holding category. On the first of the month, I use the "reset assigned amounts" followed by "reduce overfunding" functions. This puts all the assigned (and over assigned) money back to ready to assign and resets the "available amounts" based on my targets. I can then go through category by category without ever having a separate "holding" category. Just a different way to "release" the money than a holding category but since it's based on my current targets, tends to be more accurate. I find the holding category tends to be off regularly as my targets tend to be very dynamic (e.g., Chewy fluctuates a lot).
Pros: Typically, because some money does roll over in a some categories, this naturally gives me a buffer/margin for that month regardless of how far ahead I am. Yet I feel like I have a better understanding on how far ahead on my bills I am (in case of say another government shut down). The money remains "hidden" in the next month so I'm not tempted to touch it. Yet I still get the awareness of going category by category at the start of the month.
Cons: Does mean sometimes I'm overassigning in the months ahead which is less efficient. However, I think that natural "buffer" does me more good than bad - it's certainly easier to reassign then an underfunded holding category..
If Ernie has Budget With Me sessions, then Ben could have Set Targets With Me sessions. Sometimes I wish I could see more hypothetical target setting videos. I've greatly appreciated the ones I have seen so far.
Oh, I like that idea! Not exactly the same, but Ben and I do have a Targets episode coming out this week, and I think (if I remember correctly 🤣) there are a lot of hypothetical scenarios in there. ~Ernie
I started using a holding category last year when my employer switched from monthly pay periods to biweekly. I had been paid monthly for as long as I've used YNAB (since around 2007!) so didn't really want to change my monthly budgeting process. Never been tempted to spend it since I view it as future money and it definitely tells me how much I have available for the month. I'm on Team Holding Category!
I love the idea of a hybrid method. I currently end up parking the excess funds into a savings category. And then if I need it, it moves out of that savings category and into the actual expense categories.
Ben - I trust the underfunded button just like you for next month's budget! I do my budget in seconds.. (Underfunded + click = "DONE") Then, adjust as needed. I also do have a holding bucket for unplanned expenses just in case. 🙂 Good video! Thanks guys!
I just budget ahead. Working on getting 2 months ahead.
At the beginning of the month I check my goals (and readjust if necessary), get rid of any overfunding, take care of any underfunding (if the overfunding isn't enough I go to the last month I'm fillen, empty that month, get rid of the underfudning in the current month and then I start filling op the month way ahead.
I’ve been budgeting for the future as the paychecks come in, and I’m getting into “stealing from the future” types of problems (finding out [only later] that “ready to assign” next month goes negative after I move available money around). Gonna try out these holding categories methods to see how I change!
Let us know what you think of the holding category! ~Ernie
I never use the bathroom underfunded button. I'm like Ernie, I got to think each category out and have the plan for it.
You guys are blowing my mind. I have been using YNAB for 10+ years, following the rules diligently and what you are doing is bending/breaking at least 2 rules. Holding category seems like a bogus job and manipulating targets ignores the moving money between categories to cover overspending. I get it but bending the rules is killing my type A tendencies.
After seeing HIFH regarding emergency funds, I've adopted the practice of just scheduling funds in the adjacent month. This just makes it easier for the month ahead and having an emergency funds bucket just sitting there not really knowing how/when to add to it. I still having savings categories that pretty much reflect the account balance of those accounts, but they don't have large amounts because with the month ahead strategy, that is the saving account. By scheduling one-month ahead, I've also created overfunded categories which puts me even more at ease. As of this month I have a fully funded month with $496 over funded and when I get paid this month, I'll be budgeting the next month. I do mix of underfunded and manually typing. I'm semi-monthly so the first check with be typed out for categories >$100 and the second check will be auto-assign/underfunded.
I wish I could see some screenshots showing these different approaches
Maybe it could be a workshop topic.
Good to know. I'll keep this in mind for future videos! ~Ernie
Ben, please do a YNAB Budget With Me | Ben's Budget video!! Even if you don't use your real numbers it would be so interesting. I believe you have said you don't use credit cards and you have like one checking/spending account. I think it would be so inspiring to so many people! Thanks Ben and Ernie!
I go category by category and use the Underfunded button. But then I look at each item in the category to make sure nothing has been missed. Money that is left over after everything has been funded (due to underspending in some categories the previous month) is then put into my Emergency Fund. I currently can fund 1 month of spending from my Emergency Fund and am looking forward to seeing it grow.
I definitely fall between the two- I use the underfunded button for something things that never change, but I do sometimes change the amounts in some categories vs others to roll with the punches. So those varying ones need to be considered on a monthly basis to be the most accurate.
Thanks you guys!
I do something completely different to work with my own brain... overfunded all the bills until one day, I sat down on bill pay day... and the statement had not even been generated. I just relied on rollover until fully funded on the first. Might not be the "right" way, but its my way. I have full control of my finances, and I do think that is what YNAB is for!!
Full control is the name of the game here, and you won! ~Ernie
I use a bit of both. I know I'm just going to fill the category I hit that underfunded button. Larger categories that get filled over two paychecks are typed.
I get paid every 2 weeks. I created a recurring transaction for my paycheck and split my paycheck out to all the categories. It's automated and I come in and review the overfunded stuff. So my payroll day budget doesn't necessary even need to happen as it already done other than approving the payroll transaction. This works only because my paycheck is stable. The issue is variable categories like groceries, or household expenses are not consistent and I sometimes have to add $ to them, or they will build up an excess amount that I periodically go an skim it off and add it to longer term categories like auto repairs, or other stuff that have longer term targets. The part I don't understand is how the AGE OF MONEY sits at 131 days and I'm not funded into the future at all.
One other pro for the holding categories. Because my wife and I try to budget together, it reduces those budget meetings to once a month vs every paycheck (every week).
Good point-thanks for sharing this one! ~Ernie
This has convinced me to never budget into future months, but instead have a group of specific holding categories and emergency funds.
Thank you for the 2 views. I am coming from YNAB 3 and 4 and just started using Web based YNAB in January 2024.
I'd like to know what method the software was actually designed to used? Ben's or Ernie's method? Thanks.
The default method is assigning in the future, like Ben does. The holding category is something that was thought of afterwards. ~Ernie
We are doing somewhat of a hybrid. For most expenses we fund in future months. For our 'fun' categories, we put in a holding category and decide at the beginning of the month how to allocate.
I’m only half a month ahead and was scheduling into the next month but just changed it to a holding account today. I like the holding account so I can know how close I am to reaching the full amount for the month ahead.
If you're working toward getting a month ahead, that is another really good benefit. You can see how close you are to your goal more clearly that way. ~BenB
"I can't go making willy-nilly budget changes! I have to think about it for two years." I cannot agree more! 😂
My budget session is really fast too. I just assign the money automatically
The biggest advantage of a next month holding category: you can manage better the current month.
I am very new to YNAB. All of this has been very informative but I do have a question. Can someone tell me what "category" i would place this "future "Funds or "next Months" funds into? I'm a bit loss here. For example, right now it is Sept 2023 and I will get 3 paychecks this month. How do I allocate that "extra" paycheck into a Future / Next Month Fund as they are talking about in this video? Thanks for any guidance. I appreciate it!
I'm not entirely clear on the benefit of a separate holding category vs. "Ready To Assign". I let my paychecks accumulate in "Ready To Assign", and once I've gotten all of my paychecks for a month, I budget for the next month via auto-assign. What am I missing? For context: I get paid a consistent amount every two weeks.
speaking from personal experience here, I can't keep dollars in ready to assign because it makes feel like I'm "ready to spend" 🤣 Once I get those puppies in their rightful place I have way more discipline. I used to do that sometimes though, and even if it was just for a week I could witness the spending pick up a bit. You may have more discipline, but that's where I find value 🙃
You are missing rule 1, give every dollar a job. RTA should be 0.
I do give every dollar a job, just not right away. :)
I have an overall Next Month category which gets $10 a week (it’s gonna be a long process 😆) but in my Monthly Bills grouping and my Debt grouping I also have holding categories because while we aren’t a month ahead we are about 2 weeks ahead on those 2 groups (most important ones to fund fully) so I guess I have a hybrid hybrid method going on.
Please, do a video talking discussing how Ben gets his targets so accurate that he can hit underfunded to fund an entire month!!! (I have a hunch a spreadsheet might be part of the equation ;-)
If I couldn't specifically asign my money to future month's bills specifically I wouldn't use YNAB tbh. I love that I can't see how much money I have because it makes me feel broke, which helps me not spend.
We have always been taught not to budget before receiving the money, that funding requires actual income, which is YNAB's highest principle. But why can we now budget months ahead?
You're still only funding those future months with money you actually have, so nothing changes there. You're just trying to get a month ahead of your expenses so you can put more time between earning and spending. That gives you more stability and flexibility. ~Errnie
There have been a few comments about budgeting ahead with paychecks every 2 weeks. I recently went from once a month paychecks to fortnightly paychecks after having spent years budgeting everything at the first of the month. I had also created a spreadsheet to set my goals to match my paychecks. At my income level I have to budget too tightly to build in a margin. I would like for third paychecks to be "extra" but I really need that amount to get by each month.
I've adapted my system to the fortnightly paychecks by using some of Ben's method and some of Ernie's. I calculated what a hypothetical monthly paycheck would be (paycheck amount * 26/12). I set up a holding category and added an extra paycheck amount to it to cover the additional 1/6 paycheck those occasional third paychecks represent. I did this from a home sale, though this could be saved for or this process could be started after a 3-paycheck month.
My paychecks go into the holding category as well, the way Ernie does it. Then at the beginning of each month I transfer my hypothetical monthly paycheck amount to "ready to be budgeted," then use Ben's 10-second budgeting technique, auto-assigning all "underfunded" categories.
It took some time to figure out and set up, but on a monthly basis it's quite easy.
Sounds like a dialed in workflow-I love it! ~Ernie
Oh, just found you guys! So fun. So scary the way the one guy goes 2 months ahead and just clicks underfunded and only some things get funded because it’s not enough. I’m scared to do that. What happens? Does Ready To Assign turn negative? Terrifying. But I do use the one click underfunded, but only for the months that I have enough to cover the whole month, which is just one month ahead.
" What happens? Does Ready To Assign turn negative?"
Good question. No, it doesn't turn negative. YNAB will automatically assign money until you hit zero, prioritizing categories based on targets. ~BenB
Glad you guys covered this topic. I have tried a little of both and am leaning toward the holding category. Related but not the same, I have a question about reports. My income is variable. I am also not a full month ahead but getting there. Because, for example, June's income is down as compared to May's and most of June was funded by May income, when I look at income:Expenses report for June, it appears I am in the red and have budgeted more than my income in June. This issue just seems to defeat the purpose of running this kind of report and isn't really that helpful. Any tips or tricks to remedy this issue? Am I just missing something? Thanks!
I get what you're saying. When you carry money over from month to month like YNAB does, you are regularly spending money you made in a previous month. This can cause the IvE report to look negative from time to time. As long as you're following Rule 1 and always paying back overspent categories, you can know you're not spending more money than you currently have. Maybe monitoring the Net Worth report would give you a better sense of this. Hope that helps! ~Ernie
How do you deal with budgeting ahead with "needed for spending" categories that have variable spending amounts?
I have never used the auto assign button. Always go in and do it manually. And no way I could use a holding category, put the money into the next month, out of sight out of mind!
When i couldnt fill all my categories every month, and when my income varied, I found budgeting into next month worked best. It relieved anxiety to know that the important categories were filled, and it kept me feeling the (real) scarcity because I knew what wasn't yet funded. I tried the next month category and I was really anxious -- I kept having to check my calendar for when the next pay would come in do mental math to reassure myself about its adequacy; I worried the whole month. So budgeting into next month was best. But now I use a next month category. My income is more than before and it is always the same. Two pays and that's what next month needs. Nothing to worry about. I dont feel tempted to steal from it.
I am surprised you never mentioned the problem of stealing form the future. I lost a big chunk of my first month ahead this way. learned toI always keep1c in TBA as an alert for stealing from the future. Has ynab changed how it is working so that is no longer a problem?
When you income is comfortable it doesn't make any difference which method. You two are pretty comfortable now; its a long time I think since getting form one end of the month to another was a struggle for you. When income is really tight and difficult, one method will feel better than the other, and that is the method to choose. We are all different in what makes us anxious and what reassures, so there isn't a single right answer to this question.
You're absolutely right-you have to do what works best for you in that season of life! And stealing from the future can still be a problem, but now YNAB alerts you when it's happening. ~Ernie
Could you please explain at some point this “extra paycheck “ thing? I get paid every other week, and the extra paycheck doesn’t seem all that extra. I have everything geared toward being paid evert other week. What am I doing wrong? Thanks!
Some people budget monthly counting on the 2 paychecks a month. So when the 3rd/extra paycheck comes it is a bonus.
So they are counting on 24 paychecks a year (12x2).
Where you are counting on every single pay check- 26 checks a year. It is just a difference in how you look at and budget your income.
I had a question (and maybe this isn’t just a budgeting question), but I’ve noticed you guys (especially Ben 😂), put a LOT of thought into things before you take action (coughcoughnewfridgecough) maybe to a fault? Definitely not pointing fingers here - I tend to WAY overthink everything and delay action out of anxiety and self-preservation. But I was curious: in what ways has delaying action actually been less advantageous than making a quick decision? Or more extreme, what are instances where delaying action actually hurt you or set you back financially?
A very valid question! I must not be sharing as much as I could or maybe I'm not communicating it well, but I've always thought of myself as someone who makes quick decisions. I would say, generally, I'll make a decision within a week or two, or maybe a month tops. And I don't think this has hurt me financially-at least not significantly because I've been sitting here thinking for 5 minutes and can't come up with a single example! ~Ernie
Thank goodness you can snooze a target now!
This is my 3rd month with YNAB. Still trying to figure out which target to choose (need for spending vs saving) for each goal
Have you seen this guide yet? support.ynab.com/en_us/targets-in-ynab-a-guide-rk5kkI9ks It should help! Otherwise, we talk about Targets in our Getting Started Live Q&As if you ever wanted to join one! www.ynab.com/free-workshops/ ~Ernie
Thanks!!
Mire laughing than straight. Conversation and advice.
The reality is you just have experiment and figure out what works best for you. I have tried all the ways in different combinations: budget into the next month, use a holding category, go line by line, use the underfunded button. After all that, I ultimately decidedly on budgeting directly into the next month and doing it line by line. I disliked having a holding category and disliked using the underfunded button. But that's how my brain works!
P.S. I totally disagree with you about changing targets to get rid of yellow. I tell people to embrace the yellow because that represents the decision you had to make at the time 🤷♀️ But again, just my brain! :)
I wish my brain could accept the yellow like yours does! ~Ernie
I am a worse Ernie. Most of my savings don't have targets. They get five dollars except what I am focusing on. Then that gets a larger amount. Some that having a revolving amount, work taxes, personal property tax, water and sewer, retinol etc) do have targets
Sounds like it's working for ya! ~Ernie
31:00 Oh dear I do that so often 🤣
That difference between money available and total “underfunded” at the beginning of the month needs to be more prominent on the app. My most disliked feature that YNAB lacks since leaving mint recently. I can build a budget that I can’t actually afford and not realize it until later unless I do a calculation by hand.
Aren't the different goals going to impact your underfunded number as well? What if you spend some Christmas money after you have fully funded your saving balance goal?
If you use a Needed for Spending target type for something like Christmas, your spending throughout the year will not affect your monthly target amount. That's the benefit of Needed for Spending vs. Savings Balance for something like Christmas.
A good rule of thumb is if you're going to spend while you save, go for Needed for Spending. If you're going to spend everything you've saved all at once, go with a Savings Balance target. ~BenB
Is it still the same where if you go over in a category but you already funded next month then you don’t really get alerted that you did that.
You will get an alert that the category in the current month is overspent and another alert under the Assigned in the Future tab that your next month's Ready to Assign is negative. ~Ernie
Hey, You guys mentioned 3rd paychecks in this video. I would love you to talk about that in more detail. - I put this comment in the Facebook groups but I thought I would add it here to get this communities take on it.
Help! I'm trying to figure out how this magical 3rd pay day ends up being extra money. Can anyone explain if this would even work for us.
Currently I get paid fortnightly (2 occasionally 3 times per month) , my husband monthly on the same day and we pay our mortgage fortnightly (same week as my pay day) Would budgeting for this monthly based on ((Week x 52)/12) for this and other weekly expenses or is this just shuffling the deck. I'm trying to make those 5 week months not feel so difficult to budget for.
This is one of my big worries about if we get a month ahead is that we would hit one of these 5 week months and no longer be a month ahead. We do have an age of money of 85 days so it would be possible for us to shuffle money around and get a month ahead theoretically.
Hope this makes sense.
The magical 3rd paycheck only ends up being extra money if the first two cover everything else. And it helps if you're a month ahead. For example, June was a 3-paycheck month for my wife. However, in June we were spending the money we made in May (2 paychecks each). And the July budget didn't need that 3rd June paycheck because it's built on the 4 paychecks we always receive. Some things you could try-set aside a little extra each month for your mortgage so that when you have a 3-payment month, the money is already there instead of having to take it from the 3rd paycheck. And if you have other weekly expenses, you could go the route of assigning less to other categories instead of using that 3rd paycheck to fund that extra week. Hope that helps! Also, it took us a long time before 3rd paychecks felt like "extra". And there is nothing wrong with having to use that 3rd paycheck for the current month's expenses! ~Ernie
Am I the only one who just assigns next month's money right into each category in the current month? Eg. my Student Loans category - each month starts off at $700 available (leftover from last month). I make a $700 payment and assign another $700 to the category, which sits there for next month. I've been budgeting like this since YNAB 4. I wonder if there are any cons with that method that I've been missing?
Must be working for you if you've been doing it since the YNAB 4 days! ~Ernie
I wonder if someone can explain why I sometimes I don’t see the underfunded button on the iPhone app and sometimes I do?
I just took a look in my budget, and the underfunded button is only appearing when the category has a target or scheduled transaction and there's not enough money in the category to fulfill one of those. ~Ernie
I dream of the day i can reach a month ahead. I tend to hover around 10 days age of money and haven’t been able to make much progress. I will continue to try.
I budget into the net month... i also just hit underfunded
I get paid monthly and I have managed to save 5 months of salary to cover an unexpected job loss. Would you consider getting one month ahead to be seperate from this money?
Do whatever makes the most sense for you! For me, I always want to be a month ahead-even if my wife and I lost our jobs, so my job loss fund is separate from being a month ahead. ~Ernie
Thanks Ernie. That makes sense. I had tried to move everything into the next few months but I was struggling to get clarity somehow. I think I will do a combination and leave 3 months in the job loss fund and move 2 months ahead in the monthly budget.
the holding category could turn into CDs that generate additional income.
Ah be careful with that! I did that through the pandemic because I wasn't spending money, and now all those expenses I was saving for (eg trips) are coming up and I don't want to take the money out of the investment, so I feel YNAB broke because I don't have the cash to hand! Looking ahead, anything that will be spent will now live in a savings account!
I rather put the info months ahead. Make some feel more motivate the father forward it goes. If I see it n my current month I will feel like I got plenty of money to spend this month
Ive never been able to fund a whole month 😢
Love that underfunded button!
UNDERFUNDED FTW!
Sounds like you need to devote an entire episode to YNAB Wins.
And it would be 3 hours long! ~Ernie
Both, typed and underfunded.
I think this might come down to: a) variable versus predictable income and b) how far you budget into the future. We have variable and unpredictable income. I am currently budgeting into September and it's almost fully funded. I budget the same amount of money every month, which I base off of an average of the last few years of income. Like Ben, I have my targets and recurring transactions honed in and I typically just hit the "Underfunded" button until I hit that cap. I actually prefer to be 3 to 4 months ahead, so if I used a "Holding" category, I could have tens of thousands of dollars just sitting there, essentially unassigned. When the month rolls over, I may (or may not) have extra money in the needed for spending categories that I've fully funded and that have some left over from the previous month. It's like a little bonus that I can use to cover anything underfunded or to add to the "Wiggle Room" category.
The main reason I see people argue against budgeting into the future is that they steal from the future. I don't typically have an issue with it, because I cover overspending in the current month. However, that indicator at the bottom of the Budget Inspector needs to be at the top in the current month.
While watching this episode, I tried the holding category. I pulled all money out of August and September and put it in a Holding Category in July. It just felt wrong. Since I've got some underfunded categories in July due to some vacation WAMing, it was really, really tempting to just cover those underfunded categories with that huge lump sum sitting there, essentially unassigned. So, Ben, don't do it! And Ernie, if you roll forward and hit the Auto Assign, you'll have those dollars there when the month rolls over. All you have to do is "Reset Assigned Amounts" and you can assign last month's money line by line. It's the best of both worlds!!