Arbitrary Budget Rules 

Happy Friday, Budget Nerds! We would love to know if you have set any arbitrary budget rules for yourself. 🤓 Also, BenB picked the wrong mic input when he filmed this episode and feels badly about it. 😂❤️ - Ashley

My arbitrary rule is that if I have less than $5 in my Ready to Assign, it goes to a Wish Farm item. If I don’t do that, they never get funded 😳

"Every decision in life needs a good spreadsheet" 1000% agree

I love "don't borrow from true expenses to roll with the punches". That's a lesson i recently learned

I put a "family reserves" in my tracking account (not recorded in budget, won't make the chart whacky in some months and less chance of rolling with the punches here) and only use that money to help family in case of emergencies. It is an emotional decision to make sure I can help my loved ones without digging into my own personal emergency fund. this also helps giving clarity of what I can actually afford to give without second guessing or afraid that it'll affect my other financial goals. It adds another layer of security and gratefulness that I am in a position to be able to support my loved ones when they need it. 🤔😊

Totally agree with true expenses being off limits for rolling from the punches. Also, we have the rule of first pulling from categories in the same category group to cover spending. If we want to spend more on social events, it has to come first from the other discretionary categories, and if we overspend on groceries or fuel, those come first from any other living expense categories that we may be able to skim some money from. So the push and pull gets constrained to similar categories.

Ooh, I have a few fun arbitrary rules! 1) There's a restaurant in Vancouver called Bon's that does breakfast for $2.95 (it's an awesome greasy spoon relic with graffiti on every surface - totally one of a kind). Back when I was really struggling, I didn't feel I could justify even that (I had a very precise spreadsheet for my groceries to make them last as long as I needed them to, and I stretched them far - $2.95 out of 'food' would have messed with my plans for the month). So when I reached a more financially stable place and started rebuilding my budget, I decided that - no matter what - I always wanted to be able to say yes to breakfast at Bon's or any similar tiny but highly enjoyable expense. So I made a "spontaneity" category for exactly that sort of thing. I keep a steady $100 in that category, and whatever I spend, I replenish up to that $100 mark at the end of the month. My arbitrary rules for spending out of "spontaneity" are - is it just a few dollars? Will it make me happy and/or alleviate an inconvenience? Have I already fully spent the category this expense truly belongs in? If so, spend away. For as long as I've had this category, I've never spent more than $50 from it in a month (and most months, I don't touch it at all), but it has served me very well. 2) I found it so funny when Ben said he is trying to get away from budgeting by percentages - I budget almost *everything* by percentages (#FreelancerLife), and A LOT of my arbitrary rules have to do with percentages. My basic system is actually pretty simple. I've saved up my basic expenses (rent/bills/food) a year in advance, so every paycheck that comes in is divided up as follows: 25% to a future down payment, 25% to retirement, 20% to spending, 20% to next year's basic expenses, 10% to tzedakah (giving). But within those categories, that's where things get exciting! For example, for 'spending,' I fill up all of my sinking funds and fun targets a month in advance. And then, every extra dollar assigned to that category group that month gets divided up four ways: 1/4 to getting ahead on my biggest 'spending' goal (currently, wedding money), 1/4 to getting ahead on my spending targets for the month after next, 1/4 to overfunding some spending targets (this month, I'll be giving myself some extra holiday shopping money) and 1/4 to my wish farm. And that's totally arbitrary! But it means that, whether in a flush month or a lean month, my money is proportionally aligned with all my priorities. 3) Windfalls don't follow the normal rules. In any given year, I can expect two major windfalls - my tax return, and the yearly rollover of my 'basic expenses' money (because I save 20% of every paycheck to pay for next year's basic expenses, I tend to have WAY more than I need. I like it that way, because it gives me the power to make informed decisions about my cost of living). So when one of these windfalls comes along, I assign 10% to giving (that's sacred to me) and divide the rest between retirement and down payment. The way I see it, I wasn't depending on having that money in my 'spending' budget right now anyways - so why not use it to show some love to my future self? 4) Gifts, on the other hand, do follow the normal rules. If my brother gives me $40 as a holiday gift (as he does), I'll divide that up between retirement/down payment/spending/next year/giving as though it were a normal paycheck. I've learned that I feel much more comfortable with arbitrary rules that send more to my savings goals than I do with arbitrary rules that leave me more to spend. I think it's because so much of my motivation to budget has to do with my desire future stability, and I don't want to take away from that.

My arbitrary rule is I don't have a "dining out" category, I just have a food category. If I'm overspending for the month in the food category (good use of progress bars, previously I used YNAB toolkit's pacing) then any eating out comes out of the spending money/discretionary category instead of the food category. I feel like this allows me to reward myself for eating frugally when buying groceries by being able to eat out more. Conversely, if I'm spending too much on food it hurts more to take a $20 restaurant tab out of spending money instead

Money aside for charity and gifts definitely has some arbitrary rules but also money coming in as gifts also has some. It goes into a separate category and saved until it can be used on something specific (which always tends to come around!), preferably something that I can report back to the sender and say "Thank you! You got me this!". I found when it put it in as bonus income then it gets picked away at for regular life expenses. It feels more like a bonding experience telling them it went towards something special and specific, not bills or retirement. I'm sure they enjoy it more too.

For the first two years of YNAB I had no margin but then in that YNAB magic way, more money than I “needed” started to appear. I used to put what ever was left over in to an “extra income” category until I heard on a YNAB podcast about how you’re not getting the full value of Rule 3 (my weakest rule) if you just pull from spare cash to cover any over spending. You don’t feel the pinch of where you’re pulling it from and haven’t technically used Rule 1 if it just sits in “extra”. Since then, I have arbitrarily decided all dollars left over after true expenses and goals goes in a wish farm item. It’s still the first category to get pilfered but at least I feel the pain of those dream boots getting further away every time I do.

I would love to hear single-income discussions.

My arbitrary budget rule is I don't pre-fund recurring yearly/quarterly (non-monthly) true expenses. I only ever fund the exact amount needed to "stay on track". Pre-funding makes me feel better in the moment about freeing up money for future months, but it lures me into a false sense of security once that payment is due. Then I'm suddenly on the hook for that true expense again, and I might have gotten used to living life without it.

Here's my arbitrary rule - any income gets split when I enter the transaction (paychecks, check deposits). 1% to charity giving, 1% to savings, 1% to debt payoff, and then the 97% to ready to assign. I then move to the budget and assign that 97%...but shaving that 3% off at the transaction level means my savings and debt payoff funds are plumper without me doing anything, and I *love* having money to give when I feel compelled to give.

When I assign every thing that needs money I usually have some left to assign. I put it into the “Stuff I forgot to budget for” because usually some little thing will pop up during the month. When the new month comes around I take what is left in that category and add it to “Extra Loan Principle Payments”. Then when I get an amount I feel good about using I make a principle payment on my vehicle or camper.

Thanks for sharing about paying off your home. We live on the west coast homes are expensive but it’s still our plan to pay it off soon!

Ben I love the story of how you finished off your mortgage, what a cool thing to be able to do for your grandkids, and congratulations on the payoff!!!

This is so funny! I will pull from any other category before I touch my morning coffee money. I also refuse to steal from next month. A single paycheck for me can’t fund the entire next month so I split it: the first check of current month goes to bills for the next month and then my second check in the current month goes towards living expenses and other goals. I don’t want to ruin that system ever haha

I'm new to YNAB, so I have some "catching up" to do with True Expenses and getting a month ahead to get myself to the point where I want/need to be right now. Therefore I have set an arbitrary rule that I can't mess with the budget once it is set up. For that reason I have a firm rule that I use cash envelopes for groceries, personal spending, gas for my car, and household items (t.p./ Kleenex/ paper towels, detergent, etc). I can move money only from one cash envelope to another within these categories, at least until I am current with what I need in my True Expenses and I'm at least a month ahead. That way I feel like I still have some freedom.

I love your story of paying off your house. What a blessing!

Man I love these guys. Definitely a fellow budget nerd! 💵 📊 🤓 I also don't take from my "fixed sinking funds" (True Expenses, in YNAB-ese). My flexible sinking funds (trips, experiences, holidays, gifts) are where it's at on that! I also contribute at least 3% of my total saved amount to any sinking fund category that I've already finished (reached my funding goal for) - like my emergency fund. I'm trying to account for annual inflation, but it's rarely ever actually 3% a year. The 3% just saves me time having to calculate inflation every. single. month. lol. I also put an extra $100 on my mortgage principal every month because it would bother me a lot not to pay it down early. The $100 number i chose is a completely arbitrary amount though - it just sounded good! 😆

I was shocked to hear about the eating out/individual spending....we started this ourselves but it was when we started with YNAB. Thought we might be the only ones!

Iiiiintereeeesssting. How are you figuring the percentage out? Spreadsheet? Would love to just toggle percentages on for this type of adjustment within YNAB 😬

Thank you for the "margin" idea ... I am implementing it right away!!!!!!

First episode I’ve watched and I’m hooked! Great way to break things down for beginners to mid-level. More single income discussion would be so helpful.

YNAB Win. In the very first episode with your intro which makes me smile every time you guys say "You are not alone. No you are not!"

Thanks for the mention, I recently have been using scheduled transactions in some categories instead of targets, like for prescriptions, it allows me to get an exact target for each month as this number changes from month to month. Get job btw, I always pick up some helpful ideas from the Budget Nerds!

I love this. Budget nerds are my tribe!!

My arbitrary rule, any extra money like cashing out credit card points goes to the fun budget. When a budget is fuller than needed i start putting that money in the emergency fund.

Teasing the new ynab merch perhaps? 🤨🔎 Love the idea of not taking money from true expenses

When budgeting with a partner/spouse, as we buying presents for each other I don’t use the typical ‘birthday category’ like I use for extended family and/or friends. I spend that money from the category that it relates (e.g. tech coming from Home Office if it is an ipad or ‘furniture’ or ‘home Reno’ if it was a house improvement, etc). I tag it as #birthdaypresent so we remember that it was a birthday wish fulfilled but 80% of the time the present to each other tends to benefit both of us in some way. Hubbies birthday is today as it happens. I got him quality Bluetooth headphones (I already have my own from a birthday 2 years go). I’ve classified it as ‘Home Audio’, a true expense. I benefit now because I don’t have to listen to his choice of music 😜

Thanks Guys. Appreciate your info shared and It just makes tweeking the budget just that little more transparent!

I have " life " category where I put all the groceries transportation eating out beauty fun money and misc . All the overspending is covered within those categories so i can't use the true expanses and saving categories to cover the everyday overspending

I have a goal to pay off my credit card debt that is now consolidated by 30 which is almost exactly in a year and a half! The loan is a 3 year loan so it would be in double time but I’m determined

UM EXCUSE ME IS THAT A YNAB PUZZLE?!?! [Also, great show!]

I working paycheck to paycheck I change rule for ahead of month to Two paycheck ahead what you think

Follow up on finishing your loan. If your pay off amount is small enough they will sometimes let you use your escrow to cover the last payment instead! (Just make sure you have the money come tax and insurance time 😉)

With compounded interest the earlier you start saving for retirement (on a consistent basis) the less money you need to put in to get the same results as putting a lot of money later in life.

Single parent here: I stopped funding my personal fun $ with my earned income. I use my hysa earnings and credit card rewards to fund that. Now I'm getting so much from those sources that I dump the rest into the most expensive kid camp on my list.

One rule I have, that was borne from the 34 day challenge- whenever I fill up a (used) coke bottle with water, I pay myself $2.00 that’s goes into savings.

not very happy about new price change for YNAB going from 50 dollars to 98 dollars double in price that is extreme

You have to have twice the amount of the item in your free spending to buy it. And, you have to have half the amount of the item saved to take a loan for it.

I need to re-do my monthly goals, etc, since I am chronically underfunded. I wonder - is there a way in YNAB to have a running target limit (income vs expense goals) so I won’t go over my typical monthly income?

I assign 2.5% of all incoming transactions into a Lifestyle Creep category and pay myself a little bonus at the end of the quarter 🎉 it can go to whatever category I want within my have some fun category

“I always do that yearly fresh start…” What fresh start are you referring to?

What is the poster on Ernies wall?

Maybe let Car Maint keep growing then one day becomes car replace?

Done.