Most things work well within YNAB, but there are a few exceptions. When your work decides to send you on a trip, and they expect you to pay for everything on your card, how does that fit into your budget? You shouldn’t have to budget for something that’s not even in your personal budget, especially since you will be reimbursed once you return. And what happens if it takes them a couple weeks to pay you back, and your budget rolls over to the next month in the meantime? How do you handle a situation like that in YNAB?
Here’s what I do. I have a category called Work Expenses, and I budget exactly $0 each month to that category. When I get sent on a trip for work, I put all my expenses in that category. I change the Overspending Settings (click on the dollar amount in the remaining column to see it) to “Subtract it from next month’s category balance.” Warning: use this setting with caution, as it can really wreak havoc with your budget. In this case, it works perfectly though.
With this setup, you can just throw everything you get that’s a work expense into that category and not have to worry about how it impacts your budget. Even if your work takes until the following month to pay you back, you don’t have to worry about it. And the negative balance will be your reminder that you need to bug your work to pay you (or fill out your expense report!).
Since I’ve been using the software for years, I get asked questions about YNAB all the time. I got asked a good question today that I thought might be useful for people just getting started with YNAB. That question was “How do I handle credit card debt?”
If you have a balance on your credit card, and you want to pay it off over time, my recommendation is to take the card out of your wallet/purse, and put it somewhere safe in your house. The idea is to not have it with you when you need to make a purchase, so you don’t use it anymore. I’ve heard of people locking them up in a safe, or putting it in a bowl of water and freezing it (so you have to have time to think about the purchase while it is thawing out before you can even get the card). Whatever works for you, just make sure you don’t have the card with you when you make purchases.
Now for the YNAB part. Since you won’t be using the card, treat it like any other debt. Put it as an Off Budget account, and create a category for Debt Reduction in your budget. Pay your card out of what you budget into the Debt Reduction category, and just adjust your balance once a month (or once every few months if you prefer). Then, when you get it all paid off, move the account to be On Budget, and start tracking your purchases again (once you thaw out your card, of course).
As far as how much to budget in the Debt Reduction category, that all depends. What we do is make a minimum budget for our essentials, then put everything extra that comes in into that category. Even extra bonuses and random forms of income that I budget for the existing month goes in there, and I just leave the balance until the beginning of the next month. Once we do our new budget, I put the extra in the Debt Reduction category, and then make one payment for everything in there. I repeat that process every month. It’s been working out well for us since we’ve been doing it a few years ago.
Unfortunately, I didn’t get to hit any of my 2013 New Year’s Goals. We had a lot of changes throughout the year that really impacted some of our goals.
1) Reduce debt by 68.33%.
Target: 68.33%, Actual: 36.93%. Our financial priorities shifted a couple times throughout the year, and I didn’t get as much paid off of our student loan debt as I would have liked. My wife had to cut her working days from 4 to 3 due to our daycare provider needing surgery, which forced us to change providers. The new provider could only take our youngest for 3 days a week, because she already had another infant. We also found out we were pregnant with our third child in 4 years, so we had to start saving for a larger vehicle and the eventual birth of our third child. Then our renters decided to just skip town, so we had to start preparing for making two mortgage payments. Needless to say, our student loan debt became a much lower priority by the end of the year. For completeness, here’s a graph of the final progress:
2) Run a 5k.
I almost did a couple of these throughout the year, but it never happened.
3) Complete a bike race.
I didn’t do the one bike race I wanted, and never really got back into riding a bike like I thought after Blake was born.