Rule One of YNAB is Give Every Dollar a Job. And that means every dollar in every on-budget account. Even savings accounts.
We’re accustomed to thinking of savings accounts as something important everyone should have. And that’s true. But “savings” isn’t really a job. By all means, have a savings account, especially if it’s an interest-bearing account. But be aware that when you add a savings account to your budget, YNAB takes the starting balance and adds it to Ready to Assign. It’s asking you to give all that money a job.
You could do that by creating a category called Savings and then assign all the money to it. But I want to encourage you to think about it differently. Instead, assign that money to a variety of categories that represent real jobs. For example:
- Emergency Fund
- Vacation
- Car repairs
- Home maintenance
- Home repairs
- Tuition
- New car
- Swimming pool
The beauty of doing it this way is that you don’t have to feel guilty about taking money from savings when you want to spend it. Instead, you can mindfully spend money assigned to a category. If you have a home repair, just take it from the Home Repair category. If the repair costs more than you’ve budgeted, move funds from another category, according to your priorities. This helps you plan ahead for inevitable but unpredictable expenses. And it allows you to spend without feeling guilt.
Like many things with YNAB, this requires a different way of thinking. But once you get your head around it, I think you’ll see it makes a whole lot of sense. And it can be really beneficial.
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