Why Doesn't My Category Balance Match My Account Balance?
Money in a savings account should only be assigned in corresponding savings categories, right? Not so fast!
Accounts vs. Categories
Before you started using YNAB, you might have used multiple accounts to organize your money—this is particularly common for savings targets. Maybe you had a savings account for vacation, another for home repairs, and another for your antique spoon collection (hey, it's important to have hobbies! 🥄).
Now that you’re using YNAB, organizing your money is your budget’s job. Your budget doesn’t care where your money is stored; it only cares that you have the money. In fact, you could have all of your money in one account, and you’d still be able to separate it out and budget it exactly as you need to by assigning it to separate categories.
We understand that there might be certain advantages to different accounts (high yield savings account, anyone?), so we don’t discourage you from having different account types. Instead, we challenge you to think less about where that money is stored, and focus more on which job it needs to do.
If the account I use for my emergency fund has $500, shouldn't my Emergency Fund category have $500, too?
When you add your accounts to YNAB, they simply become containers for your money, and there is nothing linking that account balance to a category or group of categories (check out this blog post for more on that!). You’ll notice that when you make a transfer from one Budget Account to another, the transfer transaction doesn’t require a category. This is because no money has entered or left your budget, so your category balances (the job that money is set aside for) will not change. All of your money is pooled together, and you get to decide the job for each and every dollar by assigning it to a category.
When you try to match your category balances to your account balances, you’re essentially giving your dollars jobs twice — once in your accounts (Emergency Fund savings account), and once in your budget (in the Emergency Fund category). It’s kind of like keeping both a paper calendar and a digital calendar at the same time. It might work out most of the time, but then as changes are made along the way, you start noticing that your paper calendar says Crossfit is at 1:30, but the calendar on your phone says it’s at 1:00. Now you don’t know the right time to
skip head to your workout! It’s not only unnecessary to use two calendars, but doing so can create a lot of confusion (and cause you to be late for an appointment!).
Another way to think about it is that your accounts are like refrigerators, and your budget categories help you plan out your meals. 🍅🍇You don’t need a fridge for breakfasts, one for lunches, and one for dinners. You keep all of your food together, and it’s your meal plan that decides what job each ingredient has. Even if you do have multiple places to store your food (I’m sure you probably have a cupboard and a freezer, too!), moving an ingredient from one place to another doesn’t change which meal you’re using it for — it just changes where the ingredient is located!
Let Your Budget Do the Work!
In your budget, your accounts are now just a place to store your money. Your old method may have worked pretty well, but now that you’re using YNAB, there’s no longer a need to divide your money between accounts. Your budget categories tell you what your money needs to do, and you no longer have to make any account transfers to change your money’s job—instead, you just make a few clicks in the budget categories, and you now know that $50 is set aside for car maintenance instead of that leaky faucet you figured out how to fix yourself! 🔧
The beauty of using your categories to tell you the purpose of your money is that you can now have fewer accounts to keep track of! The fewer accounts you have, the simpler your budgeting process will be.
It can be a shift in thinking—trust us, we’ve all been there!—but it’s really powerful to let go of the idea that having money in a savings account means that the money has to be used toward long-term goals (or that a checking account is only for your everyday spending).
Are you now wondering how you can be sure there’s enough in your accounts to cover your upcoming expenses? Check out this article for tips on managing those account balances!