Age of Money vs Days of Buffering vs Neither
Users of YNAB (You Need a Budget) and Toolkit for YNAB have two metrics, Age of Money (AoM) and Days of Buffering (DoB), to help measure the amount of time their money has lasted and how long their money may last into the future. Where you are in your financial journey might have a lot to do with which YNAB metric, if any, you use and find helpful. Check out my other article to get a list of easy and helpful YNAB resources.
AoM is displayed prominently in YNAB’s web product at the top of the budget screen and aims to measure the amount of time (or age) that your money has lasted in your account before you have spent it. Found only in Toolkit for YNAB, DoB calculates your average daily spend rate and provides an estimate of how many days the money you have in your accounts could last.
AoM is a useful metric for people trying to break the paycheck-to-paycheck cycle. If you have already broken the paycheck-to-paycheck cycle and your AoM is greater than 90 days you are likely to start seeing limited value in continuing to track AoM. People that have an AoM greater than 3 months are probably working on their emergency fund and this is a great time to start using DoB.
DoB can come in handy to help gut check your emergency fund length. If you think you have 2 months of emergency funding, then your DoB should be somewhere in the neighborhood of 60 days. Of course, DoB is a coarse grain metric and the amount of time your emergency fund will last could vary greatly. For example, your emergency fund could last longer than your DoB because you will cut your expenses — no more expensive vacations, cheaper food and no eating out. Conversely, your DoB could be over estimating your emergency fund because you get your health insurance through your work and without your job supplementing your health insurance your expenses could be much higher. There are some best management practices you can put in place to get the most realistic view of your emergency money.
Emergency fund best management practices: Do not make your emergency fund one big entry into your budget. Itemize each component (groceries, rent, utility bill, etc) into its own budget item. This is helpful in at least two ways. First, if you need to dip into your emergency money it is helpful to know which budget item you are taking it from and use the budget items that are the most discretionary first — think use the internet budget before using the grocery budget. You can always find free internet service or use the data plan on your phone, but it’s much harder to find free food. Second, it’s important to adjust your emergency fund every year based on cost fluctuations and having your emergency budget itemized will let you target increases individually as inflation has not affected all expenses equally.
Which YNAB metric do you find the most useful for your budgetary process? AoM, DoB or neither?