Author Topic: Question for Stache growing YNABers  (Read 4809 times)

smalllife

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Question for Stache growing YNABers
« on: November 18, 2012, 09:18:47 AM »
First of all, I love YNAB.  It functions exactly as I expect a budgeting program would function.  One of the great benefits of YNAB is the accumulation of cash in your bank account . . . except that it isn't so great for a Mustachian who wants her dollars working harder for her future. 

I have reached the point where I feel like I need to do something to lighten the cash load.  Yet even putting my emergency fund and certain rainy day funds (home and car repairs) into my Roth IRA (or will next year, I am maxxed out for 2012) I am left with more cash on hand than I feel is necessary.  How have other Mustachians approached this issue?

Do you have any rainy day funds?  If so, which ones do you think are notable for either their presence or absence?

Do you keep a low risk investment account on budget for certain categories?

Are you more conservative in the amount of cash you keep compared to other Mustachians?

Are there any workarounds in YNAB you have discovered for these types of issues?

Do you zero out category balances at the end of the month?

Do you rely on cash flow or whack-a-mole to cover medium expenses or do you build up funds in the appropriate category.

Some ideas I have had:

Put all emergency fund-type rainy day funds into a Roth, where I can access the money if needed.

Invest at the end of the month instead of the beginning so I can clear certain category balances and send them to investments.

Do the math between low yielding checking on all my cash vs. high interest savings on a good portion of it.

Keep one "not really an emergency" category, from which I would pay vet bills and minor car repairs.  Essentially a 1K baby emergency fund to cover larger expenses and reduce some of the rainy day bloat.  (Used for higher than average bills, vet bills, minor car repairs, unexpected expense, etc.) This reduces the ability to whack-a-mole but increases investment opportunity.


Other considerations:

I hate having to check my bank balance to see if I have the funds for any and all regular expenses.  I had to do that this month while I was switching banks and it stressed me the hell out.  So I am okay with about a month's worth of spending in cash.

Once I send money to savings or investment accounts I will do nearly anything to prevent taking it back out again.  Thus I am hesitant to go too cash-lean in an attempt to grow my stache.

I very likely will max out my Roth in January 2013 because of the rainy day fund liquidation, leaving all future cash surpluses for investing in taxable accounts.  401K eligibility comes in May, which will alleviate that problem somewhat. 

Thoughts?  Other YNABing Mustachians have questions or solutions?

Connie

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Re: Question for Stache growing YNABers
« Reply #1 on: November 18, 2012, 03:59:28 PM »
YNAB seems slick and sexy, but is it worth $60? How is it better than any other budgeting system out there?

ghatko

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Re: Question for Stache growing YNABers
« Reply #2 on: November 19, 2012, 12:54:04 PM »
I have been using YNAB for over a year, and I LOVE it!

We were always pretty good with our money before YNAB, never carried a credit card balance, etc, but we didn't really know where our money went. I used MS Money for a while, but it just allowed us to go back and look at our previous spending, there was no ability to look forward to upcoming spending. We would always have a cash crunch in particular months of the year, for example, when our property taxes were due (~$2,500 twice a year), and when other 'unexpected' expenses came up. YNAB has really helped us to plan out our upcoming expenses and plan for them. It feels fantastic now when I know that property taxes need to be paid next month, and the money will be sitting there ready.

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I have reached the point where I feel like I need to do something to lighten the cash load.  Yet even putting my emergency fund and certain rainy day funds (home and car repairs) into my Roth IRA (or will next year, I am maxxed out for 2012) I am left with more cash on hand than I feel is necessary.  How have other Mustachians approached this issue?
So far we have just been keeping the rainy day funds in our savings account. It is getting 1.35% (if the balance is over $1,000) so at least it is something. Most of the categories in our budget will be used during the year, so I think we will keep that money in our savings account.

For some categories where we are building up balances for medium-term home improvement projects (e.g. replacing the windows, siding and roof), we are planning on putting those dollars into our TFSA (we are in Canada, not sure if that is a Roth IRA in the US). We haven't decided what funds to hold in the TFSA, but we will take into account the timeframe when we expect to use the money.

Overall, I agree that it seems like a bit of a waste to have a large amount of money in a regular bank account, but we want to have the budgeted money available when we need it. Like I said, for the medium and longer term savings, we are moving the funds to try to get better returns.

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Do you zero out category balances at the end of the month?
This depends on the category. We always zero out our groceries and gas for the car, but we build up balances in categories like clothes (we only go clothes shopping a few times a year) and property taxes.

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Do you rely on cash flow or whack-a-mole to cover medium expenses or do you build up funds in the appropriate category.
A bit of both, but we build up funds if we know about the expense in advance. For the expenses that could crop up unexpectedly, we don't keep an emergency fund of cash, but have a line of credit (easily accessible) if we really can't float the expense in our cash flow. That said, we haven't encountered an expense in the last year that we couldn't handle with cash flow, extra paycheck months (that income is not included in our regular budget), and our buffer.

I hope that helps!

Gillian

smalllife

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Re: Question for Stache growing YNABers
« Reply #3 on: November 19, 2012, 05:33:56 PM »
YNAB seems slick and sexy, but is it worth $60? How is it better than any other budgeting system out there?

I got it for $40 but I believe it is well worth the money.  A lot of budgeting systems are really good at tracking spending but fail to account for dynamic decision making before spending your money.  I tried a few free ones, including Mint, but they did not account for the irregular expenses in any logical form.  That's probably the best part of YNAB - being able to put money aside in a category for those things that happen only occasionally.   It also is great at tracking cash and is flexible enough to suit many needs.  The critical point of YNAB - living off of last month's income - is it's true claim to fame.   The community is more financially conservative than MMM but it has really helped me eliminate "misc" spending.

If I was an Excel wizard I could do something fairly comparable, but I'm not by any stretch of the imagination, so I rely on YNAB.  As someone who likes numbers and charts it is extremely helpful in seeing my overall financial picture.

@ghatko: That does help.  I'm trying to reconfigure some of my rainy day funds but don't have access to a savings account getting even close to that.   ING is yielding .8% and my credit union .25%.

Phoebe

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Re: Question for Stache growing YNABers
« Reply #4 on: November 20, 2012, 12:52:26 PM »
I had never heard of YNAB until reading about it here.  I went to check it out and it looks really great!  I keep track of my spending in a spreadsheet and over time have adapted it to accomodate for many of the things that YNAB does, but of course it doesn't have the slick interface.

My younger sister is having a hard time managing her money.  It's her first job and I'd love to help her get on the right foot, but she really resents being told what to do by her older sister.  I think this would make a fabulous gift for her, and she can dig in as she pleases!

Thanks so much for sharing this!!!!

Phoebe

iamlindoro

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Re: Question for Stache growing YNABers
« Reply #5 on: November 20, 2012, 01:18:19 PM »
I have played with the trial a little.  I am a longtime Quicken user, and I continue to use that.  I have all my expenses scheduled and I input the rest manually and then regularly download my transactions, which matches/reconciles with my manually entered non-scheduled transactions.

I like the look of YNAB for longer-term projections, but the dealbreakers for me are 1) apparent lack of investment support and 2) No support for automated downloads of transactions.  Are either of these possible and I'm just missing them?  It feels like I am getting the same benefit I would be getting from YNAB simply by tagging and categorizing all my transactions in Quicken, and my investments are tracked and automatically updated as well.

I am open minded or I wouldn't have tried it-- are there ways of getting around the above?  Any chance automated download/reconcile is a future feature?

smalllife

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Re: Question for Stache growing YNABers
« Reply #6 on: November 20, 2012, 07:35:49 PM »
1) apparent lack of investment support and 2) No support for automated downloads of transactions.  Are either of these possible and I'm just missing them? 

1) definitely the biggest negative for me in YNAB.  I update off budget accounts once a month to adjust portfolio balances but it does not track the investments.  I'm not sure I want it to if I'm being perfectly honest - it's a budgeting program, my brokerage can do the tracking.  There seem to be more requests for investment support though so maybe something will come of it.

2) It's a bit of a mind switch, but the big benefit of YNAB is the inability to automatically download transactions.  It forces you to be hands on with the money rather than just categorizing spending.  There is a workaround with Pocketsense if that is a deal breaker though, and they do support direct import.  I'm a bit old school and manually enter everything though :-)


While I am totally happy explaining and promoting YNAB, I know there are other YNAB/Mustachians out there .  . . cash heavy solutions?

iamlindoro

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Re: Question for Stache growing YNABers
« Reply #7 on: November 20, 2012, 08:54:39 PM »
Yeah, I manually enter everything as well-- it's just nice to have the flag that something has hit the account.  My daily process is to stuff every receipt into my wallet and to manually enter that evening.  Then, every morning when I get up I also run an account update to pull in the previous day's settlement.  I suppose if I could let go of seeing when things have hit the bank I could switch to YNAB-- I'm just not sure what advantage I would derive from it in that case.

caligulala

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Re: Question for Stache growing YNABers
« Reply #8 on: November 21, 2012, 05:13:58 AM »
Iamlindoro - I simply log into my online banking each morning and manually enter any transactions. It seems like a big deal to not have YNAB pull them in for you automatically, but it really keeps you in touch with your spending which is why they are philosophically opposed to it. The magic is in the YNAB method for budgeting and how seamlessly the software supports the method. I honetly don't know how we'd manage without it.

Smallife - I would say that I am more conservative than most mustachians in the amount of cash I would keep on hand. Having had a financial perfect storm 5 years ago, I wish I had been more prepared in the past. While we don't have a large amount of cash (yet... just paid off my last debt in October), I think I would probably keep my emergency fund, rainy day funds that are paid annually, and some amount of my unknown cost rainy day funds (car repairs, etc), and my buffer in readily accessible accounts.

Or alternately, you could add up your best guesses of what each unforeseeable expense might top out at and then sweep any excess to your investments. It is unlikely that you would have a car repair, medical emergency, and last minute emergency travel in the same week (although, it could happen, see above!) so what amount would cover any one of those mishaps at a time? Would your regular rainy day categories cover the balance, giving you time to transfer money back to them as necessary? If your most likely scenario is a $5000 emergency and you have your buffer and $5000 in rainy day funds that aren't due immediately, you should have enough cash on hand to cover that emergency. You can still leave your money categorized in its proper rainy day category, it can just live in an investment account with the knowledge that you will sell off if necessary.

As far as cash flow and whack-a-mole, I budget really low amounts to some categories because we tend to spend less when we see a small available funds number. I sometimes have to play epic games of whack-a-mole when I've overspent a bunch of categories, but I know I spend less overall if I budget tight. I do cash flow categories like clothing and household stuff because I know that I am constitutionally unable to resist spending any money that is available in those categories. Any remainder amounts in any category are zeroed out at the end of the month or rounded to the nearest dollar and directed towards whatever category I'm trying to beef up.

The beauty of YNAB and its method, pretty darn flexible!

smalllife

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Re: Question for Stache growing YNABers
« Reply #9 on: November 21, 2012, 06:56:29 AM »
@ianlindoro: there is a new feature called reconciliation which compares your bank statement to your YNAB records and alerts you if there is a transaction missing.  It goes line by line and tells you if you are off.  If you did the trial more than two months ago you might not have seen it.

@caligulala: I tend to be more conservative as well, but at this point I feel comfortable using my Roth as an extended emergency fund (for the contributions).  Once my investments pick up steam I will balance out the cash:investment ratio with rainy day funds but the stache is still small and I want to take advantage of compound interest while I am still young.