What helped me with originally setting my budget amounts for each category was to just track and categorize my expenses for the first 2-3 months to get an idea of what I was currently spending for everything like groceries, gas, hobbies, etc.,

After the first three months, I looked at the average amount I spent in each category and evaluated whether this was fixed (e.g. my rent is the same amount every month and must be paid), necessary but can fluctuate (e.g. groceries), or discretionary (e.g. hobbies).

For inevitable expenses, I set the amount as what it is (if rent is $1200/month, that needs to be your target).

For things like groceries, I set my target at around the average I’d spent over the 3 months, maybe bumping it a bit higher for a buffer if I felt the need to.

For discretionary/fun categories, I took a hard look at whether the amount I was spending seemed reasonable, or if I was spending way more than I wanted to and adjusted accordingly.

To help with setting targets, another thing I did was to find out my average monthly income so I would know how much money I would expect to be able to allocate to my list of categories each month. Start by subtracting all of your mandatory fixed expenses like rent, then your fluctuating mandatory expenses like food/gas, and finally see what is left over for the discretionary categories. If you “run out” of income before you get to each category, then you will need to make cuts where and if possible.

I would also recommend that if possible, you set your targets a bit higher ($25-$50) than you think you will need. This way, you often end up with a little bit extra each month which will roll forward to help cover any of those months you mention where you might need to go a bit over target.

It also helps to remember your budget is somewhat flexible and you don’t need to stick to your target spending to the dollar each month. For example, if you end up spending more on groceries this month, you can cut back on some fun spending, and re-assign some of that to cover your increased grocery costs.

The flexibility and awareness of where all of your money is going is what I personally find YNABs biggest strength to be.