YNAB - help!

katyp

Hoping someone might be able to help me!
I have just downloaded the trial YNAB but am struggling.
DH and I are both paid on the last Friday of the month, 25 April this month.
I have allocated what is left of this month's (April's) pay to the starting balance.
Next month, May, we will not be paid until Friday, 30 May. I have input this as income for May.
Problem is that YNAB is carrying over most of April's salary into May and also allocating May's salary into May, even though it is paid at the very end of the month.
To complicate things even further, I have various bits and bobs which come in throughout the month - BTL rents, child benefit, maintenence etc.
The upshot is that I have effectively got nearly a double salary showing in May, which surelky can't be right?
Hope that makes sense to someone!

[Deleted User]

I think you're approaching it from the wrong angle, when you say "Next month, May, we will not be paid until Friday, 30 May. I have input this as income for May." do you mean you've already entered the transaction? YNAB expects you to enter transactions as they happen, you don't pre-emptively enter a transaction, YNAB functions using your running balance. The idea is: you get paid -> enter the payment transaction into YNAB (selecting "Income for Month" in the category dropdown) and then YNAB knows that you now have that money to spend through the month.

"Income for April" means income that you spend in April, not income that you earned for your work done during April. Your employer pays you at the end of April for work you did in April, but that income is for you to spend in May. You pay for your May bills with your income that you earned during April (and was paid to you at the end of April). Does that make sense?

YNAB can deal with all of things you've mentioned, variable income, variable payment dates, variable budgeting needs, it's all possible! If you're confused / stuck with YNAB, make sure to check out their website, they have a wide variety of informative classes that can help you understand how to use the software and the method. One of the most important parts of YNAB is their methodology, it's not just a piece of software, it's an entire way of managing your personal finances.

katyp

Thanks, I did not realise that.
That makes my budget for the beginning of the month look very scary!
Is this correct way to do it - start the month with a big defecit, knowing that the money will come in later on the cover the shortfall?

~Beanie~

How are you starting with a big deficit? You should enter the money you have in the bank on the day that you start YNAB (if any!) and you then budget that amount down to zero. Any income that you received in April, you budget once it has been received. There shouldn't be a deficit anywhere.

FireWyrm

No.

OK, I got paid today, it is the last working day of April. I have allocated that money to 'Income in May' as it is to be spent in May, not April. All my DD's will come out of that money tomorrow. My budget is calculated in such a way that the big number at the top is £0.00. This means, I have allocated all of my money. When I get paid again on 31st May, that will get allocated to income in June.

Now, you may actually be starting the month in overdraft, that's fine. YNAB will allocate that as Pre-YNAB Debt. You need to slowly clean this up so that the top figure balances at £0.00 again, not a red negative amount. The figures you should be keeping an eye on, are not what the bank tells you you have, but what you have in the right most column for each of your categories. As long as your transactions for the month when entered and allocated to a category are LESS than the figure in the right most column, or that column shows a zero, then you are 'on budget'. If you spend more, then the left most column will turn red and you have to decide how to balance it back again, either by moving unused money from somewhere else, getting more income, or accepting that you will have less in that column next month.

https://dl.dropboxusercontent.com/u/7789396/YNAB.PNG

OK, lets take the above example.

In April, you will see that I spent less in the Riverford column than I budgeted (not by much, but hey, every little helps). If you look at the right most column of May, you will see that currently, there is a balance of £104. This is the £4 I didnt spend, plus the additional £100 I have budgeted.

Notice also the topmost figure for May....this shows £0.00. This means I have allocated every single penny (rule one of YNAB) and as far as I am concerned, if I stay within that framework, I cannot be out of pocket. You notice also that I 'overspent' in April. This is because I had a pre-YNAB debt which I cleared up by spending less in May. See the top of the screen, see how the overspend is carried forwards...?

katyp

I have a big deficit because there is not enough money at the beginning of the month to cover all the budgeted expenses for the whole month.
Ie the wages I was paid in April, most of which are carried over to May.
These wages are topped up throughout the month with other sources of income, which will reduce the defecit as the month progresses.
Have I got it wrong?

~Beanie~

katyp wrote: »

I have a big deficit because there is not enough money at the beginning of the month to cover all the budgeted expenses for the whole month.
Ie the wages I was paid in April, most of which are carried over to May.
These wages are topped up throughout the month with other sources of income, which will reduce the defecit as the month progresses.
Have I got it wrong?

Yes, you are doing it wrong.

You can only budget money that you actually have now. For example, if you have budgeted for a bill that is not due until the 20th May, but you know that you will have money coming in on 15th that will cover it, you shouldn't enter the bill until the 15th when you actually receive the money and enter it as income.

FireWyrm

katyp wrote: »

I have a big deficit because there is not enough money at the beginning of the month to cover all the budgeted expenses for the whole month.
Ie the wages I was paid in April, most of which are carried over to May.
These wages are topped up throughout the month with other sources of income, which will reduce the defecit as the month progresses.
Have I got it wrong?

Are you sure you have set your categories correctly?

I know what YNAB says about only allocating existing funds and that is fine, but in order to determine which categories you are likely to need in the longer term, you have to know (on average) how much money is coming in.

My first month with YNAB, I forward calculated by entering 'non-cleared' income for the relevant months to come. As I actually get paid, I delete those 'fantasy' income values and replace them with the real transaction as per the OFX download from the bank. That way, as long as I actually do get paid that amount of money, my budget will work because I only spend from a category and not any other place. I can do this because I am pretty certain I will a) get paid on the last day of the month and b) I have prior experience of how much that is likely to be. As it happens, I received a large bonus today which meant that I had to adjust my actual income transaction to the newer higher amount. I then allocated the additional money to the 'buffer' category and this makes the top figure £0.00. As long as my real transactions are all categorised and no category goes red (overspent), I know that the budget is correct.

Ignore what your bank is telling you. Trust that your budget is correct and your money allocated sensibly. When you get a few months down the line and you have a comfortable buffer, the actual balance in your accounts is irrelevant as you will no longer be looking at them except when you download a new set of transactions into YNAB.

For you, you could do the same as me. Set up an initial budget with fantasy income in the transaction register so that you can get a good idea of where to budget your money. Going forwards, it doesnt matter, you know that the income will be there and the budget it right. Only spend within the budget categories. It is a no-no to have uncategorised transactions.

katyp

So, I can put my entire income in to YNAB at the beginning of the month, even though it has not arrived in my bank account yet?
This is what is confusing me.

FireWyrm

katyp wrote: »

So, I can put my entire income in to YNAB at the beginning of the month, even though it has not arrived in my bank account yet?
This is what is confusing me.

You *could*, that is one way to do it. In reality, you are in danger of double entry, but if you are disciplined, you can do this. It does mean being very aware of incoming money and doing some of the reconcile by hand if you import transactions via OFX. What you really need to pay attention to is, what is in your right most category columns for the month since that is your 'true' spending money for that category. The actual bank balance is beside the point since you ought to be entering transactions as you make them, not as they appear in the bank. This means your reference point is always YNAB since it will always be right, no matter what is happening with the bank clearing items. All you have to do is ensure that the two reconcile exactly at about weekly intervals.

Thomas_Crown

For those people like me who aren't familiar with some of the more obscure acronyms:-

YNAB = YouNeedABudget.com

Google is my friend.