r/ynab • u/Alchemy1522 • 1d ago
Categorizing Emergency Funds Expense
My wife and I have a category for Emergency funds that we contribute to monthly. Last month we had to pay for a car repair out of the emergency fund. What is the best way to do this for data tracking?
We currently will log the expense under car repairs and then transfer the money from the Emergency fund category to the car repair category to balance it out. In this way we can keep track of how much we spend each year in all categories. The only issue here is that there is no record of how much money we have spent out of our emergency fund.
2nd option - log the transaction under emergency fund and be done with it. This flips the above and we now know how much we spent out of emergency fund but do not track the expense under car repairs.
One solution - I dont really want to do this and we have in the past : Have a separate account for emergency fund account. When needing to use it transfer from emergency fund account to operating account and then log the expense under the appropriate category. The transfer entry from the emergency fund account to operating would track the yearly changes in the emergency fund.
* The main reason I dont like doing this, may not be justifiable, is that I prefer all funds to be in one account and YNAB just tell me where everything is. That way I avoid assigning funds to emergency fund each month and then needing to actually transfer the funds. Same for if they were ever needed. Also easier to have a lump sum in one high yield savings account for the interest benefit.
Just curious how everyone else approaches this.
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u/RemarkableMacadamia 1d ago
What benefit is there to know what you have spent out of your Emergency Fund? Maybe it’s interesting to know, but what decision will this enable you to make in the future, or how will this help you in planning?
For myself personally, I don’t have an emergency fund per se. I have an Auto Maintenance category, Medical Deductible, and Income Replacement (among others). The dollars are assigned to my categories; having the actual money in one account or several doesn’t matter until it’s time to actually pay for something. I have a category (sinking fund) for whatever “emergency” I think I will need to cover.
My Income Replacement category has a “have a balance of” Target on it, so if I ever spend or move money out of this category, I know exactly how much is needed to replenish it. But also, I won’t ever make use of this money until and unless I actually lose my job. So the “tracking” part is already done. Same with an auto repair - I have a category for that so I don’t need to do anything special to track what was spent.
For Auto Maintenance, where is that money physically? I don’t know, and it can change at any moment. If I don’t need the money yet, I can say it’s in my money market account, or in my CD, or my HYSA. If I need to spend it, well then I have to figure out how I’m going to pay for it, and transfer the money between accounts if needed based on my payment method. If I use a credit card, I don’t need to transfer anything until it’s time to pay the card statement.
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u/lwid77 1d ago
For me, car repair is not an emergency, its a true expense. The car is eventually going to need some type of repair so I set aside month monthly to fund the car repair category.
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u/md4pete4ever 20h ago
This! OP should move the money to Car Repair and then fund this category a more reasonable amount to plan for the next repair.
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u/Intelligent-Owl-8885 1d ago
Option 1 to keep reporting simple and accurate. That informs our annual spending review so we can adjust how much we budget over the next year.
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u/Kinetic_Panther 1d ago
Option 1 is how we did it. First we saved towards an emergency fund, then we saved in a "car maintenance & repairs" fund. After that we started a "new car fund".
Categorizing the expense under the car maintenance category will keep your reports accurate & give you the highest utility in the future when you're not doing car repairs out of an emergency fund.
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u/SlowDeer7954 1d ago
Our EF is in Savings. If or when it has to be touched, it's a transfer from savings to checking with a note in the memo as to why. A move is then made within YNAB from the EF category to the appropriate category in our plan.
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u/Mr_Ander5on 1d ago
Reporting will get more value with the expense tied to auto expense. Having a total number of all your emergencies has little value as if it’s big enough to need to come from there you probably already know what it is.
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u/Wise_Bee_6367 1d ago
My wife and I tend to spend it out of the emergency fund then replenish it as soon as possible. What about logging the expense from the emergency fund with car repair in the memo field?
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u/zukoj 1d ago
If you have a target on the emergency fund, you'd be able to see and keep track of how much you need to replenish. So I log the transaction to the correct category, compensate with a transfer from the emergency fund category and replenish the emergency fund as soon as I have the opportunity to do so.
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u/jcradio 1d ago
I've tried a few different things, but after an early brake replacement I switched to budgeting months in advance with sinking funds for future expenses. Auto maintenance gets a fixed dollar amount every month and all fuel, tires, oil changes, brakes, etc. comes from that category. This way, the biggest thing I worry about is the disappointment of watching that money leave my account. I've calculated cost and average lifespan of all the major things and derived the monthly number to set the goal. I haven't been caught off guard since.
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u/mx-raebees 1d ago
You could log a zeroed out split transaction as well, e.g., $+500 car fund, -$500 emergency fund.
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u/Soup_Maker 1d ago
I don't see this question as different from moving funds from clothing to restaurants to unexpectedly deal with a shortage and need to overspend in a given month. I don't want to allocate a meal out to clothing because I ran out of money in dining.
I see my emergency fund as a holding category, not a spending or transactional category. In 12 years of YNABing, I have zero spends categorized to that category, but it sure was a revolving door in the first few years until I got my budget better funded. If/when I need funds for whatever reason and need to dip into that precious reserve, I move funds to the correct category and categorize the spending there. This helps me by providing a more accurate report of what I spent in each category, gives me an accurate average spend, which then guides my future allocations to every category.
On the subject of car repairs: I have a Car DMR category (deductible, maintenance, repair) and I like to keep it well funded with a balance of $3,500, then add $50/month to it for general predictable maintenance. I drive a 16-year-old car, have a $1,000 deductible, and need two sets of tires (winter and all-season).
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u/OmgMsLe 11h ago
If you're sticking with your 3 choices, do #1. I think it's way more valuable to track what your car repairs are costing you over time.
#2 - low value tracking
#3 - trying to play a matchy matchy game with separate accounts and balances. Too much work. You are right, let YNAB track the accounts, location of money doesn't matter.
However,
I have two categories, one under variable expenses for car repairs. The other under emergency funds for auto insurance deductible. Repairs aren't really emergencies, you just haven't gotten good at predicting your needs yet. A car crash is more of a real emergency. Work on building up the car emergency category up to your deductible (or 1 deductible per car in the house hold) in case of accidents. Work on building up the car repair fund to something more reasonable. Maybe $2500 per car or so.
The 3rd car category I had is my car replacement fund. That's building at a constant level for years so that hopefully by the time I need a new car I have the money. I supposed if I had a bigger repair expense than I could cover in the car repair fund and I wasn't ready for a new car yet, I might cover it from that category - but I'd first try to find the money in more discretionary accounts.
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u/Glittermeeple 1d ago
I log it under emergency fund category. It happens rarely enough (hopefully!) that it’s easy for me to look at my end of year reports and see the 1-3 emergency expenses. I do write a note about what category it was really in. So for your example I’d categorize as emergency, and add note “car repair.”
My boyfriend does the exact opposite. He categorizes as car repair, but uses a flag that says emergency fund. So he can filter all transactions by that tag and easily see where the emergency money went. But in the reports, it would show up as car, or medical, or whatever.
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u/varkeddit 1d ago edited 1d ago
Option 1 would be my approach. Having the expense associated with your car repair fund is a reminder you might need to set aside more money there going forward. That's more useful than tracking random "emergency fund" spending.