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Here’s an example of how to save for your emergency fund and Hajj with YNAB (remember, they offer a free 34 day trial):
As a reminder, it’s our recommendation that you need to have $1,000 savings in your checking account for an emergency fund for singles, and $2,000 if you have a family.
We say checking account because the money needs to be readily available when you need it (you don’t need the extra headache of transferring money from one account to the next when you’re paying for tires at the tire store).
The problem is that when you keep this buffer in your checking account, you may accidentally spend it without knowing it. Here’s how to avoid this problem by using YNAB.
Let’s say, for example, that you have $2,000 in your checking account. In the YNAB budget section, you’ll see that you have $2,000 available to spend:
Because you have bills to pay, you can’t allocate the entire $2,000 towards your emergency fund. Therefore, you’re going to assign $200 towards it:
You’re now telling yourself that you’ve allocated $200 towards this envelope. The software then adjusts your monthly budget to reflect that assigned amount:
Once this is done, you can start assigning money towards other categories. I personally look at the “available to budget” amount when I’m doing my monthly budget because that’s where I have the power to assign money to my various envelopes.
Now you can continue to add money to that envelope as your paycheck comes in, eventually growing your emergency fund to your set amount. Once you have that amount funded, you then have the buffer in your checking account, but now avoid spending it because the software doesn’t count it towards your budget.
Saving for Hajj
Following our baby steps, once you have an emergency and have paid off your debts, the next item is to start saving for Hajj. To do this, we recommend opening a separate checking account that you won’t access until Hajj is saved for.
In YNAB, you would create a new account that’s “off-budget”. That basically means that while you’re transferring money to that account, it won’t count towards your monthly budget.
We’re going to go back to our main budget screen and create a saving category called “Hajj” and assign $200 towards it:
Notice that when I assign $200 towards Hajj that my “available to budget” amount goes down to $1,600. I’ve only budgeted $200 towards Hajj, however I haven’t physically transferred that money to the Hajj account. To do that, you’ll go into the register and transfer $200 from your checking account to the Hajj account:
Two things will happen when you do this: first, your remaining balance that you have left to spend will go down (because you’ve now transferring $200 outside of your account) and second, your “Hajj” budget will go from a $200 buffer in your monthly budget to $0 (meaning you’ve spent that money):
I know this sounds like a lot but it gets easy when you do it every month. Remember, money management is 10% math and 90% behavior. YNAB takes the math out of the equation by doing all of the calculations for you, leaving you to follow your plan.
I have been using YNAB for over 2 years and have paid off multiple debts using the tool all while still having enough money in my account for my daily expenses. I have also successfully paid for 2 vacations with cash using the savings feature. There is an initial learning curve, but the payoff is worth it in the end.