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.
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.
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.
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