Aging Your Money
When you extend the time between receiving money and spending it, you become more secure. More stable and flexible. We call this aging your money.
The Big Idea
You'll see a metric for Age of Money right in the YNAB app. This number is the average age of your last ten cash transactions (cash, as always in YNAB, meaning non-credit, not literal cash-and-coins).
When you first start out, your Age of Money is going to look a whole lot like three question marks. That's because it's still calculating, so you can have accurate feedback about the average time it takes money to leave your budget. So it will take a little time to let this average build up.
The Nitty Gritty
Love math? Or just want to know more? Let's talk buckets.
No, not rain buckets or buckets with holes in them. Let's talk income buckets. Imagine that each time new money comes into your budget, it sits in a bucket. Each inflow goes into its own bucket.
Now imagine you start a budget on January 1st. Your starting balance is bucket #1. (Don't try to go back in time and figure out how old that money is already. New budget, new money.) Then you get paid on January 5th. That's bucket number #2. Your partner gets paid on the 8th. Yup, bucket #3. Your great-aunt gives you $100 for your birthday on January 11th. Bucket #4. You've got it.
As you spend, the money leaves these buckets in sequential order. Accountants call this first in, first out. The first dollar into your budget is the first one out. And on and on. (Accountants love on and on...)
So each time you spend, you can ask (and answer!) the question: How old was that bucket this money just came out of? When a transaction finishes one bucket and starts taking from the next, age is a weighted average of how old those buckets were.
This question gets asked and answered each time you spend, then the answer for the last ten cash transactions is averaged. And that's the number that appears just above your budget.