Emergency Fund vs Month Ahead
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- čas přidán 2. 06. 2024
- YNAB is not like other budgeting methods. Rule Four is "age your money" and it encourages folks to spend last month's earnings on this month's expenses, thereby breaking the paycheck to paycheck cycle in which so many find themselves stuck. Many YNAB'ers work diligently toward getting a month ahead of their expenses, budgeting the dollars they currently have in the bank account for expenses due in the next calendar month. But what about emergency funds?
Many budgeting methods encourage the idea of an emergency fund, a pile of money that is only touched to handle unexpected expenses not accounted for in the budget. A wise (or as Ben would say, prudent) thing to have! In a perfect world, however, YNAB'ers would not need emergency funds -- they would have saved enough money for future expenses via Rule Two to handle anything that could come their way. Alas, the world is not perfect, however, and many YNAB'ers choose to incorporate an emergency fund category in their budget.
Do you have to choose between having an emergency fund or living a month ahead? Of course not! Ben reminds us that even if you choose to setup your budget for month-ahead, you can always undo it and go back to an emergency fund. Or vice versa. The dollars are still there, however you decide to allocate them.
Ernie recommends that you should take your emotions into account too. For many folks, including himself, it just feels better to have a big pile of money that you can see in one category. It offers a greater sense of security than seeing multiple categories funded in the next month.
So, really, you can't lose. If you've been thinking about going month-ahead, go for it! There's always the undo button.
Share your YNAB wins with Ben and Ernie!
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Timestamps:
0:00 Intro
2:00 Ben's initial reaction
3:41 How they both work in YNAB
5:10 The benefits of being a month ahead
9:59 It doesn't even matter-budgets aren't real!
16:09 Doing whatever feels right
21:35 Ben's challenge for you RIGHT NOW!
24:53 Ernie's experiment with a Job Loss fund
29:56 What's the real reason we crave cash?
33:06 YNAB Wins
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Emergency fund was a lifesaver for us. Husband was let go and we carefully lived off our 3-6 month emergency fund for a full year. So so thankful we had planned for the what if moment. No debt but mortgage and a kid in college. Still no debt and a kid in college and thankfully a new job. Phew! Thanks YNAB
YNAB?
That is so amazing! I'm in awe that you stretched it so far.
Wow! I'm so glad you were able to stretch it as long as you needed. You're so right that often a 3-6 month emergency fund can last a lot longer if you go on a tighter budget. Something to consider when making a plan. ~BenB
I think « 30 days ahead « vs 3-6 month emerg. fund is comparing apples to oranges. I mean 90 days ahead - that would be a reasonable comparison. 30 days ahead is nice but how long will it last if you lose your job? Oh yeah, 30 days. :)
If you fellas are off to Europe.... i am available to carry your bags😁
"Month Ahead" in YNAB is simply a 1-month emergency fund. It's saving enough income that you can cover your expenses the next month. Traditional emergency funds just extend that time horizon, as the time it takes to find a new job and start receiving a salary is generally more than 1 month. They are not mutually exclusive.
That's what I was thinking.
Well not exactly the same. Emergency fund is bare minimum to survive so cancel netflix, no dining out, no even fancy meals, just bare stuff that you must have to survive on, let's say 1500, but on normal month, you save money, you maybe invest, you have wants purchases etc. so your month ahead could be 3000 or even more. So month ahead would cover more than one month if you need to quickly strip down to necessities only.
@@donaatassayou can define it however you want. It your money. My emergency fund is 6 months of my current living expenses and lifestyle. Of course if I lost my job I would naturally be more conservative with my money but I don’t need to cut out everything and live off rice and beans.
Actually, there’s a slight difference in psychology.
If you’re treating free money like months ahead, then once you come up with a big expense, you can spend them - and then you are vulnerable for unexpected risks.
On the other hand, an emergency fund would be untouchable by any expenses but absolutely necessary ones giving you real security.
Touch and agree!
We handle the emergency fund a few different ways in our budget:
1) 1 month ahead
2) Job loss safety net (~3 months of base expenses)
3) Insurance deductible/Appliance failure
YNAB Win:
December 2021 I set a goal of obtaining positive net worth within a year (based on the picture and progress YNAB showed me!). The economy forced an adaptation to the timeline, but as of June 1st I am now net positive! After 3 college degrees, leaving me in debt for all of my 20s, it feels freeing to be getting ahead in life financially.
Great progress!
Getting a month ahead was my precursor to building an emergency fund. Saving 3-6 months of expenses seemed like an impossible task when I was starting to get my finances in order, and on limited income. But breaking the paycheck to paycheck routine was a reasonable place to start. Once I was a month ahead, I just started saving on top of that and eventually built up enough to have a real efund. Don't underestimate the month ahead principle as an easy way to get started getting your finances in order, its a lot more friendly for people who are dealing with a chaotic financial life and just need to get the absolute basics under control first
I agree that getting a month ahead is a faster win, and it makes money feel more free to make an e fund more attainable.
And a month ahead can function as a mini e fund if you're truly in a pinch
But I would probably just tackle both simultaneously, because I prefer seeing the bigger savings number and will probably impulsively drain my buffer anyway 😂
Love seeing everyone's opinions
If you think about it, getting a month ahead or more and saving for true expenses, IS an emergency fund.
Ever since I watched Hanna's video about "Budget Categories I deleted", I no longer have a category called "Emergency Funds/Family Emergencies". My goal now is to be a month ahead, and ultimately a year ahead... God willing!!! 🤲... it's a slow build but I will get there!
Sure, but charting out your budget a year in advance becomes a headache if you need to change literally anything about it. IMU, it's better practice to plan a max of a month ahead and have the rest in sinking funds.
@@greg5892 That is a plan 👍🏻
Ben - “The budget is a social construct! Make the change and undo it if you don’t like it!”
Also Ben - “Oooo I like that idea… I’ll have to think about it and see if I’ll make that change to my budget” (spoiler alert, he won’t) 😂
Also as a YNewbie, my YNAB Win is I checked my budget before I grocery shopped and I didn’t overspend two weeks in a row! Still learning what the target needs to be long term, but there’s food on the table and money assigned so I’m happy
LOL. Do as I say, not as I do. 🙈 ~BenB
I was following the 'month ahead' before I knew it was a thing (and before I found YNAB). I was always taught to put half my estimated bill total aside each pay (assuming biweekly, it would be 1/4 aside for weekly) and by the end of the year with the two 'extra' checks I was ahead. My dad was an accountant and preached this method. Along with ALWAYS balance your checkbook to the penny! lol.
This is fascinating! Kudos to your dad! And kudos to you, too, for following his advice! ~Ernie
Yeah, your dad sounds pretty awesome! ~BenB
@YNABofficial thanks! I didn't always follow his advice, lol, but I always remembered it and go back to it.
Idk if it is because I'm sleepy, but I'm trying to understand your dad's strategy, but I'm failing 😔 Can you explain it again? I feel like it will be really helpful to me as a mom of 3 kids.
@ladylove34 of course! Basically, I'd add up all my bills for any given month (estimating things like electric that vary) then divide it by my number of pays, 2 for biweekly, and set it aside. Within a year, because biweekly has the extra pay twice, I'd be ahead by a month on my bills. I've seen it referred to as a half payment method. I'd start small and just concentrate on one or two bills at a time (or ride the credit card float if I used a card for that bill) until I'd get the full month ahead. While we have debt I don't worry about getting my variables like grocery ahead, just my bills. Hope that helped!
For me the main reason why I stick with the emergency fund for now is that I can clearly see how much of my income I'm saving which is extremly important for me since I want to build that up.
I like having the emergency fund category because I put all that money in an HYSA. It gets a little complicated (and confusing) to pull daily expenses from my savings account instead of checking account. However, I do want to be one month ahead and that money lives in my checking.
TLDR: I have both and I get the benefits of both 😊
I went the Hannah approach and got rid of my emergency fund category and assigned those dollars to true expenses and month ahead. I’m working on getting two months ahead.
As you grow into your budget (over time), you can have both.
Well said! ~BenB
I started budgeting ahead. I like it better. What I ran into was having a "next month" category became too tempting to touch it if a category needed funding, instead of making hard decisions about where else to pull the money from. Doing that kept me from actually getting ahead. But the extra money isnt "doing nothing" either way, because much of that money is actually sitting in a high yield savings account earing better interest than if it was sitting in a checking or standard savings account earining a pittence.
Oooh, that's a really interesting perspective, Daniel. Going ahead and putting it to next month puts it out of sight. I'd never thought about that as a pro of that method. ~BenB
For me, a 3-6 month emergency fund, is for something big that may arise. The “month ahead” is just so I don’t have to be waiting for my paycheck to pay my bills and helps me prioritize any changes. Love it!
I'm doing a hybrid solution: I try to reach 1-2 month ahead in YNAB, but I also have a general "Emergency Fund" category with a target to always keep it at ~2500$ for stuff I was truely not expecting. If I ever have to dig into that category, my process is to stop my monthly planned long-term investing fund (20% of my income), focus top priority to replenish it to my target goal, then I am allowed to restart investing and trying to keep 1-2 month ahead at the same time.
What most people consider an emergency fund is a quick 1-2,000 goal that is easier to save while starting a budget and getting out of debt. Once that goal is saved then you can use it as the base for the month ahead goal. Then roll that over to the 3-6 month saving goals. You can still label it Emergency Fund or change it to something else. After getting one month ahead, one doesn’t have to save at the fast pace and some of what was going to then saving goal can then be redistributed to other categories that had been put on hold. Once we have 3 months saved then we will move it to a high yield savings account and not just sitting in our checking account or normal savings.
For us it’s BOTH an emergency fund AND a month ahead. A month ahead for the regular household operation. Gives you freedom to plan your cash flow. An emergency fund for those high dollar emergencies.
To me it becomes more complicated if I start budgeting ahead. I feel less in control. I keep wanting to check how far ahead I am. An emergency fund seems simpler. I know what amount I need to get by for three or six months and I can see right away if I’m there or not yet. Also, I like to budget for the upcoming month when I receive my monthly salary. At that time I have a better understanding of all the social events that are coming up.
I'm curious. Do you get paid once a month? That changes the dynamic quite a bit! ~BenB
@@YNABofficial Yes! Once a month, around the 25th. (I live in the Netherlands where this is common.)
@@MissVindicatI’ve got the solution for you: I have a category called “N-months ahead” which is a multiple of the money I would need to budget for the next month (next month’s budget for essentials times n)
@@YNABofficialHi! I also get paid monthly, could you please elaborate on how this changes the dynamic? 😃🤔
@@samarasimmons if you're paid on the last day of the month (June 30, for example), technically you would be using last month's income as you spend that money on July 1. But you would still feel a pinch because you're spending your new paycheck as soon as it arrives. In this case, you'd want to get in a flow where you're spending the paycheck you earned two months ago (the June 30 paycheck is spent in August). That gives you at least 30 days between earning and spending. Hope that helps! ~Ernie
Since I'm still paycheck to paycheck, I feel more comfortable budgeting for the next month, however I currently have a very stable job with good pay so I'm budgeting to make large payments on my debt to get some of that cleared up. The APR is pretty rough and making normal payments wasn't doing it for my mental health. Once I make a dent in those and have some more funds on hand, I'll be fully budgeting a month+ ahead. The debt is personally my priority.
My YNAB win is thanks to Ernie. He gave the idea of doing allowances for children in the YNAB budget. Game changer! We started this past school year for our 9 & 11 year old. We discovered that every incidental expense (like scholastic book flyers, “special” shirts for one time school events) that my husband and I used to have to determine if it was worth spending our money on we could pass that decision on to our kids. It was incredible how when we asked if it was worth spending from their money category- those shirts, book fair toys, etc. didn’t seem as important. Keeping their money as a line item on our budget also saves us from our kids losing cash or forgetting their wallet when we are out and they find something they want to have. This has definitely been a way to alleviate stress and help teach our kids scarcity- with a constant running total that is always accessible to them and us. Thanks YNAB!
Glad to hear this is working so well for you and your family! ~Ernie
Idk if teaching your kids scarcity is a nice thing to do, but maybe frugality or prudence is fine. You want them to learn responsibility without being too traumatized. Otherwise you know they will go crazy with a credit card as an adult if they felt deprived as kids.
@@Iqueyscarcity isn’t trauma and we should definitely avoid making it traumatic. Done well, it makes them more resilient, especially if things really do get scarce.
I was doing something in YNAB. I didn’t have enough money in RTA and I was expecting an error that I couldn’t fund a category when I clicked to fund it. I didn’t get an error. 🤔🤔 I went about my happy life thinking the Universe gave me free money. 😂 It was when i looked a month ahead that I realized there was chaos (trash burning in the street, etc. 😆). I wish YNAB had told me that it stole from my future to fund that category. 😐
I have 1 more accelerated payment to finish off the car loan. Then I will complete my one month ahead goal.
I think I like my one lump sum for income replacement. I want it to only be for that purpose. Plus, I don’t want to give up my category name - Gringotts Vault 713. 😬
If you use the toolkit there is an option to turn on to notify you that you’re stealing from the future
I have both. 3 months of expenses in the emergency fund and 1 month ahead. Love and need both for my inner peace.
I have one month ahead and 6 month emergency fund. Having 6 months ahead is just a pain to maintain, to many clics and it is not user friendly to handle
This is one area I think the app really needs some kind of improvement. Clicking one month ahead is fine. But it is a pain to go further and see a picture of what you have.
@@chelsea-lewisagreed. I also think there should be an option that if we have a category funded for the next several months and we make a change to amount available in any one of those months, we should be given the option to apply that change automatically for all future months as well (as opposed to going into each individual future month and having to do that manually)
Thank you for your advice! I have never been able to keep money in the emergency fund due to car and home repairs. Basically I never budgeted for true expenses. Your solution of putting money aside for future month’s expenses will turn the tide for me financially. I was unemployed unexpectedly for 5 full months. It takes longer for older people to find work again.
I am now at the point where I have money in the bank at the end of the pay period. It is an truly awesome feeling and I look forward to when I am a full month ahead.
Hannah's video deleting categories helped me change my focus and switch my budget up. Very helpful.
Thanks guys! I needed this video so much!
I joined YNAB when I already had an emergency fund. Instead of having a category for an emergency fund, I put all of my dollars to fund the future budgets. I grouped all of the categories that I needed to survive in “Immediate Obligations” and paid all of them for 6 months. The money left over, I put towards my monthly savings goals. So for my next Paycheck, I’ll fund January’s obligations (it’s July right now) and with the money left over, I’ll put money towards augusts savings goals. I think this app is absolutely wonderful and really helps DEFINE what an emergency fund is. It has allowed me to think in months fully funded versus some vague target number that I hope I could live off of in the case of job loss.
I love this! The flexibility in YNAB helps alot! I'm like hmmm a month ahead for me is more than I was struggling (mentally) trying to save for an emergency fund after having to deplete it several times. The feeling of seeing the rest of this month green and money truly allocated to next month and it having a purpose, a defined job is so refreshing! My next paycheck comes early this week and I'm excited to fund my future with intention! This feels better, I get the feel of I can actually do this, I know where my money is going! My emergency fund has been split into insurance deductible, auto repairs, travel, etc. IT FEELS SO MUCH BETTER! Thank you!
Back when I was in the red and struggling to make ends meet, getting a month ahead seemed impossible, but I slowly reached it category by category. For me, that was easier to motivate myself for than 3-6 months of emergency funds, because I was already behind. That amount was too big for me to mentally prepare for at the time. Now that I'm a higher earner, it's a lot easier to set goals like that. So I guess it also depends on where you're at in your budgeting journey: if you're starting out and/or earning less, then getting a month ahead is probably the better way to go because it's easier to reach and easier to motivate yourself to achieve.
I can understand the concept of taking the EF to budget ahead. But I see my EF as a separate category for actual emergencies...it not always going to be a job/income loss.
But as Ben said if you do have a job/income loss I would have to update the budget by eliminating unnecessary expenses...and than using the EF to fund the necessary expenses. By having an EF category, it let you know what I have to cover emergencies (excluding job/income loss). I hope that makes sense.
Funny I came across this video today 9/10/23. I have been doing this for the last 2 months and never knew this was a thing. I have been trying to pay all next months bills during the prior month and at the same time saving up an emergency fund and its been a blessing I love the feeling of starting the month off with all bills paid.
I have a long term replacements section that I have in my budget. It has categories for each large item and an estimated amount as a savings target with the lifespan being the due date. I still have a way to go adding everything though.
Thanks for another great episode!
When Ernie was talking about Michelle's YNAB Win, I wanted to share what I am doing with my mortgage payments...
Ever since I refinanced my mortgage for another 30 years, I continued to maintain my pre-refinance payment, which came out to about 19% monthly overpayment. However, about a year ago, I decided to stop overpaying my mortgage and to put that entire 19% into an index fund. I have added a new YNAB category ("Mortgage Investment") and setup an automatic transfer with my Fidelity. Then, every 3 months, I increase that amount by 1% of my mortgage payment. So, if my mortgage is $1000/month, I would increase my monthly contributions by $10 every 3 months.
I should say, though, this works for me because I lucked out and have a really low interest rate on my mortgage and stock market can easily beat my rate. Also, since I am doing a monthly purchase of the index fund, I get to buy that fund at its best and its worst times, which gives me "dollar cost averaging".
Finally, if I'll have a change or heart with this approach and will decide to re-prioritize mortgage payoff, I can sell my "mortgage investment" funds and make a big payment on my mortgage.
That spreadsheet by Lisa sounds awesome! I want a copy of it too!
The day I had my Buffer( one month ahead) fund fully funded was a great day! My one month ahead is part of my emergency fund, just stored in a different category.
I definitely raided my emergency budget when I was first getting a month ahead. It was a game changer and I was able to rebuild my efund pretty quickly. These days' I'm budgeted 2 months ahead. That scratches my itch for planning ahead, while the efund gives me an addition 2 months income replacement, plus the satisfaction of seeing that chunk of money. I also like the idea that if I needed to dip into that, it wouldn't disrupt my budgeting system immediately. In addition to my other sinking funds, it might be a little overkill, but I have most of that money in 5%+ short term CDs right now. When the interest rates go down, I might reassess and move some of that money to my investment account.
Wish there was a summary of the "try this" steps. Really hard to sit through the conversation and pull out the action item. The context is nice, but maybe a clear wrap up is helpful.
I built a very similar spreadhseet to Lisa. It was terrifying when the first monthly amount calculates but agree - having the plan gives you peace.
I would love to see a copy of that home repair spreadsheet, too!! Please share a link in a future video if you get it and the original YNABer approved 😊
This could also be helpful in deciding things that need to be covered under your insurance policy, and how much coverage you feel you and your family should have.
Same!
I personally see my month ahead as part of my emergency fund. It was the first thing I did personally as it takes away a lot of the daily cashflow headache and it makes rolling with the punches easier. After that I got rid of my debt, after that I saved up my 6 month emergency fund.
I do job loss fund + next month holding. If I ever lose my income, I'll move money from job loss fund to the next month holding in lieu of my income. The mechanics of it feels really nice, because I like to see everything I have in the current month and it will make it easy to ration the job loss fund if needed.
When it comes to funding these categories. All income goes to next month holding. At the start of a month that category gets wiped, new month gets assigned including the job loss fund. This way I get to have the security + the fun of being able to customize my budget allocation at the start of each month.
I've also noticed that when you allocate into future months that rolling with the punches can mess with those months, and so you have to go redo those ones anyways, or certain target types can get changed depending how much you have rollover from a category.
As a military family, we have pretty stable job security. For us a big chunk of change in the bank is more security than being ahead on bills. Having such a secure income changes a lot of the choices we make with our “emergency funds”
I used to have a category in my YNAB budget that included all my bank accounts on their own line item except one. This included my Ally Savings/Emergency Fund, UFC-Car replacement, USAA-Insurance, Child #1 savings, and Child #2 savings, etc. However, I realized this was not a practical approach as any money that went into my checking account went into all the other categories, even if I knew I would be moving that money to another category if I originally started it in a Car replacement bank line item. I was needlessly limiting the available cash due to an arbitrary idea that the other accounts had to match the line items in my budget. So, I decided to do a "Reset Available Amounts" for all my line items and then did "Underfunded" since all my line items (except the bank account line items) have target amounts. This helped me cover all my expenses and have extra money for the next month.
I broke my emergency category into multiple subcategories. I call my emergency funds category "Just a Matter of Time". :D And broke it down into general, pet, appliance, auto and household repair. I know I could put it all in one, but I'm so visual, that it helps me put money aside for those categories.
Agree 100% on getting a month ahead over emergency fund, or I would tweak it a bit to say get $1000 starter emergency fund and then go after the month-ahead. Once I got a month ahead, there was a very tangible reduction in my stress levels. As you mentioned, the mechanics of working the cash flow issues takes a lot of time and energy. Once I was one month ahead, that ALL went away and autopay became a comfortable tool to use. One question, one of you mentioned you put next months funds in a holding category and then fund your budget from that at the turn of the month. What's the benefit of doing that as opposed to simply funding next months categories as each paycheck comes in? I'm finding the features in YNAB make that so easy so that by the time the next month roles around there's literally nothing for me to do because the money's there ready to go. Great podcast!!
Wow this helped a lot focusing on saving towards getting a month ahead, saving 1K IN CASH, then debt and full blown focusing on getting MONTHS ahead.
YNAB WIN: I loved this episode and the one where you each shared your categories! I was inspired to review my financial Life Surprises that came up over the last 2 years and created a category for "Appliance Repair/Replacement" based on us having to replace our kitchen garburator out of the blue last year. And low-and-behold, our food processor broke and I needed a new one - and I had MONEY in my category! Honestly, a huge huge WIN in my book! :D Thank you both for helping me get a handle on my budget - you are awesome.
Getting to a month ahead means you have a 1month emergency fund because it means you have a month of cash in some account balance.
I do both the month ahead in YNAB and a category for a month ahead in my categories. The month ahead in YNAB is a lifesaver. Once I fund it, I do not look at it until the month turns and then I am happy each month when it is fully populated. I keep adding to my current monthly budget's category for the month ahead with the long-term goal of having a year's worth of life paid for--as a goal for being fine if a serious life issue arises and I need to walk away from work or something like the pandemic arises again and there is no work. Having YNAB saved me during the pandemic with no job. I was not even a month ahead at the time. Any way you think of it, being a YNABer helps you survive most anything. My yearlong goal will take years, but I will still have a job loss possible and all with less stress.
I aim for three months ahead, because I have a long-term disability insurance policy. A long-term DI policy typically has a waiting period of 90 days before you will start receiving income replacement from it. So, by being three months ahead in my budget, I am effectively being my own short-term disability insurance to hold me through those first 90 days.
Cheque account buffer, defently helps when bills are on auto pay. Cheque account buffer in some ways is similar to overdraft except a little larger minus fees the bank charges.
This insightful video just gave me a YNAB win! I accepted Ben's challenge and was able to convert my emergency fund category into all of July's expenses and some of August's expenses. While looking at a fully-funded July (based on known expenses as of today), I determined the Assigned subtotal for the categories that would be part of my bare-bones budget, along with the Available subtotal for the categories that wouldn't.
The available non-essential dollars plus my Ready to Assign dollars exceeds 3 months of bare-bones expenses, and I would not have determined that as quickly if my emergency fund category still existed.
Nice! And you're so right-assigning the emergency fund to actual future expenses gives so much more clarity! ~Ernie
I miss the multi month view from YNAB4
I just started saving and budgeting and I’m documenting my journey. I have an emergency fund but I may have to use it for a new car due to an accident. It sucks but I will bounce back. Good luck to everyone in their journey. May we all reach our goals and more ❤🦋
I have a large consumer debt that I'm paying off. Had an emergency fund and was accelerating my pay down of the debt. Got hit with sizeable federal and state tax bills that wiped it out. I had to use the emergency Fund. I'm rebuilding it and currently at 64% Funded. When it is fully funded I will increase the money I have to pay it off. I believe while in debt the emergency Fund is more important than being one month ahead.
Same here! 👏
I've been budgeting ahead since I start with YNAB when the web app launched. I just moved all of my money for next month into a holding category. I think it will be easier to manage categories I like to keep topped off at the start of each month (variable expenses like water bill). I had been spending a lot of time managing and moving money in those categories to keep balances at those levels since I over budget intentionally. I think this works better for folks who like to use the auto budget and sinking funds.
I don’t like budgeting into the future because I forget about it. I’m with Ernie and I want to see it, but I don’t like the ambiguity of it not being assigned for very specific things. Honestly a report that showed category balances for multi-months similar to the income vs expense report where you can select the months, would be super cool to just see where the funding is for all the months in the future.
Key word: Optionality. Once I grasped this concept it was a game changer
44+ years ago when when I started my first real job at the beginning of the pay scale I guess I started by saving what was a month ahead (this was before email, cellphones, ATMs & autopay/bill pay options). So I saved up for an extra months rent, utilities, gas, food… I suppose that was really an emergency fund, but I thought of it as a month ahead.
That's so fascinating you started the month ahead thing pre-internet! ~Ernie
@@YNABofficial yup, unless you were a NASA or DOD contractor you didn’t have internet in 1978. I only made $180.50 a week back then, was new in town and couldn’t find an apt to rent in a safe neighborhood for 25% or under budgeting rule of the day. I did find an unfurnished one for about 30% of my base pay and figured it would be ok for 4 reasons: I got pay raises up the 5 year pay scale every 6 months, the job had a ton of mandatory overtime, didn’t party or have expensive habits (other than gas for driving travel), and had zero debt thanks to lots of family friends giving me nice quality used furniture. Almost immediately I learned we might have a strike in 1980, so in addition to everything else people save money for I was trying to save enough money to pay all my bills for at least a month if not 2 because my mother as a teacher had been on strike for 6 weeks (to get binding arbitration in their contract) while I was in high school. Being on strike was hard for her, but the months of recovery was hell for the family. In an era before prepping my mother, a child in the Great Depression, always had a month or 2 of food in the cupboard. Not knowing about the month ahead method I recall asking the apt manager if it was possible to pay rent a month ahead. While they agreed, I decided to keep it in a separate account at the credit union.
I might be a bit neurotic but I struggle with sticktoitiveness so I actually enter in transactions manually and go over my budget every morning.
As a test, I just did September and October and I do feel better!!
I prioritize getting a month ahead because I'm paid biweekly. Biweekly pay is a pain in the butt when you're not a month ahead. If I were paid monthly, I think I'd probably prioritize emergency fund first. However, after I'm one month ahead, I switch to putting the extra into an emergency fund rather than continuing to fund further and further ahead in my budget.
Very good point! The dynamic changes quite a bit based on your pay cycle. ~BenB
Thanks for this video exploring both an Emergency Fund and getting a month ahead. I am curious what you would recommend for someone retired that is drawing on what is basically a pension (aka fixed income) where there is not a chance of losing that income stream, but unexpected expenses might be more of a threat. We have about 3 months of expenses in our Emergency Fund, leftover from our pre-retirement budget plan. But I wonder if we should revisit our strategy with that category; e.g. funding other envelopes (savings or future months) and lowering the amount for unexpected expenses in that category. Any thoughts?
I've been doing a month ahead since before I knew it had a name. Gives me so much peace of mind to know that none of my auto debits will bounce, no matter when they pull in the month.
Hmmm I think being 2 months ahead is good for job loss. But I also still want to keep my emergency fund - not for job loss, but for the unexpected expense that I legitimately cannot predict or is too niche/unlikely to bother making a category for. Like...suddenly having to take an overseas flight for an unwell family member or some kind of catastrophic car problem that exceeds my auto maintenance category...like, not all these really rare bad things will happen so I don't want an individual budget for each of them, but I do want to have some money set aside for the random, weird thing that might one day pop up.
Hi! Thank you. I watched the video yesterday, just in time for the new month. Since "budgets do not exist", I decided to use the extra money for July. I never thought it possible, but I think I can be a month ahead pretty quickly. I have been a month ahead in my True expense for a long time, but I never thought about the other expenses :) thank you!!!
Emergency fund is also supposed to sit in a hysa to avoid losing value to inflation. So that’s the biggest distinction.
6:23 oh my gosh, the Cash Flow problem has been my life for *years*. I list all my expenses down a list in a spreadsheet, list my paychecks as two column headers, then use math and due dates to try and even out the strain on each paycheck to make cash flow feel consistent across the month instead of really low then really high points.
I am SO READY to stop caring about that.... Soon 🤞
in response to the YNAB wins, I created a category group in YNAB called Home Projects listing EVERY thing we are wanting or needing to do in the house - from small things like new faucet to large expenses like windows. Like a honey-do list. I put a savings balance for the estimated cost. Then I hide this group. When we are considering renovations or some small improvement, I can look at the big picture and see where any money is best allocated. This makes sure we don't spend everything on small improvements when we should focus on larger projects. EVERYTHING goes here - roof, furnace, fence, renovations, etc. By doing this with targets its easy to see how much we need to allocate to these things. Also it lets us keep track of things we want to do around the house.
Love it! ~Ernie
I do both! I’m a month ahead and will be working towards two months ahead, but I like setting a specific amount aside each month for an emergency fund. The goal is to never use it, but the reality is sometimes emergencies happen that are more expensive than what’s saved for that true expense. I could roll with the punches or I could pull from future money but, I feel better not having to give something up to pay for that emergency.
I definitely think there's a good argument for having both! I still have my prudent reserve, too. As for what you should go for *first*, I'm still a month ahead guy. 😊 ~BenB
I know I will need a new refrigerator soon so I have money set aside that I consider "money spent on the refrigerator I haven't bought yet". Anything left over when I get it will be allocated elsewhere as I see fit.
Simple ,
1) DO NOT touch emergency fund .
2). Budget to pay your dues for the month ahead with your expeted income for month ahead .
Warning if you get the bad habit to snatch emergency funds then be assured you are undisciplined .
Suppose u cut-off an amount of emerg-fund and godforbid u get sick ??????? Where to run to ????
I think one thing that a big emergencyt fund has an advantage of over getting a month ahead is if you store it in an easily accesible High Interest Savings Account where it can make you 4% of interest. A $10,000 EF sitting in an HISA, can make you and extra $400 a year if it's untouched. Obciously that's not that much but if that emergency fund doesn't get used for 5 years, it goes from $10k to $18.8 due to compound interest just for sitting there.
The timing on this is cracking me up! After weighing this decision for months, literally last night I finally "just did it" as Ben suggested and redistributed my emergency fund into true expenses and getting a month ahead. Now, I'm sitting with it to see how it feels. It took me some mental gymnastics to get over a lifetime of conditioning to have a traditional emergency fund. Time will tell...
Let us know how it went!
I currently don't have a job, no income. I'm lucky to have a place to live but aside from housing I'm living out of my savings. I've been pulling out of my Emergency Fund category when I do my budgeting. I was a couple of months ahead at some point, which helped me when I lost my job because I didn't have to figure out the budgeting situation right away.
On another note. I always move my paychecks that fall on the final days of the month to the 1st. That way the income falls on the active month I'm budgeting for, and the reports make sense. I guess when I get a month ahead that won't matter so much but that's my solution for now anyways.
I have a rainy day, working on a month ahead and emergency fund of 3-6 months
annual budgeting has been working for me for years. I always pay all my bills except car insur, on a yearly basis. car insur I have to pay every 6 months. It feel so nice and free to not have any bills to pay each
I have talked about this on my channel and the importance of when you get sick or have a death in the family that you don’t have to worry about deadlines because everything is paid a month ahead!
We’ve been a month ahead for years, way before I heard of YNAB. We use this months money to pay next months bills. It helps make budgeting easier.
The month ahead is where YNAB 4 was killing it. It made so much sense and was easier in my opinion. No need for extra holding categories and could see multiple months at once.
Totally get it. I think if YNAB had a multi-month view, I probably wouldn't use a holding category. ~Ernie
I agree.
@@YNABofficialYNAB does have a multi-month view. If you look at your current budget on the web, and no categories are selected, under the quick action buttons, it will show him much is assigned in the future and how much per month.
We have a 6 month FFEF, which on a bare born budget would last us 8-9 months. We have Sinking Funds because we pay non-monthly stuff (car insurance, HOA, property taxes, property insurance) and anything else I can either every 6- or 12 months. We also have an account buffer which covers all our expenses including cash envelopes for one month. We are totally debt free (no mortgage).
The reason I do both is to move the emergency balance to a high interest rate savings account so the money is working for me. I also try for two months ahead.
As an adult with ADHD, these videos have helped me a lot to stick to my budget. I've been watching so many of your videos and I love this podcast, but I'm SO dissapointed that YNAB doesn't work with Norwegian banks. There are no norwegian versions of it either.
I already had an "Emergency Fund/Non-Monthly Expenses" savings account before starting to Ynab a few months ago. The problem was that I started to view the money in there as savings and really hated having to touch it. Now, adding "months ahead" to my game and planning for those categories right there in my budget gives my brain enough peace to "let it go" when the time comes, without feeling guilty or stressed out about it. This is actually the main reason I switched from my old budgeting app to Ynab, I needed a better plan for my money, other than "great you didn't spend it". I enjoy my cushion AND my month(s) ahead. 😊
Ben, we are in the subset of YNABers to whom you were talking: I just switched our budget from EveryDollar to YNAB and only funded half of the first month with our paychecks, yet we have a 2-3 month fund of bare bones expenses sitting in savings. Thank you for the advice. Will let you know if it feels better (or worse) to allocate some of those funds.
Awesome! So glad you're willing to give it a try! What's nice is you can always go back. ~BenB
I am not sure that I understand the notion of taking 'money from the future', as it was referred to in this video for times when you need to access money as the result of a job loss. I guess I can see the concept of moving it back to now in the case of an emergency that can not be handled with 'true exenses' budgeting in which case the end result would be similar to borrowing from the entertainment fund for the clothing fund when you find that clothing item on-sale this month and your clothing budget is already been used. For the situation where there is a loss of income, this is where being a couple months ahead in your budget pays off. When you get to that new month, the money is already sitting there in the proper budgets. No need to pull from the future, it is in the future waiting for you to catch up.
I recently added an emergency fund even though I've previously ascribed to the method of just getting a month ahead. With the month ahead format, I found it too easy to wam using next months money, rather than reducing spending in another category to make up for it. I think it will be harder for me to pull out of a category like an income loss or emergency fund.
Same here!
Love that, Logan. Key to Rule Four is, once you get a month ahead, don't touch that money so you can *stay* ahead (unless you have to, of course). There's a lot to think about there with the emergency fund being an extra buffer to protect that month-ahead money. ~BenB
We have both.
The month ahead is one of the things drawing me to consider YNAB. We’ve been doing a form of one month ahead for 10 years in GoodBudget, but we only have it that way for bills. Groceries, gas, incidentals, etc are still in the mode where we’re screwed if we miss a paycheck. I love the option YNAB has to dedicate this funds to next month or further in the future so they don’t end up getting spent sooner.
That being said, even a month or 2 ahead, I’d still keep an emergency fund even we’re a month or 2 ahead. The reason is that in a job loss level emergency, we’d have to cover health insurance outside of work and other expenses that work is currently covering.
You're very right. I'm thinking more and more we should just call an Emergency Fund what it is - a job loss fund.
I am a month ahead. I get paid weekly. Out of each weekly pay I send 1/4 of my monthly bills to a holding account. By end of year I will be a further month ahead there too.
IT hard budget by budget monthly when add monthly expenses and variable expenses so I need change rule 4 to 2 payckeck ahead in order meet the goal , I got paycheck every other week
We got a month ahead first and then started working on the emergency fund. My wife feels safer with that extra $ sitting around. My next goal is to get 2 months ahead.
Love the content!
One item of constructive criticism is Ben’s mic has been a bit “hot” lately. Maybe the gain is turned up too high. I only noticed when he gets excited or laughs. Just thought you should know. Thanks!
We've been noticing it too, and there's a fix in place! You should notice a difference starting in episode 068. ~Ernie
Where can i get a ynab sweatshirt?? I work from home and would wear it anytime I'm cold (which is often) as a reminder to keep using the app!
I did a month ahead with the creditors vs. holding that money and using my emergency fund as it should. This way, you have two benefits in one.
I've heard of getting a "month ahead" before, but they might've heard it here.
I am aiming for at least 3k for my EF, then I would like to go month ahead, I still have anxiety to budget the EF to months ahead 😂
I'm glad more people at the company are podcasting! No offense Jesse!
I have both