YNAB Emergency Fund.
You Need a Budget (YNAB) is one of the most popular budgeting apps that helps people control their finances. YNAB uses what is known as zero-base budgeting to help you distribute all your incoming funds to their rightful place.
One of the most useful features of YNAB is the built-in Emergency Fund feature. This allows you to plan your emergency savings goal and set a target year for when you want to achieve it. YNAB then automatically calculates how much you need to save each month to get there.
What Is an Emergency Fund?
Everyone should have a reserve fund in case of an unexpected turn for the worse. An emergency fund is a fairly large amount of cash that either covers unexpectedly large expenses or is enough to cover all of your bills for months or more.
Events that may require an emergency fund include:
- job loss.
- emergency medical care.
- major overhaul of a house or household appliances.
- Car overhaul.
- An unexpected trip for family reasons.
People have trouble setting up a contingency fund because there is rarely room for that in any budget. However, since YNAB distributes all funds received to certain budget categories as money arrives, it encourages you to commit at least a portion of your income to that budget on a monthly basis.
This little nest egg can reduce stress levels because even if something catastrophic happens, you will know that you have time to figure things out, but it won’t ruin your life.
How Much Should You Save in an Emergency Fund?
Most financial experts agree that you should have an insurance fund that will help you pay important bills for at least 3-6 months.
To figure this out, go through all your bills and add up the ones you couldn’t avoid without paying for 3 to 6 months. These can be things like:
- Mortgages
- Car Loans
- Grocery
- Fuel to and from work
- Utilities such as electricity, heat and water.
If you have enough room in your budget, you can also include expenses such as credit cards, personal loans, and entertainment services. However, many of them can be extended or canceled for a while if you call the company and ask.
Once you’ve calculated how much you need to survive for 3-6 months, it’s time to set up your Emergency Fund at YNAB.
Setting Up Your YNAB Emergency Fund
Open the YNAB website and log in to your account. Scroll down to Emergency Fund and select it.
The Emergency Fund editor will open in the right pane. This is where you can set up and manage your emergency fund over time.
At the top of this panel, the current status of your fund is displayed. You will see the goal at the top, and in the advice box, you will see how well you are funding it.
In the tips box in the middle, you will find some tips on how much you need to donate to the Emergency Fund this month to get closer to your goal. You will see several options here.
- How much should be returned to the fund to compensate for everything you spent from it this month (money removed).
- The amount you need to set aside as a whole this month to stay on target based on the overall savings trend from now to your target year.
- The amount you need to set aside this month to make even moderate progress towards your goal (even if it is below your savings target).
If you want to change your savings target (or if you haven’t set one yet), select Change Target.
This will open the Target window where you can set the target of the emergency fund and the date when you want the emergency fund to be fully available.
When finished, select “Save Target”. Now that your emergency fund goal has been set, you are ready to commit to it monthly and track your progress towards that goal.
Managing and Monitoring Your YNAB Emergency Fund
Each month when you select an emergency fund, the top bar will display quick tips on what you need to do to reach that goal by the date you specify.
Ideally, you should type in the “keep up” amount that the advisor offers in this field. This will ensure that you stay in line with the YNAB savings trend.
If you are behind in any month, you will have to add even more next month. This is a slippery slope, along which it will be very difficult to achieve the set goal by the desired date.
YNAB also provides several quick links to help you figure out the right amount for your monthly income. Just scroll down to the Automatic Assignment section to see them.
Select any of the following links to automatically assign the amount displayed to the right of it.
- Underfunding: The budget is just enough to fund the target, so you will make some progress.
- Assigned last month: Use the same amount that you assigned to your foundation last month.
- Last month spent: not relevant for the emergency fund.
- Assigned Average: Will budget 12 months average of what you have allocated in the past.
- Average spent: not relevant for the emergency fund.
- Reset available amount: reset available funds to 0.
- Reset assigned amount: reset assigned amount this month to 0.
At the bottom of the right pane, you will see the totals related to your fund. Here you can find your current total balance and how much you have left from the last month that went into this month.
You will also see the amount you have already assigned to the fund this month.
Cash and borrowing costs are not related to the Emergency Fund, so you can ignore these balances.
Another thing to know about using the YNAB emergency fund is that you can quickly view the records of past amounts that you transferred to and from the fund over time.
Just click on the little watch icon next to the amount you gave to the fund this month.
A window will appear where you can view the entire history of all transactions to and from this fund.
Set Up Your YNAB Emergency Fund Now
The Emergency Fund at YNAB is the first place to spend money. Don’t ignore this feature. Find out how much you need to live for 3-6 months and set a goal.
Carefully distribute the amount needed to achieve this goal. Once you do that, you can sleep better at night knowing that even if life confuses you, you will have the financial support to absorb it.
YNAB Emergency Fund
YNAB Emergency Fund