Emergency Fund vs Month Ahead

YNAB is not like other budgeting methods. Rule Four is "age your money" and it encourages folks to spend last month's earnings on this month's expenses, thereby breaking the paycheck to paycheck cycle in which so many find themselves stuck. Many YNAB'ers work diligently toward getting a month ahead of their expenses, budgeting the dollars they currently have in the bank account for expenses due in the next calendar month. But what about emergency funds?

Many budgeting methods encourage the idea of an emergency fund, a pile of money that is only touched to handle unexpected expenses not accounted for in the budget. A wise (or as Ben would say, prudent) thing to have! In a perfect world, however, YNAB'ers would not need emergency funds -- they would have saved enough money for future expenses via Rule Two to handle anything that could come their way. Alas, the world is not perfect, however, and many YNAB'ers choose to incorporate an emergency fund category in their budget.

Do you have to choose between having an emergency fund or living a month ahead? Of course not! Ben reminds us that even if you choose to setup your budget for month-ahead, you can always undo it and go back to an emergency fund. Or vice versa. The dollars are still there, however you decide to allocate them.

Ernie recommends that you should take your emotions into account too. For many folks, including himself, it just feels better to have a big pile of money that you can see in one category. It offers a greater sense of security than seeing multiple categories funded in the next month.

So, really, you can't lose. If you've been thinking about going month-ahead, go for it! There's always the undo button.

Share your YNAB wins with Ben and Ernie!

Timestamps:
0:00 Intro
2:00 Ben's initial reaction
3:41 How they both work in YNAB
5:10 The benefits of being a month ahead
9:59 It doesn't even matter—budgets aren't real!
16:09 Doing whatever feels right
21:35 Ben's challenge for you RIGHT NOW!
24:53 Ernie's experiment with a Job Loss fund
29:56 What's the real reason we crave cash?
33:06 YNAB Wins

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[antonrekun]

Actually, there’s a slight difference in psychology.

If you’re treating free money like months ahead, then once you come up with a big expense, you can spend them – and then you are vulnerable for unexpected risks.

On the other hand, an emergency fund would be untouchable by any expenses but absolutely necessary ones giving you real security.

[junipertree]

Emergency fund was a lifesaver for us. Husband was let go and we carefully lived off our 3-6 month emergency fund for a full year. So so thankful we had planned for the what if moment. No debt but mortgage and a kid in college. Still no debt and a kid in college and thankfully a new job. Phew! Thanks YNAB

[andrewmitchell]

"Month Ahead" in YNAB is simply a 1-month emergency fund. It's saving enough income that you can cover your expenses the next month. Traditional emergency funds just extend that time horizon, as the time it takes to find a new job and start receiving a salary is generally more than 1 month. They are not mutually exclusive.

[elizabethgadsby]

We handle the emergency fund a few different ways in our budget:
1) 1 month ahead
2) Job loss safety net (~3 months of base expenses)
3) Insurance deductible/Appliance failure

YNAB Win:
December 2021 I set a goal of obtaining positive net worth within a year (based on the picture and progress YNAB showed me!). The economy forced an adaptation to the timeline, but as of June 1st I am now net positive! After 3 college degrees, leaving me in debt for all of my 20s, it feels freeing to be getting ahead in life financially.

[cramias]

Getting a month ahead was my precursor to building an emergency fund. Saving 3-6 months of expenses seemed like an impossible task when I was starting to get my finances in order, and on limited income. But breaking the paycheck to paycheck routine was a reasonable place to start. Once I was a month ahead, I just started saving on top of that and eventually built up enough to have a real efund. Don't underestimate the month ahead principle as an easy way to get started getting your finances in order, its a lot more friendly for people who are dealing with a chaotic financial life and just need to get the absolute basics under control first

[TheBaciWorld]

Ben - “The budget is a social construct! Make the change and undo it if you don’t like it!”
Also Ben - “Oooo I like that idea… I’ll have to think about it and see if I’ll make that change to my budget” (spoiler alert, he won’t) 😂

Also as a YNewbie, my YNAB Win is I checked my budget before I grocery shopped and I didn’t overspend two weeks in a row! Still learning what the target needs to be long term, but there’s food on the table and money assigned so I’m happy

[VictorMartinez-zfdt]

If you think about it, getting a month ahead or more and saving for true expenses, IS an emergency fund.

[corkspa]

I was following the 'month ahead' before I knew it was a thing (and before I found YNAB). I was always taught to put half my estimated bill total aside each pay (assuming biweekly, it would be 1/4 aside for weekly) and by the end of the year with the two 'extra' checks I was ahead. My dad was an accountant and preached this method. Along with ALWAYS balance your checkbook to the penny! lol.

[janiliebtbudgets]

For me the main reason why I stick with the emergency fund for now is that I can clearly see how much of my income I'm saving which is extremly important for me since I want to build that up.

[smstnitc]

I started budgeting ahead. I like it better. What I ran into was having a "next month" category became too tempting to touch it if a category needed funding, instead of making hard decisions about where else to pull the money from. Doing that kept me from actually getting ahead. But the extra money isnt "doing nothing" either way, because much of that money is actually sitting in a high yield savings account earing better interest than if it was sitting in a checking or standard savings account earining a pittence.

[jeweltungpalan]

I like having the emergency fund category because I put all that money in an HYSA. It gets a little complicated (and confusing) to pull daily expenses from my savings account instead of checking account. However, I do want to be one month ahead and that money lives in my checking.

TLDR: I have both and I get the benefits of both 😊

[dpayne]

As you grow into your budget (over time), you can have both.

[VictorMartinez-zfdt]

I went the Hannah approach and got rid of my emergency fund category and assigned those dollars to true expenses and month ahead. I’m working on getting two months ahead.

[jaclynswinney]

My YNAB win is thanks to Ernie. He gave the idea of doing allowances for children in the YNAB budget. Game changer! We started this past school year for our 9 & 11 year old. We discovered that every incidental expense (like scholastic book flyers, “special” shirts for one time school events) that my husband and I used to have to determine if it was worth spending our money on we could pass that decision on to our kids. It was incredible how when we asked if it was worth spending from their money category- those shirts, book fair toys, etc. didn’t seem as important. Keeping their money as a line item on our budget also saves us from our kids losing cash or forgetting their wallet when we are out and they find something they want to have. This has definitely been a way to alleviate stress and help teach our kids scarcity- with a constant running total that is always accessible to them and us. Thanks YNAB!

[sassyliving]

What most people consider an emergency fund is a quick 1-2, 000 goal that is easier to save while starting a budget and getting out of debt. Once that goal is saved then you can use it as the base for the month ahead goal. Then roll that over to the 3-6 month saving goals. You can still label it Emergency Fund or change it to something else. After getting one month ahead, one doesn’t have to save at the fast pace and some of what was going to then saving goal can then be redistributed to other categories that had been put on hold. Once we have 3 months saved then we will move it to a high yield savings account and not just sitting in our checking account or normal savings.

[wely]

I'm doing a hybrid solution: I try to reach 1-2 month ahead in YNAB, but I also have a general "Emergency Fund" category with a target to always keep it at ~2500$ for stuff I was truely not expecting. If I ever have to dig into that category, my process is to stop my monthly planned long-term investing fund (20% of my income), focus top priority to replenish it to my target goal, then I am allowed to restart investing and trying to keep 1-2 month ahead at the same time.

[MissVindicat]

To me it becomes more complicated if I start budgeting ahead. I feel less in control. I keep wanting to check how far ahead I am. An emergency fund seems simpler. I know what amount I need to get by for three or six months and I can see right away if I’m there or not yet. Also, I like to budget for the upcoming month when I receive my monthly salary. At that time I have a better understanding of all the social events that are coming up.

[Cynderent]

Since I'm still paycheck to paycheck, I feel more comfortable budgeting for the next month, however I currently have a very stable job with good pay so I'm budgeting to make large payments on my debt to get some of that cleared up. The APR is pretty rough and making normal payments wasn't doing it for my mental health. Once I make a dent in those and have some more funds on hand, I'll be fully budgeting a month+ ahead. The debt is personally my priority.

[wildrachanne]

I joined YNAB when I already had an emergency fund. Instead of having a category for an emergency fund, I put all of my dollars to fund the future budgets. I grouped all of the categories that I needed to survive in “Immediate Obligations” and paid all of them for 6 months. The money left over, I put towards my monthly savings goals. So for my next Paycheck, I’ll fund January’s obligations (it’s July right now) and with the money left over, I’ll put money towards augusts savings goals. I think this app is absolutely wonderful and really helps DEFINE what an emergency fund is. It has allowed me to think in months fully funded versus some vague target number that I hope I could live off of in the case of job loss.

[arambladen]

Ever since I watched Hanna's video about "Budget Categories I deleted", I no longer have a category called "Emergency Funds/Family Emergencies". My goal now is to be a month ahead, and ultimately a year ahead... God willing!!! 🤲... it's a slow build but I will get there!