Author Topic: do you follow all the "YNAB rules"...  (Read 11828 times)

FuckRx

  • Pencil Stache
  • ****
  • Posts: 788
do you follow all the "YNAB rules"...
« on: February 27, 2014, 05:55:07 PM »

I love YNAB, makes sense to me and has been so far the only thing that has worked for me...
in one of their strategies (there are only 4) they talk about living on last month's income...
those who are familiar, do you do it? is it helpful? i have an opportunity to do that (finally)...
i got $8,400 in cash that was owed to me so i'm thinking of using some of that for that purpose...

Ziggurat

  • Stubble
  • **
  • Posts: 125
  • Age: 54
  • Location: Toronto area
Re: do you follow all the "YNAB rules"...
« Reply #1 on: February 27, 2014, 06:04:41 PM »
We do use the living on last month's income rule. Our main checking account gets dinged with fees for all transactions if we dip below a certain amount any time in the month. So the YNAB rule, combined with money building up in categories for property tax and other items that come once or a few times per year, pretty much ensure the cash flow will work out. It's one less thing to worry about.

Plus I find YNAB just flows better if you play along with the way they intended it to work.

nottoolatetostart

  • Bristles
  • ***
  • Posts: 426
Re: do you follow all the "YNAB rules"...
« Reply #2 on: February 27, 2014, 07:16:34 PM »
I do 1 (give every dollar a job) and 3 (roll with the punches). I did the rainy day, but I hated having those balances grow so much. It made me feel like we weren't making any progress. We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

thepokercab

  • Bristles
  • ***
  • Posts: 486
Re: do you follow all the "YNAB rules"...
« Reply #3 on: February 27, 2014, 08:40:08 PM »
Plus I find YNAB just flows better if you play along with the way they intended it to work.

+1 The last rule I started following was the buffer or "live off of last month's income" rule.  I basically just used my tax refund for this. 

I do end up classifying my investment accounts and my savings account as "off-budget" accounts which might go a bit against the grain.  I make weekly transfers to Vanguard for our IRAs and weekly transfers to a savings account for our house down payment fund.  Personally, I find that it just works better for me when I classify these as expenses, just like rent, food, etc..   

cdnmustachegrower

  • 5 O'Clock Shadow
  • *
  • Posts: 13
Re: do you follow all the "YNAB rules"...
« Reply #4 on: February 27, 2014, 09:46:36 PM »
I do. 

I broke the rule to finish my student loan, then my vehicle died a month later!  I'm entirely sure I'd say I regret it as I rolled with the punches and still had half a buffer.  By next week I'll have the buffer restored since I'll be getting a bonus. 

Following rule 4 definitely makes the software easier to use.  I started buffered so I didn't realize the difference.  Also love YNAB, nice easy way to see what all your money is going to.

mlipps

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: do you follow all the "YNAB rules"...
« Reply #5 on: February 27, 2014, 09:47:35 PM »
I do the last months income for my husband's paycheck, which we use for all our bills and expenses. Mine goes straight to our cash savings and fluctuates more, and I was driving myself crazy trying to figure out how much we could add to savings from my husbands paycheck each month, so I switched all my paychecks and any random money that goes right into savings to go to the same month budget. You gotta do what works for you!

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #6 on: February 27, 2014, 10:04:35 PM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Russ

  • Handlebar Stache
  • *****
  • Posts: 2213
  • Age: 28
  • Location: Boulder, CO
Re: do you follow all the "YNAB rules"...
« Reply #7 on: February 27, 2014, 10:15:54 PM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.

I read that as in a tool to provide a little extra buffer / safety net / emergency fund because you definitely already have the money, not as in you have to spend it all

Not that I've even heard of these before today. Could be way off base.

Joel

  • Pencil Stache
  • ****
  • Posts: 774
  • Location: California
Re: do you follow all the "YNAB rules"...
« Reply #8 on: February 27, 2014, 10:26:01 PM »
I utilize Rule 4 and "live on last month's income". Ultimately, it allows me to budget for the entire month on the first, and not have to worry about the timing of when I will receive paychecks (I'm paid on the 15th and last day of the month, if that matters, and used to be every other week).

I keep around 10k in my checking account, and excess usually goes in my investment account. My investment account is on-budget, and most of my categories are growing and have large balances, especially my category called "Future". It is large enough to absorb any potential market loss, and I adjust the balance at the end of every month.

Zikoris

  • Magnum Stache
  • ******
  • Posts: 3427
  • Age: 32
  • Location: Vancouver, BC
  • Vancouverstachian
Re: do you follow all the "YNAB rules"...
« Reply #9 on: February 27, 2014, 10:31:28 PM »
I don't use YNAB myself, but it seems a bit pointless to live on last month's income when I make $2300-$3000 and only spend about $700. I can't understand how that would be a useful thing to do. It seems like a lot of accounting with absolutely no benefit.

Bookworm

  • Guest
Re: do you follow all the "YNAB rules"...
« Reply #10 on: February 27, 2014, 10:39:22 PM »
I don't use the "last month's income" rule because at the end of the year, I want all the reports to show income and expenses that belong together.

I'm still working on getting it to work the way I want to.  I'd really like to be able to manually assign things to the time periods where I want them instead of having the program sort them by transaction date.  For instance, we received our 2013 tax refund in February of 2014, so that where it shows up.  I'd rather have it be part of 2013.

N

  • Handlebar Stache
  • *****
  • Posts: 1376
  • Location: Chicago
  • You must change your life. -Rainer Maria Rilke
Re: do you follow all the "YNAB rules"...
« Reply #11 on: February 27, 2014, 10:47:12 PM »
I dont understand the rule to mean you have to "spend" all of your last months income.
I understand it to mean that you have a buffer of one months expenses.

If our income is 4k in march, as it comes in, I mark it for use in april. April's Budget now has 4k. I assign all those dollars. maybe 1k of them goes towards savings or emergency or investments or what have you, but its assigned. and its money we earned the month before.

I do follow the rules. I used to pay bills with the same months money and it was often a balancing nightmare. this way is SO easy. On the first of the month, I have all of the money I can spend for that month. I do not worry about the bills, Ive already assigned their payments. I can set up auto payments or withdrawals or whatever.

its really like a virtual envelope system, that is super easy to adjust and re-distribute.

mlipps

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: do you follow all the "YNAB rules"...
« Reply #12 on: February 28, 2014, 06:03:23 AM »
I don't use the "last month's income" rule because at the end of the year, I want all the reports to show income and expenses that belong together.

I'm still working on getting it to work the way I want to.  I'd really like to be able to manually assign things to the time periods where I want them instead of having the program sort them by transaction date.  For instance, we received our 2013 tax refund in February of 2014, so that where it shows up.  I'd rather have it be part of 2013.

Change the transaction date.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #13 on: February 28, 2014, 07:11:32 AM »
I dont understand the rule to mean you have to "spend" all of your last months income.
I understand it to mean that you have a buffer of one months expenses.

But it's not "live on last month's expenses" - because what if your expenses are higher (whoops, car and property insurance are due).

IDK, it seems the best method to me is just have a cash cushion, and then spend as little as necessary to make you happy.  Simple. 

But really, do whatever works for you.  Personal finance has no rules, so trying to prescribe some never works.  If their "rules" work for you, great.  If they don't, fine, modify them and move on.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

EK

  • Pencil Stache
  • ****
  • Posts: 733
  • Age: 32
  • Location: Fredericksburg, VA
    • Happily Enough
Re: do you follow all the "YNAB rules"...
« Reply #14 on: February 28, 2014, 07:16:30 AM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.

Well I find it handy to budget based on previous months because we never have to time bills according to when our paycheck hits the bank.  (We don't keep much money in our checking.) It's also handy for people with irregular income because it takes the guesswork out of the budgeting if we base our budget on the previous months income.

Living on last months income doesn't mean spend the whole amount, it just means you have to assign a "job" to every dollar you earned- this can include savings items like paying down debt, adding to a retirement account, building emergency fund, etc. 

YNAB is a very helpful tool for people who are not naturally good at managing their money and need help controlling expenses.  We're not all perfect yet. ;)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #15 on: February 28, 2014, 07:30:36 AM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.

Well I find it handy to budget based on previous months because we never have to time bills according to when our paycheck hits the bank.  (We don't keep much money in our checking.) It's also handy for people with irregular income because it takes the guesswork out of the budgeting if we base our budget on the previous months income.

Living on last months income doesn't mean spend the whole amount, it just means you have to assign a "job" to every dollar you earned- this can include savings items like paying down debt, adding to a retirement account, building emergency fund, etc. 

YNAB is a very helpful tool for people who are not naturally good at managing their money and need help controlling expenses.  We're not all perfect yet. ;)

Yeah, the argument about having erratic income never convinced me.  If anything I think living on last month's income is an even worse strategy with erratic income.

But by living on last month's income when your income is erratic means one month you spend a lot (based on making a lot the previous month), and then the next you might spend very little (based on making very little).  Wouldn't it make more sense to have a buffer (that you top off in good months, draw down on in low months) and spend as little as possible, rather than having a "feast or famine" type spending based on what you earned the month before?

Our final sentences/conclusions on those two posts agree perfectly though, it's a good tool for beginners.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

thepokercab

  • Bristles
  • ***
  • Posts: 486
Re: do you follow all the "YNAB rules"...
« Reply #16 on: February 28, 2014, 07:50:10 AM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.

Well I find it handy to budget based on previous months because we never have to time bills according to when our paycheck hits the bank.  (We don't keep much money in our checking.) It's also handy for people with irregular income because it takes the guesswork out of the budgeting if we base our budget on the previous months income.

Living on last months income doesn't mean spend the whole amount, it just means you have to assign a "job" to every dollar you earned- this can include savings items like paying down debt, adding to a retirement account, building emergency fund, etc. 

YNAB is a very helpful tool for people who are not naturally good at managing their money and need help controlling expenses.  We're not all perfect yet. ;)

Yeah, the argument about having erratic income never convinced me.  If anything I think living on last month's income is an even worse strategy with erratic income.

But by living on last month's income when your income is erratic means one month you spend a lot (based on making a lot the previous month), and then the next you might spend very little (based on making very little).  Wouldn't it make more sense to have a buffer (that you top off in good months, draw down on in low months) and spend as little as possible, rather than having a "feast or famine" type spending based on what you earned the month before?

Our final sentences/conclusions on those two posts agree perfectly though, it's a good tool for beginners.  :)

I'll venture that for a mustachian, the YNAB rule of "living on last month's income" doesn't really mean that. It's basically another way of saying that you have a buffer.  For myself, all it means is that I have a cash cushion in my checking that cover's all of my expenses for the month. And for me, expenses also mean automatic investments, transfers to savings etc.. I basically don't have to think about it.  If I am able to spend less money in a certain month, great.  I just transfer it to savings.  If I spend more than I thought-  whatever, I have a "buffer" in YNAB that lets me cover it. 
 

Zette

  • Stubble
  • **
  • Posts: 138
Re: do you follow all the "YNAB rules"...
« Reply #17 on: February 28, 2014, 07:56:25 AM »
I don't use YNAB myself, but it seems a bit pointless to live on last month's income when I make $2300-$3000 and only spend about $700. I can't understand how that would be a useful thing to do. It seems like a lot of accounting with absolutely no benefit.

"Living on last month's income" is just a way to say "don't live paycheck to paycheck".  By YNAB standards, you are living on last month's income, because you have a sufficient buffer built up that you don't have to wait for your paycheck to arrive on the 14th so that you can pay your electric bill on the 15th.

So YNAB helps people move from living paycheck to paycheck to at least being a month ahead, and eventually being able to handle things like semi-annual car insurance payments.  Most mustachians are way beyond this.  It's still an effective tool if you want to maximize your savings by planning out and minimizing your spending -- you just happen to assign a large amount of your income each month to savings categories.

KateR

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Re: do you follow all the "YNAB rules"...
« Reply #18 on: February 28, 2014, 08:01:20 AM »
Live on last month's income always seemed a bit silly to me, especially for a Mustachian. If you are saving at a decent rate, why would you live at last month's income?  That implies a 0% savings rate.

We don't live on last month's income because only a small portion of our income actually goes towards bills and the majority goes to investments.

+1

Say, for example (making up some numbers here), last month's income was 6k.  I spent 2k, and saved the other 4k.  Why on earth would I live on last month's income (6k)?

That's as silly as the retirement rules of thumb around needing to save up X where X is a percentage of your income.  Your income should have nothing to do with your expenses (other than hopefully being higher than them).

It's great for beginners who don't LBYM, but for a Mustachian it's a silly rule.

Well I find it handy to budget based on previous months because we never have to time bills according to when our paycheck hits the bank.  (We don't keep much money in our checking.) It's also handy for people with irregular income because it takes the guesswork out of the budgeting if we base our budget on the previous months income.

Living on last months income doesn't mean spend the whole amount, it just means you have to assign a "job" to every dollar you earned- this can include savings items like paying down debt, adding to a retirement account, building emergency fund, etc. 

YNAB is a very helpful tool for people who are not naturally good at managing their money and need help controlling expenses.  We're not all perfect yet. ;)

Yeah, the argument about having erratic income never convinced me.  If anything I think living on last month's income is an even worse strategy with erratic income.

But by living on last month's income when your income is erratic means one month you spend a lot (based on making a lot the previous month), and then the next you might spend very little (based on making very little).  Wouldn't it make more sense to have a buffer (that you top off in good months, draw down on in low months) and spend as little as possible, rather than having a "feast or famine" type spending based on what you earned the month before?

Our final sentences/conclusions on those two posts agree perfectly though, it's a good tool for beginners.  :)

I'll venture that for a mustachian, the YNAB rule of "living on last month's income" doesn't really mean that. It's basically another way of saying that you have a buffer.  For myself, all it means is that I have a cash cushion in my checking that cover's all of my expenses for the month. And for me, expenses also mean automatic investments, transfers to savings etc.. I basically don't have to think about it.  If I am able to spend less money in a certain month, great.  I just transfer it to savings.  If I spend more than I thought-  whatever, I have a "buffer" in YNAB that lets me cover it.

+1 - The purpose of that YNAB rule is to help you learn to live off of money that came in last month vs. counting the days to each paycheck - essentially a cash cushion - and not that you need to spend as much as you received.  YNAB emphasizes allocating your money to any job as "spending,"  so if I made $6k, spent $2k on bills and either saved or invested the remaining $4k, they still consider the saved/invested money as "spent."  For people who currently live paycheck to paycheck (I just left that cycle!), it helps you build a little breathing room into your budget, so you don't need to worry about automatic payments bouncing.  Definitely not an issue for mustachians, but I think YNAB is targeted more towards the recent converts/normal folks who are just trying to learn good financial habits.

lexie2000

  • Stubble
  • **
  • Posts: 222
Re: do you follow all the "YNAB rules"...
« Reply #19 on: February 28, 2014, 08:04:58 AM »
I've read a lot about YNAB and it "seems" like a lot of work, but hey, if it works for those who use it more power to them.

We've always simply taken savings off the top and lived off the rest, spending as minimally as possible.  Our EF has always doubled as an EF (i.e. unexpected auto repair)/large, planned expenses account (i.e. property taxes), so anything that pops up can be transferred out of there and into the checking to cover.

Zikoris

  • Magnum Stache
  • ******
  • Posts: 3427
  • Age: 32
  • Location: Vancouver, BC
  • Vancouverstachian
Re: do you follow all the "YNAB rules"...
« Reply #20 on: February 28, 2014, 08:08:02 AM »
Lots of talk about trying to time bills and paychecks, and how that causes stress...

Uh, why not just autobill to a credit card and pay it off when you get paid? My boyfriend and I put everything except rent on credit card (and that one we would if we could), and do payouts twice a month. Everything gets paid, we don't have to think about it, we pay no interest or fees, and we get credit card points.

If I had to keep money in chequing and juggle things to cover bills, it would give me stress too. I rarely keep more than $200 in chequing. We do payouts on payday, and the rest goes into investments.

orcas50

  • 5 O'Clock Shadow
  • *
  • Posts: 53
Re: do you follow all the "YNAB rules"...
« Reply #21 on: February 28, 2014, 08:26:30 AM »
Lots of talk about trying to time bills and paychecks, and how that causes stress...

Uh, why not just autobill to a credit card and pay it off when you get paid? My boyfriend and I put everything except rent on credit card (and that one we would if we could), and do payouts twice a month. Everything gets paid, we don't have to think about it, we pay no interest or fees, and we get credit card points.

If I had to keep money in chequing and juggle things to cover bills, it would give me stress too. I rarely keep more than $200 in chequing. We do payouts on payday, and the rest goes into investments.

This works for some bills we have, but a few payees don't take auto credit card bill pay, such as our mortgage lender, county treasurer (semi-annual property taxes), and utilities company as well as a few others.

smalllife

  • Pencil Stache
  • ****
  • Posts: 983
Re: do you follow all the "YNAB rules"...
« Reply #22 on: February 28, 2014, 08:39:52 AM »
Lots of talk about trying to time bills and paychecks, and how that causes stress...

Uh, why not just autobill to a credit card and pay it off when you get paid? My boyfriend and I put everything except rent on credit card (and that one we would if we could), and do payouts twice a month. Everything gets paid, we don't have to think about it, we pay no interest or fees, and we get credit card points.

If I had to keep money in chequing and juggle things to cover bills, it would give me stress too. I rarely keep more than $200 in chequing. We do payouts on payday, and the rest goes into investments.

I work somewhere where I can see how even giving them access to the credit card can cause issues.  Going over the limit or something like that wouldn't be an issue, but I don't trust auto drafts.  I have re-occuring scheduled bill pay from my bank instead.  It's too easy to miss (for me! I know everyone's brain works differently) when all you are looking at is a register. 

Using YNAB allowed me to catch a mailing error from my City - the personal property bill got lost in the mail and I saved myself the late fees by recognizing that fact. 

I don't have to juggle things to cover bills, but I do intentionally keep my paycheck low enough where I have to pay attention (stretching my 401k contribution as much as I can).  Using YNAB makes me feel comfortable doing so, and as a result I save more.  Everyone sees money differently - saving off the top and living off the remainder is exactly what I do with YNAB, it just looks a little different. 

Joel

  • Pencil Stache
  • ****
  • Posts: 774
  • Location: California
Re: do you follow all the "YNAB rules"...
« Reply #23 on: February 28, 2014, 09:10:50 AM »
I'm not quite sure how some of you are turning live off last months income into spend all that income. That is not at all what it means in ynab terms. It means you budget money you already received last month to cover this month. Just because you are budgeting the money does not mean you have to spend it all. It seems people are assuming that people who don't consider themself mustachian must just spend all that money. That's not at all the purpose of the rule.

EK

  • Pencil Stache
  • ****
  • Posts: 733
  • Age: 32
  • Location: Fredericksburg, VA
    • Happily Enough
Re: do you follow all the "YNAB rules"...
« Reply #24 on: February 28, 2014, 09:14:58 AM »

Yeah, the argument about having erratic income never convinced me.  If anything I think living on last month's income is an even worse strategy with erratic income.

But by living on last month's income when your income is erratic means one month you spend a lot (based on making a lot the previous month), and then the next you might spend very little (based on making very little).  Wouldn't it make more sense to have a buffer (that you top off in good months, draw down on in low months) and spend as little as possible, rather than having a "feast or famine" type spending based on what you earned the month before?

Our final sentences/conclusions on those two posts agree perfectly though, it's a good tool for beginners.  :)

Okay okay sorry to keep dragging this out... But budgeting what you made in the last month doesn't mean you have to SPEND it on dumb shit... It just means ASSIGN the dollars.  It doesn't mean the dollars have to be assigned to things you don't need to buy.

 For example, my husband is an independent contractor.  If he earns more in a given month it doesn't mean that next month we go crazy shopping for 20 new giant TVs, it just means that in the following month we would know we have more money that we can safely, without worrying that we will accidentally overdraw an account, send extra to student loans or move to an investment account.  Because the money is already there because we already earned it last month.  So if we want to just stay on top of it, we can send out our bills and make our various payments to savings thingies on the first of the month if we feel like it.  You can "budget" money to savings as well as spending is what I'm saying.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #25 on: February 28, 2014, 09:44:51 AM »
Lots of talk about trying to time bills and paychecks, and how that causes stress...

Uh, why not just autobill to a credit card and pay it off when you get paid? My boyfriend and I put everything except rent on credit card (and that one we would if we could), and do payouts twice a month. Everything gets paid, we don't have to think about it, we pay no interest or fees, and we get credit card points.

If I had to keep money in chequing and juggle things to cover bills, it would give me stress too. I rarely keep more than $200 in chequing. We do payouts on payday, and the rest goes into investments.

This works for some bills we have, but a few payees don't take auto credit card bill pay, such as our mortgage lender, county treasurer (semi-annual property taxes), and utilities company as well as a few others.

Set that up with bill pay with your bank to send a check.  I autopay all those, even though they don't have an option to pull (mortgage payment stays the same, I get property taxes at the beginning and can schedule it for the whole year, utility bills may be the only exception, but those either stay similar, so I you may have a slight over payment, or autopull).
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #26 on: February 28, 2014, 09:49:13 AM »

Yeah, the argument about having erratic income never convinced me.  If anything I think living on last month's income is an even worse strategy with erratic income.

But by living on last month's income when your income is erratic means one month you spend a lot (based on making a lot the previous month), and then the next you might spend very little (based on making very little).  Wouldn't it make more sense to have a buffer (that you top off in good months, draw down on in low months) and spend as little as possible, rather than having a "feast or famine" type spending based on what you earned the month before?

Our final sentences/conclusions on those two posts agree perfectly though, it's a good tool for beginners.  :)

Okay okay sorry to keep dragging this out... But budgeting what you made in the last month doesn't mean you have to SPEND it on dumb shit... It just means ASSIGN the dollars.  It doesn't mean the dollars have to be assigned to things you don't need to buy.

 For example, my husband is an independent contractor.  If he earns more in a given month it doesn't mean that next month we go crazy shopping for 20 new giant TVs, it just means that in the following month we would know we have more money that we can safely, without worrying that we will accidentally overdraw an account, send extra to student loans or move to an investment account.  Because the money is already there because we already earned it last month.  So if we want to just stay on top of it, we can send out our bills and make our various payments to savings thingies on the first of the month if we feel like it.  You can "budget" money to savings as well as spending is what I'm saying.

I understand you don't have to spend it, but what I don't understand is why you're "living on last month's income" at all.  What does the income have to do with it?

Instead spend what you will, and earn what you can.  Keep a buffer if your income is erratic.

What does the phrase "spend last month's income" add, or even mean?

In other words, honest question: Does your spending vary based on the previous months income?

If yes, I'd argue you're doing spending wrong.

If no, and your spending doesn't vary based on the income, isn't "live on last month's income" completely meaningless?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

EK

  • Pencil Stache
  • ****
  • Posts: 733
  • Age: 32
  • Location: Fredericksburg, VA
    • Happily Enough
Re: do you follow all the "YNAB rules"...
« Reply #27 on: February 28, 2014, 10:14:36 AM »
You're living on last months income to create a built-in buffer one one months expenses.  In context of YNAB, that's all it means.  The money you earned in the past month is your buffer that covers all your expenses (this includes money budgeted towards noble goals, not just unnecessary spending) for the next month.  It's that simple.  Last months income is your buffer so you don't hit $0 in the checking account and cause yourself any easily avoidable problems like overdraft fees.  That's all it means to live on last months income.  It's mostly designed to help beginners get out of the paycheck to paycheck cycle, but even once someone is past that stage it's still an easy and convenient way to quickly see what funds you have available at that very second for whatever you're planning to use them for.

Spend what you will and earn what you can isn't at odds with using YNAB.  YNAB is just one way to track and manage such things.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #28 on: February 28, 2014, 10:18:44 AM »
You're living on last months income to create a built-in buffer one one months expenses.  In context of YNAB, that's all it means.  The money you earned in the past month is your buffer that covers all your expenses (this includes money budgeted towards noble goals, not just unnecessary spending) for the next month.  It's that simple.  Last months income is your buffer so you don't hit $0 in the checking account and cause yourself any easily avoidable problems like overdraft fees.  That's all it means to live on last months income.  It's mostly designed to help beginners get out of the paycheck to paycheck cycle, but even once someone is past that stage it's still an easy and convenient way to quickly see what funds you have available at that very second for whatever you're planning to use them for.

Spend what you will and earn what you can isn't at odds with using YNAB.  YNAB is just one way to track and manage such things.

Then you're living on a precreated buffer.  It may have been created 6 months ago, and topped off with last month's income (if you even had to dip into it).  If your spending doesn't fluctuate with last month's income, then last month's income has nothing to do with it. 
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

smalllife

  • Pencil Stache
  • ****
  • Posts: 983
Re: do you follow all the "YNAB rules"...
« Reply #29 on: February 28, 2014, 10:23:38 AM »
I understand you don't have to spend it, but what I don't understand is why you're "living on last month's income" at all.  What does the income have to do with it?

Instead spend what you will, and earn what you can.  Keep a buffer if your income is erratic.

What does the phrase "spend last month's income" add, or even mean?

In other words, honest question: Does your spending vary based on the previous months income?

If yes, I'd argue you're doing spending wrong.

If no, and your spending doesn't vary based on the income, isn't "live on last month's income" completely meaningless?

Think of it not as last month's income, but changing the definition of is what is in my 'available to spend, save, or otherwise do monetary things with' bucket.  For you, that is likely your checking account balance at any given time.  Given your circumstances and low spending, that makes perfect sense.  For others, having that number defined over a month rather than on a per paycheck basis, even if they save the exact same amount, is what they prefer.

My spending does not really vary.  What I choose to save for does.  If I have lots of overtime, I fill the buckets for the rainy day funds more than I would otherwise and try to max out the Roth a little earlier, or send a little more to the mortgage.  My spending on food, necessities, and wants does not change very much, if at all.  To turn the question on it's head, would you consider this the "wrong" way to save? 

Regarding "living on last month's income" being meaningless, do you still have the same question when you use the working definition above?   For most Mustachians I would imagine it's just a buffer in the checking account so we don't have to worry about direct deposit errors, seeing a really low balance in the account, or double checking sending money to investments as soon as we get the funds available. 

Once you pass the initial out of paycheck cycle, it becomes a streamlined way to see your finances on a monthly basis.  It also means I'm more comfortable using the Roth as my emergency fund, because if need be I can tap the buffer.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #30 on: February 28, 2014, 10:35:01 AM »
That's exactly what I'm arguing.

Calling it one thing, when it's something else, is misleading.

I agree with that working definition of calling it having a buffer, or whatever.  Calling it "living on last month's income" isn't true, for a Mustachian.  It may be true for someone who literally spends all they earn, just now they spend all of last month's money instead of this month's, to make sure they don't run out.  Then their spending will vary wildly.

For a Mustachian, you aren't (and shouldn't) live on last month's income.  It's a deceptive term.  You're living on a buffer, that you may build up with last month's income. But the amount of the income (be it 3k or 10k) shouldn't change the spending, you shouldn't live on it, etc.

So many people seem to be jumping to the defense of YNAB.

I like YNAB.  I recommend it to people using a budgeting tool.  But I don't like the phrasing of that.

It's okay to like something and not defend every single aspect of it, or not see someone criticizing one small aspect of it as attacking the whole thing.  ;)

There are even (gasp) elements of Mustachianism I flat out ignore and/or don't promote.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

smalllife

  • Pencil Stache
  • ****
  • Posts: 983
Re: do you follow all the "YNAB rules"...
« Reply #31 on: February 28, 2014, 10:40:52 AM »
Calling it one thing, when it's something else, is misleading.

Do you have a similarly catchy and memorable phrase to suggest?  It's already called a buffer when talking about the mechanics of YNAB, but the sales tag line is "living on last month's income" since the word buffer can mean so many different things.  I wouldn't call that kind of branding misleading, especially when their FAQs tell you exactly what's meant by it. 

lsaurus

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: do you follow all the "YNAB rules"...
« Reply #32 on: February 28, 2014, 10:51:38 AM »
We follow all the YNAB rules and it works great for us.  Six months ago my fiance and I decided to start budgeting together. We have no debt other than the condo mortgage but wanted to get on the same page before we got married. YNAB software and method helped us fine-tune our goals and work together. Our savings rate the past 6 months has been over 50% and our goal is to get to 65% by the end of next year.  The best part of YNAB is our monthly budget meeting (that sounds super official but it's really just 20 minutes looking over the budget and discussing future goals).  All our investment accounts are "off budget" and we only update them monthly. It's fun to see our networth change.  Living off last months income isn't the same as spending last months income. Our spending doesn't vary much from month to month but when we have larger income months (tax refund, 3 paycheck months, gifts from family, etc.) we just have more to send to vanguard the next month.  I love that both of us can see the budget at anytime on our phones and know how much we have previously agreed to spend on fun money, vacations, eating out, etc. It works for us. We are on the same page at the beginning of the month so there are no spending suprises as the weeks go by. It's tricky to financially combine 2 people who have had their own methods of budgeting for years even if both of us are naturally frugal. YNAB has helped make the transition relatively pain free.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27888
  • Age: -999
  • Location: Traveling the World
Re: do you follow all the "YNAB rules"...
« Reply #33 on: February 28, 2014, 10:58:16 AM »
Calling it one thing, when it's something else, is misleading.

Do you have a similarly catchy and memorable phrase to suggest?  It's already called a buffer when talking about the mechanics of YNAB, but the sales tag line is "living on last month's income" since the word buffer can mean so many different things.

To me I'd rather have clear and honest over catchy and memorable.

/shrug
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

EK

  • Pencil Stache
  • ****
  • Posts: 733
  • Age: 32
  • Location: Fredericksburg, VA
    • Happily Enough
Re: do you follow all the "YNAB rules"...
« Reply #34 on: February 28, 2014, 11:03:08 AM »
That's exactly what I'm arguing.

Calling it one thing, when it's something else, is misleading.

I agree with that working definition of calling it having a buffer, or whatever.  Calling it "living on last month's income" isn't true, for a Mustachian.  It may be true for someone who literally spends all they earn, just now they spend all of last month's money instead of this month's, to make sure they don't run out.  Then their spending will vary wildly.

For a Mustachian, you aren't (and shouldn't) live on last month's income.  It's a deceptive term.  You're living on a buffer, that you may build up with last month's income. But the amount of the income (be it 3k or 10k) shouldn't change the spending, you shouldn't live on it, etc.

So many people seem to be jumping to the defense of YNAB.

I like YNAB.  I recommend it to people using a budgeting tool.  But I don't like the phrasing of that.

It's okay to like something and not defend every single aspect of it, or not see someone criticizing one small aspect of it as attacking the whole thing.  ;)

There are even (gasp) elements of Mustachianism I flat out ignore and/or don't promote.

I will own my defensiveness ;)

 I wouldn't want someone to find this thread and think that using YNAB would not be a good idea because one of the tag lines MIGHT be misinterpreted (although it's clear in the explanation YNAB provides) to mean something kinda sorta not exactly mustachian.  I think we can all recognize that different phrases can have different meanings depending on their context, and I wouldn't want someone to be turned off to a very good budgeting and tracking system based on a semantic misunderstanding of certain phrase.

Bookworm

  • Guest
Re: do you follow all the "YNAB rules"...
« Reply #35 on: February 28, 2014, 11:19:18 AM »
I don't use the "last month's income" rule because at the end of the year, I want all the reports to show income and expenses that belong together.

I'm still working on getting it to work the way I want to.  I'd really like to be able to manually assign things to the time periods where I want them instead of having the program sort them by transaction date.  For instance, we received our 2013 tax refund in February of 2014, so that where it shows up.  I'd rather have it be part of 2013.

Change the transaction date.

I used to, but since I use it as my check register, then it bugged me that it was showing the wrong transaction date.  No biggie, and overall I love the program.

payitoff

  • Guest
Re: do you follow all the "YNAB rules"...
« Reply #36 on: February 28, 2014, 12:22:55 PM »
i use YNAB and the way "living off of last month's income" i think will be better explained if we show it as an example:

income $4000 , expenses $1000

YNAB allows you to budget your income as 'money available this month' and 'money available next month',
with YNAB telling you give every dollar a job, its as easy as assigning your $1000 to every expense you have on your budget
and the extra $3000 you can either move it to "money available next month' or the next 3 months that is or you can assign your $1000 next month, then the $2000 will have a "job" under your savings budget.


its just a more detailed way than Mint, coz you do the dirty job yourself (assigning and reconciling) and not backwards, where it gets assigned when the expense gets posted after in the bank.  for people who are still a working mustachian like me, YNAB helps me get in control with my spending, i try to not look at my bank balance, instead just rely on YNAB and i can only buy groceries if i see i still have 'little workers' sitting in there.



MayDay

  • Magnum Stache
  • ******
  • Posts: 3998
Re: do you follow all the "YNAB rules"...
« Reply #37 on: February 28, 2014, 12:35:19 PM »
We use YNAB and we do it completely wrong.  All we use it for is to track our spending.  It currently shoes something like -40,000$ in our account! 

We tried to use excel for years to track spending and it was such a pain in the ass.  For 50$, YNAB is well worth it even if all you do is track expenses! 

jexy103

  • Stubble
  • **
  • Posts: 124
  • Location: Seoul, South Korea
Re: do you follow all the "YNAB rules"...
« Reply #38 on: February 28, 2014, 02:15:00 PM »
I started using YNAB shortly after I started following Dave Ramsey's plan and had about $15,000 in student loans to pay off. I didn't have a Buffer for the first few months, because I wanted every extra dollar to go to paying off debt. When I switched to Rule 4 about 6 months later, it was a huge relief. It smoothed things out. I was able to save monthly for semi-annually car insurance with a YNAB line item while still throwing every extra dollar at my student loans. I could pay rent and buy groceries and everything else I needed for the month on day one, regardless of the last time I got paid. YNAB kept all the dollars in line and told me exactly how many dollars I had doing each job.

Now, after being debt free for 1.5 years and practicing mustachianism, I probably don't need to break things down so minutely, but I'm accustomed to it and I like the system. I still have an emergency fund on top of the buffer, but I'm comfortable enough now that I'm considering put my e-fund in a taxable savings account, and if I have a $3-4,000 emergency, I can pay for it from my month ahead buffer. I have a large security gland, so I like to have a lot of liquid funds available "just in case," but I think I'm outgrowing that a little. But my month ahead buffer will double as my e-fund, and I fully intend to continue using Rule 4.