Last week, after I wrote about how I do money, reader Darlingpants asked me to clarify one aspect of my budget:
I’m curious how you manage budgeting many months far in advance in YNAB. From that post it sounded like you budget as far out as your emergency fund lets you? I tried that and I found it really frustrating to have to page months into the future to move money around for the current month, and I didn’t have the same “aha” moment you did, because spending more this month led to red numbers in a month I couldn’t see unless I deliberately looked far into the future. Maybe I’m misunderstanding, or maybe you’re much better than me about not spending more than you planned to (very likely!), but I was enchanted by your post about it and disappointed to not find the same emotions when I tried it out.
I do not just budget “as far out as my emergency fund lets me.” My YNAB budget is currently built out for the entirety of 2020, even though I haven’t yet earned enough dollars to cover all of the costs of the year. (Technically I could cover the cost of the next four years from my investments, but YNAB only lets you budget cash in checking and savings accounts — which is fine by me.)
What do I mean by “built out for the entirety of 2020?” Well, at the end of 2019 I took a look at my average expenses by category (which YNAB happily provides), asked myself where I wanted to spend more and where I wanted to spend less, and came up with some numbers that would allow me to support those financial values while still remaining within my $2,500/month personal spending goal.
And then I put those numbers into the budget.
There is, of course, some wiggle room. Currently I have $443.07 in discretionary income every month; this money lives in YNAB under a category labeled “discretionary” and gets moved to “clothing” or “dining out” or “books” as the month progresses. These budget line items, along with the majority of my “quality of life” expenses, begin every month at $0. If I want a new book or a new outfit, I’ll pull from discretionary. (I used to budget a certain amount of money for “quality of life” stuff every month, but it made me feel like I was locked in to spending $100 on clothes and $20 on books, and sometimes you need more books and not as many clothes.)
Likewise, if I decide to spend more on rideshares than the $60 I budget every month, I’ll either pull money out of “discretionary” or pull from a different area of my personal budget (like “tea,” and yes I drink enough tea that I have a $15/month budget line item just for Celestial Seasonings purchases).
But if I wanted to buy something that cost more than $443.07, I’d either have to pull from next month’s discretionary income or wait a month or two until there was enough in the discretionary category to cover it.
I do borrow from future months’ spending, on occasion. I’m planning some summer travel, for example, so I pulled some of the cash that I’d budgeted for the fall and front-loaded it into the first few months of the year. That way, I could book tickets in advance and still keep my budget balanced.
On that note, I actually considered setting up my January YNAB budget with the full total of everything I hoped to spend in every category for the rest of the year — if I wanted to spend $3,000 total on vacation, for example, January’s “vacation” budget line item would begin at $3,000, whatever didn’t get spent in January would carry over to February (and so on), and the budgeted amount would gradually get smaller as I made purchases against the budget.
But I knew that it would be a lot easier to pace myself throughout the year if I divided every total budget line item by 12. Knowing that I get $443.07 in discretionary spending every month is a lot different than knowing that I have to make $5,316.84 of discretionary cash last through December. It’s a lot easier for me to stick to my budget if I take it in monthly installments — and I think that’s the case for a lot of people.
And yes, I am very good at not spending more than I planned to, in part because my financial-independence-based motivation for saving and investing money is very, very strong.
Also because I spent so many years living on much less money than I am currently earning, and I’ve only allowed myself a very small amount of lifestyle creep.
So I hope that answers your question, Darlingpants. Does anyone else budget this way, and are you able to stick to your budgets? ❤️