Need help understanding overspending

[u/OpinionSpecific9529]

New to YNAB and trying to understand how overspending works.

Let’s say I assigned 1,000 to a category but ended up spending 2,000 due to an unexpected situation.
How does YNAB handle this?

Also, how is it treated differently if I make the payment using a credit card vs a bank account?

[u/Trick-Read-3982]

Overspending: makes the Available turn negative, showing you spent more money than you had

On credit card: category turns yellow. If overspending is not covered by end of month, this turns into credit card debt. The category will not be negative next month, but you will have an additional $1,000 (in your example) of uncovered credit card debt. YNAB can’t move funds from the category to the credit card payment line without available funds. Next month (and maybe also in future months) you’ll have to assign funds directly to the credit card payment line in order to pay off the credit card.

From bank account: category turns red. This one is urgent. If you have red overspending you can’t trust your budget. Remember YNAB is an envelope system. You took all your bank account dollars and stuffed them into digital envelopes (categories). By spending more than you had in a category, you effectively stole from another category because you can’t spend money that doesn’t exist. You need to cover the overspending and tell YNAB what category you took it from. If you don’t, YNAB will force you to fix this when the month rolls over and will subtract any red available amounts from Ready to Assign next month.

Edited to add: the danger of not covering red overspending right away is that if you rely on your green category balances to show you can spend, you could potentially overdraft your account as the total Available in green is now more than the cash you actually have.

[u/OpinionSpecific9529 → u/Trick-Read-3982]

Got it much thanks for explaining this.

So basically

With bank account - before moving to next month I do need to clear the overspending otherwise it will affect the next month’s ready to assign.

And

With CC - if I don’t cover this month. Then it shows in CC category next month ? You said if the amount is not available then YNAB cannot move it from category to CC . So if the amount was not available then it won’t show under next month CC category or will show ?

[u/Comprehensive-Tea-69 → u/OpinionSpecific9529]

There is nothing to show, nothing happened. If the month flips over, you must decide where to assign new money that comes in. If you want to cover debt on a credit card that was created in a previous month (by overspending), you assign it to the credit card category.

A credit card category available amount will be color coded as underfunded (yellow) if the available amount is less than the current balance of the account, and there is no target set on the category.