The YNAB Buffer

If you’ve ever been to the YNAB forums before then you have more than likely heard of this thing called a “Buffer”. If I had to describe it in a line I would say that it’s simply a reserve of cash that you earned last month that you use this month to spend and save. The way to keep that going is nearly automatic since if you aren’t spending this month’s money then it is building up to become the buffer for next month.

But I digress, describing something by the scientific mechanics in which it lives just serves to confuse people. So with that in mind allow me to put it another way by painting a picture for you.

Every month bills come due.

Some are predictable, others are not, but even the ones that aren’t predictable can be guessed at with a fair amount of accuracy. Then of course there are other expenses, food and gas usually top the list followed by entertainment. After that the list begins to narrow down to saving for annual expenses or rainy days. Normally most people approach each month – and the outflows of money that will occur – with dread since they most likely have to juggle paychecks and payments figuring out how to keep them all in the air without dropping one of the payments. Some people refer to it as “timing” your paychecks to match the payments. That fits I suppose but what if there were a better way?

Would you try it?

Imagine if you will that instead of receiving a paycheck once a week or every other (or whatever odd frequency) that instead you received a check on the first day of the month that equaled all of the paychecks that you would normally get in a month? If you take that as a good thing then consider what it would be like to sit down on the afternoon of the 1st day of each month and write out all of the checks, authorize all of the electronic payments and otherwise pay all of your bills in one sitting, one day a month. After that you would set aside enough money to float you through the month to pay for groceries, gasoline and entertainment with enough left over for short and long range plans as well.

If you were to do so then you would essentially be living under Rules 1, 2 & 3 of the YNAB methodology and by doing so you would eliminate (or at least seriously reduce) money stress in your life. Then, as long as you have your budget written down (or better yet in the YNAB software) you could take advantage of Rule 4 and “Live on Last Month’s Income”.

This my friend is all there is to what is known as the “Buffer”, one full month’s worth of expenses in cash saved up for and used to do exactly as I’ve described above.

The power of the buffer cannot be overestimated, strive for it and once you get there you won’t go back to juggling ever again.