Overspending

It happens. What matters is what you do about it.

If you're perfect, stop reading. If you're like the rest of us, we have GREAT. NEWS. Having a budget doesn't mean you have to get everything right. And it definitely doesn't mean you'll never overspend. So let that go and read on.

Ideal: Cover it Now

Overspending happens whenever you spend more in a category than you had Available. If your overspending created a red category balance, that means you've overspent with cash. Not necessarily literal cash, but maybe with your checking account. If it's orange, your overspending happened on a credit card. (If you spent with both cash and credit cards in your overspent category, YNAB takes the cash out first for accounting purposes.)

The important thing? This is where a traditional budget says you've failed. It's where a YNAB budget says, You're human. Adjust.

How to adjust? Move money. You made a plan originally, but now you've got to change it. Look for categories that are green where you can cut back and move some money to your overspent category. That's it. No guilt. Maybe a lesson learned, sure. But no guilt.

Can't Adjust Now?

Sometimes it happens. You overspend and you just can't adjust now. (see: Not Perfect above). Here's what happens:

Cash Overspending

When you overspend with cash, you spent all the money in that category, plus some money from your other categories, so there is a risk of over-drafting your actual bank account. Because of this, it is important that you hold your budget accountable. YNAB does this by subtracting any cash overspending from your To be Budgeted in the following month.

Credit Overspending

When you overspend with a credit card, you've racked up some additional debt - though no actual cash has left your budget or accounts.  To reflect this, uncovered credit overspending becomes a part of your credit card balance at the end of the month. You'll see the category that you overspent goes to $0.00 in the following month - but you now have more debt to budget for in your credit card payment category.

Cash vs Credit

Cash overspending is more urgent in the here-and-now, because you've got less money in hand to adjust and adapt. But beware credit overspending—don't let an orange color, or the fact that you still have cash in hand, leave you piling up debt. Cover your overspending no matter what the color whenever you can!

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