YNAB (you need a budget) from a savings perspective

katejo

I have read many reviews of YNAB but they are mostly from a debt clearing perspective. I want to improve my money organisation so I don't run out before the end of the month but I actually have no debts (apart from a smallish mortgage). I only spend on my credit card whan I can pay off at the end of the month. I just want to see better exactly where the money is going. Has anyone found that using YNAB improved their savings? I am trying to build up an emergency fund but, as I approach a figure of 3 x my monthly salary, something else comes along which needs payment straight away and the savings balance goes down again. I want to build that reserve up to a higher level. I am a single homeowner so only have 1 income to go on.

Giraffeseeker

Hi Katejo

Ynab most certainly is perfect for you. It is 100% designed to help your wealth to grow, and it will help you avoid this "something else comes along which needs payment straight away and the savings balance goes down again"

I do have debts, but putting that to one side (as I have a fixed lump sum payment go out on the 1st so treat it as one additional bill), I now have so many savings "pots" (in ynab, the money is all physically in one account) and between them they cover every eventuality.

When I started ynab in Feb I was ALWAYS up to my overdraft limit by a few days before payday. Yesterday was payday and I had £2200 in my account. I do not feel I have given up anything at all but ynab has made a huge difference.

I have the following categories/pots:
- Car repairs (last 12 months costs + 10% divided by 12 per month)
- Christmas (£50 per month, currently £400)
- Holiday (varies - my additionally earned income goes in there)
- Dental (£15 pcm - pot added 2 months ago after big dental bill)
- Children expenses (high balance at the moment as about to do uniform shopping - have been adding £40 pcm)
- Car Tax (tax cost divided by 12 months)
- Gifts (£50 pcm - high at the moment as monthly surplus has been building for my two son's autumn birthdays)

In addition I have an "emergency fund". This was being funded at £50 pcm but additional earnt income recently (exam marking) has built it to £1000 so I am not adding any more unless some is spent.

It has taken a while to get stable with all the categories - I had big car repair bills a couple of months in which wiped out the car repairs pot AND the emergency fund, for example.

Once all your "rainy day" pots are set up and being budgeted for, you can save to your hearts content knowing that if there was a car repair bill, or when Christmas comes along, you have separate pots of money ready to do the job.

IF I didn't have debts, my next pot would be car replacement savings. As it is, when my debts are repaid in 2 years I will save quite aggressively for a new car over about 10 months and then as soon as I have bought it, I will create a savings pot for the next replacement 4 years later and that will become just a regular part of my budget.

By the way, YNAB also EXPECTS you to pay off your CC in full at the end of the month, so you are already in sync with the system on that count.

HTH

katejo

Thanks! 1 further question. If I try the free trial and enter my info, will it transfer to the paid version or do I have to start again?

I am never anywhere near my free overdraft limit but often get around £100 overdraft by the end of the month. Sometimes it is because I am too ambitious about how much to transfer into savings early in the month.

re. credit card: do you set up an account on YNAB to cover the credit card? I always pay mine as soon as I get my salary.

Giraffeseeker

Yes, use the free trial and then when it expires it'll give you the option of entering an activation code, which you can buy from YNAB or from Steam (marginally cheaper on Steam at £29.99). You won't lose data or need to reinstall etc.

You should set up 3 "on budget" accounts - savings, current, and credit card. Enter the balances as they stand today. You will end up with a initially big "available to budget" amount due to your savings, but create an "Emergency fund" category and budget your savings to that.

Remember that YNAB doesn't care where your money is. So if you have allocated £100 for eating out, and you actually spend this £100 on your credit card, your eating out category will still reduce to zero. You then just do a "transfer" from your current ac to credit card when you pay it off.

Likewise, with savings just budget the amount you want to save into your emergency fund category each month and then do a transfer from your current account to your savings account. YNAB won't mark the money as spent because it still exists in the category.

You won't be able to hit your overdraft accidentally. If you have allocated all of your months income including £200 to "emergency fund" (which you transferred to your savings account), and then you spend to "-£80" in groceries, you will see the category go "red". You'll have to WAM (whack a mole) by moving money from another category to make it go green again. If you therefore WAM from your emergency fund category, which you know is held in another account, you'll have to move the money back to avoid an OD. Like I said, YNAB doesn't care where the money is, just that is has been spent (or not spent).

Sounds complicated but it isn't. I suggest joining one of their online classes or watching a recording of one on their website.

Good luck!

katejo

tintingirl wrote: »

Yes, use the free trial and then when it expires it'll give you the option of entering an activation code, which you can buy from YNAB or from Steam (marginally cheaper on Steam at £29.99). You won't lose data or need to reinstall etc.

You should set up 3 "on budget" accounts - savings, current, and credit card. Enter the balances as they stand today. You will end up with a initially big "available to budget" amount due to your savings, but create an "Emergency fund" category and budget your savings to that.

Remember that YNAB doesn't care where your money is. So if you have allocated £100 for eating out, and you actually spend this £100 on your credit card, your eating out category will still reduce to zero. You then just do a "transfer" from your current ac to credit card when you pay it off.

Likewise, with savings just budget the amount you want to save into your emergency fund category each month and then do a transfer from your current account to your savings account. YNAB won't mark the money as spent because it still exists in the category.

You won't be able to hit your overdraft accidentally. If you have allocated all of your months income including £200 to "emergency fund" (which you transferred to your savings account), and then you spend to "-£80" in groceries, you will see the category go "red". You'll have to WAM (whack a mole) by moving money from another category to make it go green again. If you therefore WAM from your emergency fund category, which you know is held in another account, you'll have to move the money back to avoid an OD. Like I said, YNAB doesn't care where the money is, just that is has been spent (or not spent).

Sounds complicated but it isn't. I suggest joining one of their online classes or watching a recording of one on their website.

Good luck!

Hi Tintingirl

I have started the trial and have set up accounts (not the credit card one yet). I assume that the cc one just includes my current balance? I have paid the full amount for this month. My main account looks in the red because I gave my balance as it is today, not the full amount which I was paid on the 27th. several of my DD's for this month have already gone out. Is that correct? I have entered my regular monthly bills but some have already gone out of the account. I have entered details of income which I will get at the end of August (with relevant dates).

Giraffeseeker

Hi Kate

Just budget for what is left to pay this month with the money you have - budget to zero and not into the red or you'll run into problems. If the DD's have already gone they don't need budgeting for this month.

YNAB should always reflect reality so you shouldn't really have your end of August wages in there yet - enter it as a recurring payment and it will "appear" on payday for you to budget with.

Next month you can budget a a full month.

Credit card is the same - enter the balance as it is today.

katejo

tintingirl wrote: »

Hi Kate

Just budget for what is left to pay this month with the money you have - budget to zero and not into the red or you'll run into problems. If the DD's have already gone they don't need budgeting for this month.

YNAB should always reflect reality so you shouldn't really have your end of August wages in there yet - enter it as a recurring payment and it will "appear" on payday for you to budget with.

Next month you can budget a a full month.



Credit card is the same - enter the balance as it is today.

If the DD's have already gone they don't need budgeting for this month. : Do you mean i should leave them out of the left hand budget column completely? I have set up payment dates for all the DD items and these ones have dates after I am next paid at the end of august.

In a similar way, I don't have to make any CC payments until after I am next paid. I cleared it at the end of July. I have used the card since but have not had a statement. Am i supposed to enter expenditure on the card on the CC account as I use it?

I have added my salary as a recurring incoming payment (in the same way as my recurring DD outgoings). Hope that makes sense to you

N1AK

katejo wrote: »

I have read many reviews of YNAB but they are mostly from a debt clearing perspective. I want to improve my money organisation so I don't run out before the end of the month but I actually have no debts (apart from a smallish mortgage). I only spend on my credit card whan I can pay off at the end of the month. I just want to see better exactly where the money is going. Has anyone found that using YNAB improved their savings? I am trying to build up an emergency fund but, as I approach a figure of 3 x my monthly salary, something else comes along which needs payment straight away and the savings balance goes down again. I want to build that reserve up to a higher level. I am a single homeowner so only have 1 income to go on.

A budget which you use, be it YNAB or not, will normally be helpful if you want greater control of your money.

Personally I think YNAB is a little over-simplistic, but that is probably a selling point for most people who don't want to spend longer using more complex software for benefits they won't use.

YNAB isn't going to stop you having to blow your entire emergency budget. Although I would personally query how 'accurate' your budgeting is if you regularly need 3 months earnings at no notice! Big purchases like new bathrooms, cars etc should really be handled by budgeting for them.

katejo

N1AK wrote: »

YNAB isn't going to stop you having to blow your entire emergency budget. Although I would personally query how 'accurate' your budgeting is if you regularly need 3 months earnings at no notice! Big purchases like new bathrooms, cars etc should really be handled by budgeting for them.

I have always thought that the requirement for 3 months earnings is to cover you if you lose your job unexpectedly or have an extended period of illness (without good sick pay from work). It would then cover essential direct debits like mortgage/broadband/council tax etc.
For things like a new bathroom, I save first.

I am as yet undecided as to whether it is worth using YNAB or not.

getmore4less

MSMoney is free and better it has many more features that help with budgets and tracking.

Anyway whatever tool you use just think of yourself in debt as you have a savings goals that you have not reached yet.

If trying to save £10k think of it as a 10k debt and use the debt reduction techniques(debt is just negative savings).

A budget is a plan of where money will go(spends/savings etc.) and needs to be done for at least a year in detail and forward looking beyond that to cover the bigger objectives.

THe trick is getting your catagories correct* and a realy good idea is to normalise on a year, that is tital each catagory for a years worth and use those numbers to prioritise where you plane to use your money

if you can get income for a year to match the spends/savings for a year then it becomes a tracking and cash flow exercise.

You then need a tool to track you are on plan.

A lot of people confuse budgets with cash flow.

The budget is the plan, cash flow is making sure you have the money in the right places at the right time.


* The catagory list will grow over time, as all the things you forgot use up cash, no more suprises eating a 3 month saving pot, they will have been budgeted for.

With a 10 year plan you have things like new cars washing machines decorating all in the plan.

katejo

I will have a look at MSMoney. I thought that I had read that it had been discontinued. Must be confusing it with something else. Is it available as an App as well? I have browsed budgeting apps but couldn't tell if they were really any good or not.