Your emergency fund is a buffer that protects you from taking on debt. If the car loan interest rates are low, I would prioritize the buffer over paying down that debt. Press J to jump to the feed. The clarity and convenience of working with month-sized chunks is huge. If it’s not great, an emergency fund can be really helpful. But in the event of an emergency, wouldn't you grab money from the emergency fund? You pay out your 500 on the first, and build back up to $1000 by the end of the month. The "Next month's income" category is your buffer. Emergency Fund. If you follow this plan, you’ll always be one month ahead of your actual income. (I know it's different for everyone, let's just say I'm following the 6 month rule of EF). Really focusing on building a larger EF. The buffer's purpose is to enable to you budget a full month at a time. So this is my savings budget as of today. When you save this money and put it to work, YNAB calls that a Buffer. May 15. One of your budget categories will be emergency fund and using your emergency fund to fund your emergency fund just kind of sounds wonky so a new term was created to make a distinction between the two. The emergency fund is not the same as the buffer. Our emergency fund is in an account at Ally Bank, and this worked well for us when we held only emergency funds in that account. The Buffer allows you to put some space between when you receive your income and when you actually need to use it . Or let’s say I prefer to change the budget group currently titled “HOUSING” to “YO MOMMA’S HOUSE.” Easy peasy. It’s a small cushion of savings to help you stay afloat in case of a financial crisis. It's like a little envelop you keep shoving money into until one month suddenly you can pull that envelop out and pay all your expenses without even having to wait for pay checks to come in. I align that with living on last months income. I've been largely ignoring Rule 4 because I didn't understand it from an recordkeeping perspective (I do already have enough to cover next month's expenses - YNAB just doesn't show it) - and you've given me that "aha!" YNAB’s automatic emergency fund More than simply enabling you to track income and balance your expenses, YNAB helps you build that emergency fund automatically. So, I ended up taking my emergency fund out of CapitalOne360, and threw enough into my checking account to be one paycheck ahead (per YNAB… It allows you to access your funds all at once for paying bills and funding other things and then you use your paychecks to fund the next month. ... A discussion subreddit for popular budgeting software You Need A Budget. Though YNAB appears to treat income differently from categories, really "this month's income" and "next month's income" are internal categories that YNAB happens to display differently. Emergency Fund vs. The other reason people call it a buffer is because you use it every month to pay your bills, an emergency fund is supposed to be for emergencies only. I have an emergency fund and some money saved to buy a car which is my need. It helped that we had our “baby” emergency fund in place that was the seed for the buffer. My last paycheck of June I budgeted for July since all of my expenses were covered for the rest of June. If you lose your job or are unable to work, this fund will give you several months to get back on track, while still covering all of your usual expenses. Are you a risk-avoider or risk-taker? What is a True Expense? So, on July 1st, I had enough money to cover all of July's expenses. You have complete control over the number and names of categories, just as you would in a spreadsheet. Feel free to post any news, questions, budget strategies, tips & tricks and advice related to YNAB. Is this another way of doing the buffer? A discussion subreddit for popular budgeting software You Need A Budget. This provides us with a more robust emergency fund we are more comfortable with, as well being able to budget and pay our bills on a monthly basis (vs per pay check budgeting). What we have found to be successful is to have a combination of one full month Dave Ramsey Emergency Fund (vs $1000) + one full Month YNAB. Emergency Fund - A separate category that you stash money into for when you have an unexpected emergency. With the buffer, you are putting away money that will grow to be the amount you typically need to live through the month. My question is: Is this basically the same as the buffer except I'm allocating it into an "envelope" rather than leaving it in the "Available to Budget"? Now, I could technically say I’m fully buffered, given that my savings could fund a full month’s budget, leaving all this month’s paycheck for the following month. If you’re new to budgeting it can take a while to think of, and prepare for, all of your Rule Two expenses. I currently have around 2 months. Related to personal finance, budgeting, money and financial matters. It's that more categories that only increase your administrative overhead are not useful. Press J to jump to the feed. There are other great options like Personal Capital , using your own custom spreadsheet or good old fashioned pen and paper – but Mint vs YNAB is one of the biggest rivalries in budgeting. Sure, you can call your faucet a pipe because it kind of is and it's connected to the pipes but it's honestly something a little different with more functionality. For some emergencies, it also helps to use an emergency budget—a deflated spending plan to make sure the money in your fund lasts as long as possible. After using YNAB since August, I recently did a budget re-set and transferred funds from our emergency fund into our checking account so that we could get a month ahead - or really, just a paycheck ahead. YNAB places a lot of focus on right now, and the future (aging money, buffer etc). To make sure you keep your emergency fund funded, it’s best to keep your emergency fund and buffer separated. When my next paycheck comes, and it's set for next month, then that money could be used on an emergency, but I'd have to wait for it to come, and between the first of the month and the first paycheck, I don't have it. You can't use this category as your buffer money, you can't use it as you're rolling with the punches category. But if that paycheck bounces, you're screwed for rent, which is why you need an Emergency Fund. Budgeting Your Savings. In contrast, a buffer mostly provides an administrative convenience. Have a reserve for 3-6 months of expenses: Like your emergency fund, this is designed to provide a buffer in case of something unexpected. A great strategy that YNAB recommends is saving up a "buffer", basically a month's expenses, so … You gradually move you into a position where you have built a cushion into your budget so that you always have an extra month’s worth of living expenses built into the mix. When I wasn't buffered, I would enter income for 'this month', budget what I needed, then whatever I had left would go into a 'buffer' category. You missed the point of Jesse's video: fewer is not alway better. The way that you are doing this is perfectly acceptable. The concept of living on last months income is a great idea and we have started in the direction by adding in a “buffer” category and budgeting into it every month. If people want to buy a TV for example they just set aside a fraction of their paychecks towards it. I'm already buffered now (yey), but should I go with a 6 months emergency fund or a 5 month. I got this paycheck last week. Press question mark to learn the rest of the keyboard shortcuts. YNAB - You Need A Budget, is a great zero based budgeting software that actually tells you how much money you have left to spend in each category of your budget. I know a lot of people just used their EF to completely buffer themselves, then worked their EF back up. College student without too many expenses but I'm saving for when I graduate in case I don't find d a job right away. When a paycheck comes in this month, I'll set it as income for next month, so on August 1st, I'll have enough money to cover all of August's expenses. Once I had saved enough to cover a month's worth of expenses, I released it in the upcoming month and budgetted it, then hid the 'buffer' category. If you get your monthly paycheque on the 31st of the month, set that to "income for next month", and can cover the next month's bills with it, you're Fully Buffered. How dialed-in are your priorities? Temporarily overspending, then using the reimbursement to cover it. The training materials and videos on the site generally tell you not to bother filling in historic transactions. Investing. Any savings -- the buffer, emergency funds, vacations, you name it -- have an implicit cost when you have debt. (Is that a word?) If you are in debt and can’t imagine being able to save money, use a tool like Chime or Qapital, or make it a game, whatever is going to work best for you. "The Buffer" in YNAB-speak is to set aside money received this month to fund your budget for next month in order to break the paycheck to paycheck budgeting cycle. Feel free to post any news, questions, budget strategies, tips & tricks and advice related to YNAB. Each month, you ha… You mention releasing it into the next month once you have enough buffered how do I go about doing this exactly, I'm honestly rather confused for the most part. Dave says to have an emergency fund. Once you are buffered, cash flow issues are reduced. But…I think when you open a sentence with “I could technically say…” – you’re technically kidding yourself – or missing the point. To me, it just seems weird leaving numbers on the "Available to Budget" if it can be placed in the Emergency Fund category. That's why savings accounts are Budget Accounts--you'll give each of your savings dollars a job, too. $0; We have reached a level of emergency fund we are happy with. It's like a little envelop you keep shoving money into until one month suddenly you can pull that envelop out and pay all your expenses without even having to wait for pay checks to come in. Depending on what you make and how your expenses look, 9 months could be too much or too little. True Expenses are your large, less-frequent expenses. However, I would keep it mentally separate from your emergency fund. I wish people would stop calling the buffer an emergency fund. It's not something to fall back on in desperate times. The emergency fund is not the same as the buffer. It only becomes an issue if you want to use the money in the tracking account for more than one purpose. It's not really an emergency fund, because that money is already earmarked for something else as of right now. You’ve probably heard of an emergency fund. 439 Shares. So, it makes sense that the first step for getting started is to establish a small emergency fund in a separate savings account. Buffer - Keep double the amount of each bill in it's budget category. New comments cannot be posted and votes cannot be cast. This means all the dollars in your budget need jobs—it doesn’t matter if that job is immediate, a few months from now, or years down the road. But is all the hype true? 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