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Beginning Balance

May 5, 2023

What if all your spending... was actually borrowing? Ok, well not ALL your spending, but those situations in which you pull money from one category of your budget and apply it to another. Jesse gives the example of going to a special dinner at an exclusive restaurant. Reservations are very difficult to get, and you finally get one when someone else cancels -- but it's tonight. And you don't have the cash available in your restaurant category! So you move money from another budget category to cover the expense, because this is your only chance to go to dinner. We all run into these situations from time to time. Maybe it's not a fancy restaurant, but situations arise where you have to spend money now or forego an opportunity forever.


YNAB does a good job of making you aware of the tradeoffs. When you move money from, say, car repairs, to cover the restaurant expense, you must acknowledge that your car repair category is now underfunded, and that you'll have to replace that money later. Essentially, you're saying that "future you" will figure it out and generate the cash needed to replenish that fund. Jesse takes this a step further. Really, even though you "had the money" because it was in your budget, you still borrowed from future you -- because you created a liability which future you must take care of.


You didn't actually take on debt per se -- you didn't charge a credit card or take out a loan -- but you did borrow the money, from yourself. In that sense, everything is borrowing. Mark and Jesse explore the implications of this line of thinking, and how YNAB could better illustrate this concept.


Mark Butler, Virtual CFO

The Money School: