I think the general rule is to have 9 months of expenses stashed in an emergency fund. 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. May 15. Embrace Your True Expenses. It's not something to fall back on in desperate times. With the buffer, you are putting away money that will grow to be the amount you typically need to live through the month. Press question mark to learn the rest of the keyboard shortcuts. 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. I know a lot of people just used their EF to completely buffer themselves, then worked their EF back up. 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. Just click “HOUSING” and type your preferred title. The training materials and videos on the site generally tell you not to bother filling in historic transactions. What is a True Expense? But is all the hype true? That was a few months after I started using YNAB. True Expenses are your large, less-frequent expenses. It took me about three months to get fully buffered and a decent sized emergency fund, just keep building up those categories. Temporarily overspending, then using the reimbursement to cover it. There will be no more contributions until either we have to replace some, or we reach a few years from retirement and have to build up a 3 year cash buffer. Are you a risk-avoider or risk-taker? It's not really an emergency fund, because that money is already earmarked for something else as of right now. If you follow this plan, you’ll always be one month ahead of your actual income. I currently have around 2 months. When former YNAB blogger Mark posted about his current financial priorities, the list looked like this (in order): Build one month buffer ($5,100) Save 3-Month Emergency Fund ($15,000) Pay off all debt other than the mortgage on the house ($72,000) Finish his basement + other house projects; Pay for kids’ college; Save for retirement Press J to jump to the feed. With the buffer, you are putting away money that will grow to be the amount you typically need to live through the month. That's why savings accounts are Budget Accounts--you'll give each of your savings dollars a job, too. The emergency fund is not the same as the buffer. Thank you! 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. I'm already buffered now (yey), but should I go with a 6 months emergency fund or a 5 month. Is this actually good, I came to this thread to have this answered as well. Or let’s say I prefer to change the budget group currently titled “HOUSING” to “YO MOMMA’S HOUSE.” Easy peasy. But if that paycheck bounces, you're screwed for rent, which is why you need an Emergency Fund. The emergency fund is not the same as the buffer. Dave says to have an emergency fund. Whether you’re 15, 25, or 65, if you’re having trouble with your money and want to improve, the very first step you should take is to build a Bank Account Buffer™. 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. Press question mark to learn the rest of the keyboard shortcuts. You pay out your 500 on the first, and build back up to $1000 by the end of the month. Budgeting Your Savings. So this is my savings budget as of today. There are two ways to handle reimbursements: Budgeting for the initial expense. 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. Feel free to post any news, questions, budget strategies, tips & tricks and advice related to YNAB. 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. Once you are buffered, cash flow issues are reduced. ... do not spend a dime out of this category. The training materials and videos on the site generally tell you not to bother filling in historic transactions. $0; We have reached a level of emergency fund we are happy with. 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. 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. A buffer is an extension of an emergency fund. Emergency Fund - A separate category that you stash money into for when you have an unexpected emergency. (I know it's different for everyone, let's just say I'm following the 6 month rule of EF). To make sure you keep your emergency fund funded, it’s best to keep your emergency fund and buffer separated. Reimbursements. The "Next month's income" category is your buffer. We get paid 1st/15th, so being able to completely fund the … I'm fully buffered. Feel free to post any news, questions, budget strategies, tips & tricks and advice related to YNAB. I will write more details about this … 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. 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. Related to personal finance, budgeting, money and financial matters. Buffer - Keep double the amount of each bill in it's budget category. Do you just put that money into a buffer slot and let it sit or what I'm actually very confused on that part and would appreciate any help. My last paycheck of June I budgeted for July since all of my expenses were covered for the rest of June. You missed the point of Jesse's video: fewer is not alway better. I wish people would stop calling the buffer an emergency fund. Ex: Your rent is $500 - try to end each month with $1000 in your "rent" category. When you save this money and put it to work, YNAB calls that a Buffer. Do this with each bill category - lights, gas, phone, etc. ... YNAB makes this point about emergencies: " When you’re budgeting each month for inevitable car repairs, the bill from the mechanic six months from now won’t be an emergency at all." moment. 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. Thanks for your reply! So, it makes sense that the first step for getting started is to establish a small emergency fund in a separate savings account. The clarity and convenience of working with month-sized chunks is huge. The way that you are doing this is perfectly acceptable. Depending on what you make and how your expenses look, 9 months could be too much or too little. 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. One thing that many people don’t realize is that even when you are trying to pay off high interest rate debt, having some kind of emergency fund is still a really good idea. 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. 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. You can see in the screenshot below I clicked ‘mortgage’ and can change it to ‘rent.’ Or, since I don’t pay HOA dues, I can click the trash can and get rid of that line. For some, you'll know the amount and due date – like your auto registration or annual insurance premiums. You have control over how you classify them too. If it’s not great, an emergency fund can be really helpful. 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. 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. So, on July 1st, I had enough money to cover all of July's expenses. As you can see from the picture, every month I enter some money out of every paycheck into the Emergency Fund and build up some money to cover any emergencies. 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. So I've been seeing a lot of people say things about having a buffer for the ability to live on last months paycheck and my question is what is different than that and the emergency fund and also how do you go about living on last months paycheck so to say? Get a Bank Account Buffer™. The thing to remember is that this type of plan essentially functions as a one-month emergency fund. 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. I got this paycheck last week. That's what an Emergency Fund is for: covering expenses that aren't your normal bills, or making up for lost income. With a cult-like following, YNAB (stands for “You Need A Budget“), which started as a custom spreadsheet, has turned into a complete budgeting solution, helping users “save over $6,000 in their first year using the software! This breaks the paycheck-to-paycheck cycle, provides you more time to plan when the unexpected happens, and also allows you to budget for the whole month at once. 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. 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. Really focusing on building a larger EF. A discussion subreddit for popular budgeting software You Need A Budget. The less fine-tuned your budget is, the greater your need for an emergency fund will be. 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. Related to personal finance, budgeting, money and financial matters. However, I would keep it mentally separate from your emergency fund. The "buffer" doesn't even need to be one month's worth of income in order to make the transition into … In contrast, a buffer mostly provides an administrative convenience. I have an emergency fund and some money saved to buy a car which is my need. Your emergency fund is a buffer that protects you from taking on debt. Press J to jump to the feed. Any savings -- the buffer, emergency funds, vacations, you name it -- have an implicit cost when you have debt. It’s a small cushion of savings to help you stay afloat in case of a financial crisis. 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). 439 Shares. A discussion subreddit for popular budgeting software You Need A Budget. The buffer is basically a one month emergency fund, but it also simplifies budgeting. "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. Rainy Day (YNAB Rule Two) budget categories might offer some risk of new interest expense; I’ve identified my cars, my appliances, and my teeth as risky aspects of my own budget. How dialed-in are your priorities? If you’re new to budgeting it can take a while to think of, and prepare for, all of your Rule Two expenses. An emergency fund is more stable, I have it all the time, so I can count on it. New comments cannot be posted and votes cannot be cast. You can't use this category as your buffer money, you can't use it as you're rolling with the punches category. Emergency Fund. Existing debt gives a 100% probability of interest expense, so it would be the primary focus of all available money, even at the expense of a smaller emergency fund. Is this another way of doing the buffer? You create a category in your budget called "Buffer Savings" or something like that and you fund it little by little to get that one month of expenses in so when you get your paychecks you can allocate them to the next month and then pay your bills all at once. nYNAB. It only becomes an issue if you want to use the money in the tracking account for more than one purpose. A great strategy that YNAB recommends is saving up a "buffer", basically a month's expenses, so … I align that with living on last months income. (Is that a word?) Now, whenever I am paid, I send my paychecks to the upcoming month, then I will budget it after all my months paychecks are in. Two of the biggest budgeting apps out there are Mint by Intuit (the creators of Quicken) and YNAB, short for “You Need a Budget”. 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. I guess this is a more subjective part of the budget because others might be saving for specific items. New comments cannot be posted and votes cannot be cast. Investing. The buffer's purpose is to enable to you budget a full month at a time. With Rule 1 in the YNAB Method, you'll Give Every Dollar a Job. It helped that we had our “baby” emergency fund in place that was the seed for the buffer. 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. I feel like having a buffer AND an emergency fund is like having two emergency funds? 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"? But in the event of an emergency, wouldn't you grab money from the emergency fund? If people want to buy a TV for example they just set aside a fraction of their paychecks towards it. 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. ... A discussion subreddit for popular budgeting software You Need A Budget. Related to personal finance, budgeting, money and financial matters. 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. If the car loan interest rates are low, I would prioritize the buffer over paying down that debt. The Buffer allows you to put some space between when you receive your income and when you actually need to use it . 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!" You have complete control over the number and names of categories, just as you would in a spreadsheet. 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… But…I think when you open a sentence with “I could technically say…” – you’re technically kidding yourself – or missing the point. 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. Feel free to post any news, questions, budget strategies, tips & tricks and advice related to YNAB. It's that more categories that only increase your administrative overhead are not useful. Emergency Fund vs. The buffer is the faucet. 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. I have done it that way in the past as well. A Bank Account Buffer™ is my name for what other people may call a cash cushion, mini emergency fund, rainy day fund or back-up savings. 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. Buffer. Emergency funds and generously-padded categories provided financial security: If an unexpected expense occurs, I'll have some ability to absorb it without making uncomfortable sacrifices to my other spending priorities. Each month, you ha… To me, it just seems weird leaving numbers on the "Available to Budget" if it can be placed in the Emergency Fund category. YNAB places a lot of focus on right now, and the future (aging money, buffer etc). You’ve probably heard of an emergency fund. Buffer/emergency fund - correlation with age and wealth. And if I use it, then I have to be careful to time my expenses for next month to make sure I have enough in my account to cover them when they come. 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