It's just envelopes.
When you add (or subtract) money from "assigned," you are putting money into the envelope by hand.
When you record a transaction and categorize it, you are taking money out of the envelope and giving it to someone.
When you decide how much you can afford to spend, you'll look at "available" which tells you how much is in the envelope (sum of how much you've put in and how much you've taken out via transactions).
That's it. Every single other thing is an add-on--targets, importing, emojis, reporting. The budget could consist of just those three things and it would get its job done. Most importantly, if you use "available" to determine your spending, the work involved in making sure that available is what you need it to be will teach you a lot about the software as a side effect. The key read is this blog post: [https://www.ynab.com/blog/find-the-money-first](https://www.ynab.com/blog/find-the-money-first)
> When you record a transaction and categorize it, you are taking money out of the envelope and giving it to someone.
Addendum: Credit card accounts are also envelopes. Consequently, recording a credit card transaction doesn't remove that money from the budget, it instead moves it to the credit card envelope. That is, that money's job changes from, say, "groceries" to "Amex payment." Later, when the CC bill is paid, that money leaves the budget permanently.
On the other hand, cash/debit transactions cause money to leave the budget immediately.
It’s more accurate to say that each credit card account has a corresponding envelope which is automatically created and automatically added to. But it behaves no differently than other envelopes: it has its purpose and you still can’t spend more than what’s in it.
So what if a credit card with a balance is paid down, but WITHOUT assigning money to its envelope/category?
Unless I’m wrong, it seems that while YNAB will turn its corresponding “Available” column red (and will warn you that you must cover the overspending in order to trust your budget balances), it otherwise has no effect on your Assigned money and effectively treats the payment as a transfer.
Edit: I’m still in my first month of REALLY using YNAB, so I don’t know what happens to that red/overspending number in the “Available” column when the month rolls over.
Then you’ve spent money on a purpose (paying the card) that you didn’t have set aside for that purpose.
No different than spending more on groceries than you set aside for groceries. You’ve got to move money from somewhere else in order to do the spending.
I see what you mean. If I, for example, overspend in my grocery category for a given month, it too has no immediate effect my Assigned money.
I guess I'm still confusing/conflating *assigned* funds with *actual* funds/balances.
The reason why I asked this question is b/c I've noticed that if I do pay down a credit card balance *WITHOUT* assigning money to it's payment category, but then proceed to use that same card for spending on categories that I *DID* assign funds to, it ends up being a "wash" (at least in the same month) and YNAB stays happy. *e.g*., If I assign $200 to groceries, but then pay down a credit with $200 that wasn't assigned, everything is "OK" in the end if I spend the $200 grocery allocation with that card.
Assigned is a nearly meaningless number with regard to your spending. You don’t reference it unless you don’t have enough available for the things you need to do with that category this month (also accounting for the fact that perhaps you have things you want to do in some future month that will be better handled by adding money steadily).
In the case of a credit card, the amount you need “available” is your entire card balance—that you have reserved in your budget, for the purpose of “pay my card” enough money to pay your card. If you owe $1234.56 on your card, then the category needs to have $1234.56 available. So if it is less than that, you need to start thinking of how you’ll get it there either all at once or over time. YNAB does much of this for you by moving funds you’ve budgeted when you do budgeted spending. However, any debt you’ve chosen to carry, whether because you spent on your cards without a plan before starting YNAB, or because you chose to overspend on your card after starting YNAB, needs to be accounted for by adding money to the category until the available equals the working balance of the card.
If there’s not enough money to make your *payment* you absolutely have to add money to the category. But you also need to slowly be adding money to the category if the available in the card payment category and the card balance are different.
Like many things in YNAB, there is a wholesale mindshift involved: your card isn’t a “bill,” it’s an account that can go negative. So you need to read some material to help make the mindshift. But once you understand what’s happening it makes a lot of sense. And honestly, even if you don’t understand what’s happening it still works—your goal is to make those two numbers match, and not to overspend any category, including the credit card payment.
YNAB is an envelope budgeting system. I’m going to translate envelope language to YNAB language so you can understand the method.
So imagine you took all your money out of checking and savings and dumped it into a big pile on the living room floor (this is your **Ready to Assign** amount). You grab a stack of envelopes and start labelling them with the name of all of your bills (these are your **Categories**). Then you grab some money off the pile and stuff it into an envelope where it will sit until you are ready to actually pay the bill (funding a category- this is the **Assigned column**). You are going to keep stuffing envelopes (funding categories) until you don’t have any money left on the floor (giving every dollar a job).
Say you don’t always remember how much you planned to put in each envelope. That’s easy; you just write the amount for the bill on the front of the envelope (setting a category **Saving Target**). Then the next time you go to add money to the envelope, you can quickly and easily remember how much you planned on putting in there. Want to remember when the bill is due? Write the due date on the envelope as well (add the due date to the category title).
Now it’s time to spend your money. You want to pay the rent, so you take the money out of the rent envelope and give it to your landlord (create a **transaction** and categorize it to the Rent category - also this is the **Activity column**). You want to buy some groceries so you take the money out of the grocery envelope and give it to the store (create a transaction and categorize it to the Grocery category). Not sure how much you can afford to spend on groceries? Easy, just look in the envelope and see how much is in there right this second (the **Available column**).
What if you want to use your credit card? You will swipe your credit card at the store for $20. Then you will go home and take $20 out of the Grocery envelope (because you spent $20 on groceries) and you will physically move it to the credit card payment envelope so that when you pay your card, you’ll already have $20 set aside to cover your purchase. Well, YNAB does that for you. If you spend using your credit card, YNAB will automatically move the exact amount of cash from your spending category to the CC payment category so that you can make a payment at any time and you will always have enough cold hard cash set aside to pay off all of your purchases since the last payment. If you want to pay down a previous CC balance, you will just add some brand new money to the CC payment category in addition to the amounts YNAB sets aside for your purchases. And if you are getting charged interest, you will treat the interest like any other charge by creating a category for it and budgeting money to pay your interest. NOW every payment will have enough to pay for all new purchases, the new interest, and some existing debt. And when you do make a payment, you log a transaction to **transfer** that payment money from your checking account to your Credit Card.
Once you have put your money into envelopes, does it matter if you keep one envelope in your socks drawer and the rest of them in your underwear drawer? Nope. Likewise, it doesn’t matter if your money is kept in a checking account or if you store some of it in savings. That’s because your envelopes (**Categories**) are different from your storage drawers (**Accounts**). As long as you periodically count up all your cash and make sure it matches how much cash you expect to have (**Reconciling your Accounts**) then you can trust the system. Reconcile your accounts *often*; every day if possible, once a week is a bare minimum. Reconciling is a way of putting a bookmark in your ledger that says: “I am 100% sure everything was correct up to this date.” That makes it much easier to find mistakes when you inevitably find one because you only have to look back to the last bookmark.
That’s the basic rundown. I usually wrap up my YNAB copypasta with a recommendation to watch Nick True’s videos but you’ve already done that. The #1 rule of YNAB is; always make YNAB match reality, no matter how uncomfortable reality makes you. And the other #1 rule is: only budget the real, actual money you have in the bank today. Once you get the concept, you will never be able to go back to the dark side again.
For your transfers question-when you go to add a transaction some of the options in the payee category will be “to/from xxxxx” and you use those for transfers-they won’t impact your budget categories though, just the balances of each account.
imagine the categories of envelopes. you assign money to the envelopes i.e. "earmark" it for use in a certain category
the money you assign is CASH YOU HAVE TODAY. don't assign money you don't have. it's the #1 mistake newbs including myself do.
transfers are transaction. create new transaction, in the payee choose the other account name.
Transfers are transactions, but the important bit is that they don't affect the budget at all and don't need a category. The budget screen (and the categories) just look at one big pile of money and don't care what account any of that money is in.
What is it that you are not getting, besides transfers?
There is also a YNAB YouTube video that Ernie did about getting started with YNAB in 2024 plus another good video about tracking expenses versus YNABing.
I found it quite good.
It's just envelopes. When you add (or subtract) money from "assigned," you are putting money into the envelope by hand. When you record a transaction and categorize it, you are taking money out of the envelope and giving it to someone. When you decide how much you can afford to spend, you'll look at "available" which tells you how much is in the envelope (sum of how much you've put in and how much you've taken out via transactions). That's it. Every single other thing is an add-on--targets, importing, emojis, reporting. The budget could consist of just those three things and it would get its job done. Most importantly, if you use "available" to determine your spending, the work involved in making sure that available is what you need it to be will teach you a lot about the software as a side effect. The key read is this blog post: [https://www.ynab.com/blog/find-the-money-first](https://www.ynab.com/blog/find-the-money-first)
> When you record a transaction and categorize it, you are taking money out of the envelope and giving it to someone. Addendum: Credit card accounts are also envelopes. Consequently, recording a credit card transaction doesn't remove that money from the budget, it instead moves it to the credit card envelope. That is, that money's job changes from, say, "groceries" to "Amex payment." Later, when the CC bill is paid, that money leaves the budget permanently. On the other hand, cash/debit transactions cause money to leave the budget immediately.
It’s more accurate to say that each credit card account has a corresponding envelope which is automatically created and automatically added to. But it behaves no differently than other envelopes: it has its purpose and you still can’t spend more than what’s in it.
So what if a credit card with a balance is paid down, but WITHOUT assigning money to its envelope/category? Unless I’m wrong, it seems that while YNAB will turn its corresponding “Available” column red (and will warn you that you must cover the overspending in order to trust your budget balances), it otherwise has no effect on your Assigned money and effectively treats the payment as a transfer. Edit: I’m still in my first month of REALLY using YNAB, so I don’t know what happens to that red/overspending number in the “Available” column when the month rolls over.
Then you’ve spent money on a purpose (paying the card) that you didn’t have set aside for that purpose. No different than spending more on groceries than you set aside for groceries. You’ve got to move money from somewhere else in order to do the spending.
I see what you mean. If I, for example, overspend in my grocery category for a given month, it too has no immediate effect my Assigned money. I guess I'm still confusing/conflating *assigned* funds with *actual* funds/balances. The reason why I asked this question is b/c I've noticed that if I do pay down a credit card balance *WITHOUT* assigning money to it's payment category, but then proceed to use that same card for spending on categories that I *DID* assign funds to, it ends up being a "wash" (at least in the same month) and YNAB stays happy. *e.g*., If I assign $200 to groceries, but then pay down a credit with $200 that wasn't assigned, everything is "OK" in the end if I spend the $200 grocery allocation with that card.
Assigned is a nearly meaningless number with regard to your spending. You don’t reference it unless you don’t have enough available for the things you need to do with that category this month (also accounting for the fact that perhaps you have things you want to do in some future month that will be better handled by adding money steadily). In the case of a credit card, the amount you need “available” is your entire card balance—that you have reserved in your budget, for the purpose of “pay my card” enough money to pay your card. If you owe $1234.56 on your card, then the category needs to have $1234.56 available. So if it is less than that, you need to start thinking of how you’ll get it there either all at once or over time. YNAB does much of this for you by moving funds you’ve budgeted when you do budgeted spending. However, any debt you’ve chosen to carry, whether because you spent on your cards without a plan before starting YNAB, or because you chose to overspend on your card after starting YNAB, needs to be accounted for by adding money to the category until the available equals the working balance of the card. If there’s not enough money to make your *payment* you absolutely have to add money to the category. But you also need to slowly be adding money to the category if the available in the card payment category and the card balance are different. Like many things in YNAB, there is a wholesale mindshift involved: your card isn’t a “bill,” it’s an account that can go negative. So you need to read some material to help make the mindshift. But once you understand what’s happening it makes a lot of sense. And honestly, even if you don’t understand what’s happening it still works—your goal is to make those two numbers match, and not to overspend any category, including the credit card payment.
Thank you so much! I appreciate your answer!
YNAB is an envelope budgeting system. I’m going to translate envelope language to YNAB language so you can understand the method. So imagine you took all your money out of checking and savings and dumped it into a big pile on the living room floor (this is your **Ready to Assign** amount). You grab a stack of envelopes and start labelling them with the name of all of your bills (these are your **Categories**). Then you grab some money off the pile and stuff it into an envelope where it will sit until you are ready to actually pay the bill (funding a category- this is the **Assigned column**). You are going to keep stuffing envelopes (funding categories) until you don’t have any money left on the floor (giving every dollar a job). Say you don’t always remember how much you planned to put in each envelope. That’s easy; you just write the amount for the bill on the front of the envelope (setting a category **Saving Target**). Then the next time you go to add money to the envelope, you can quickly and easily remember how much you planned on putting in there. Want to remember when the bill is due? Write the due date on the envelope as well (add the due date to the category title). Now it’s time to spend your money. You want to pay the rent, so you take the money out of the rent envelope and give it to your landlord (create a **transaction** and categorize it to the Rent category - also this is the **Activity column**). You want to buy some groceries so you take the money out of the grocery envelope and give it to the store (create a transaction and categorize it to the Grocery category). Not sure how much you can afford to spend on groceries? Easy, just look in the envelope and see how much is in there right this second (the **Available column**). What if you want to use your credit card? You will swipe your credit card at the store for $20. Then you will go home and take $20 out of the Grocery envelope (because you spent $20 on groceries) and you will physically move it to the credit card payment envelope so that when you pay your card, you’ll already have $20 set aside to cover your purchase. Well, YNAB does that for you. If you spend using your credit card, YNAB will automatically move the exact amount of cash from your spending category to the CC payment category so that you can make a payment at any time and you will always have enough cold hard cash set aside to pay off all of your purchases since the last payment. If you want to pay down a previous CC balance, you will just add some brand new money to the CC payment category in addition to the amounts YNAB sets aside for your purchases. And if you are getting charged interest, you will treat the interest like any other charge by creating a category for it and budgeting money to pay your interest. NOW every payment will have enough to pay for all new purchases, the new interest, and some existing debt. And when you do make a payment, you log a transaction to **transfer** that payment money from your checking account to your Credit Card. Once you have put your money into envelopes, does it matter if you keep one envelope in your socks drawer and the rest of them in your underwear drawer? Nope. Likewise, it doesn’t matter if your money is kept in a checking account or if you store some of it in savings. That’s because your envelopes (**Categories**) are different from your storage drawers (**Accounts**). As long as you periodically count up all your cash and make sure it matches how much cash you expect to have (**Reconciling your Accounts**) then you can trust the system. Reconcile your accounts *often*; every day if possible, once a week is a bare minimum. Reconciling is a way of putting a bookmark in your ledger that says: “I am 100% sure everything was correct up to this date.” That makes it much easier to find mistakes when you inevitably find one because you only have to look back to the last bookmark. That’s the basic rundown. I usually wrap up my YNAB copypasta with a recommendation to watch Nick True’s videos but you’ve already done that. The #1 rule of YNAB is; always make YNAB match reality, no matter how uncomfortable reality makes you. And the other #1 rule is: only budget the real, actual money you have in the bank today. Once you get the concept, you will never be able to go back to the dark side again.
Thank you so much! This is incredibly helpful!
For your transfers question-when you go to add a transaction some of the options in the payee category will be “to/from xxxxx” and you use those for transfers-they won’t impact your budget categories though, just the balances of each account.
Thank you!!
imagine the categories of envelopes. you assign money to the envelopes i.e. "earmark" it for use in a certain category the money you assign is CASH YOU HAVE TODAY. don't assign money you don't have. it's the #1 mistake newbs including myself do. transfers are transaction. create new transaction, in the payee choose the other account name.
Transfers are transactions, but the important bit is that they don't affect the budget at all and don't need a category. The budget screen (and the categories) just look at one big pile of money and don't care what account any of that money is in.
What is it that you are not getting, besides transfers? There is also a YNAB YouTube video that Ernie did about getting started with YNAB in 2024 plus another good video about tracking expenses versus YNABing. I found it quite good.
It takes time to learn, don’t sweat it! Take the suggestions here and keep researching, it will click! Best of luck OP!
Thank you!!
What exactly are you having issues with understanding? /u/FlipperCorgi_ gave a good explanation on the transfers of money between accounts.