Choose a category funding rule

A category sets aside part of your available loan amount for one purpose, such as a car, a rental property, or your annual premium. The money stays in the policy. The category is your label for what that borrowing room is for.

The funding rule says how the category gets its share the next time that amount grows. The rule does not move money by itself. It runs when you select Auto-distribute on the Categories page, and you can change the amounts it proposes before you save.

Steps

1. Open Categories and select Add Category. The screen is New Category.
2. Enter the Category Name. Optional: enter a Target Amount. See Target Amount. The target is the total you want the category to hold, not a payment you send.
3. If the screen shows Plan for a premium, you can select a policy to save for its premium. The Target Amount then becomes the premium bill, which includes the Current PUA Payment of the policy, and you cannot change that target. Selecting the policy here does not link it to the category. Also select the policy under Policies, or its growth will not fund the category.
4. Under Policies, make sure each policy that should fund the category is highlighted. Select a policy to add or remove it. With one policy, IBC Tool selects it for you.
5. For a cost that comes back, select Recurring expense. See Recurring expense categories. This is a different kind of category, and the rule does more than fill it.
6. Under Funding Rule, select None (manual), % of growth, or Fixed amount. The three choices are there to help you pick.
7. For % of growth, enter the Percentage. For Fixed amount, enter the Amount for each premium period. The amount is for one period, not for one month, unless your premium is monthly.
8. Select Create Category.

To change the rule later, open the category, select Edit, and then Save Changes.

The three choices

None (manual)

Pick this when you want to decide each time. The category gets money only when you assign it yourself on the Categories page. Auto-distribute leaves it alone.

Example: a down payment on a rental property. You do not know when you will buy, so you assign to it when you are ready, rather than on a schedule.

% of growth

Pick this when the category should grow with your policies. Each time your available loan amount grows, the category gets that same share of the increase.

Example: a reserves category at 25%. When your available loan amount grows by $4,000, reserves gets about $1,000. The rest is still available for other categories, or it stays unassigned.

Fixed amount

Pick this for a regular amount on your premium schedule. You enter one amount for each premium period.

Two things about that amount are easy to miss.

The amount applies once for each policy you link. A category linked to two policies can receive the amount twice, once from each policy’s growth.

IBC Tool also scales the amount to the time that has passed. The category gets the part that matches the time since that policy last grew in IBC Tool. It never gets more than the growth itself, so a small increase cannot overfill the category.

Example: a car fund at $500 for each quarter, on a quarterly policy. A snapshot one quarter after the last growth gives $500. A snapshot one month after gives about $167. A long gap gives more than one quarter at once, because more than one quarter of the schedule has elapsed.

Target Amount

The Target Amount is the total you want the category to hold, for example the price of a car. It is optional.

• Funding rules stop filling the category when it reaches the target. Growth beyond the target goes to other categories, or it stays unassigned.
• The Categories page shows how much the category still needs to reach the target.
• Leave the target empty for a category with no end point, such as reserves. A rule then keeps filling it, with no cap.

With Plan for a premium, the target is the premium bill, and IBC Tool sets it for you.

How the rules share an increase

The rules run when you select Auto-distribute on the Categories page. The button shows up when some of your available loan amount is not assigned yet.

• IBC Tool fills the fixed-amount categories first, then the percent categories.
• Inside each group, it follows the order of your categories on the Categories page. Drag a category up when you want it funded earlier.
• A category stops when it reaches its Target Amount.
• Money that no rule takes stays unassigned. Nothing is hidden. You can assign it by hand.

IBC Tool shows the proposed amounts before it saves anything. Auto-distribute looks at all growth that is still unassigned, including older growth you never assigned. A rule takes its share of each growth one time. The amounts you save from Auto-distribute count toward that share, so the next Auto-distribute does not offer them again. If you lowered an amount before you saved, or you remove a saved amount in the ledger, the next Auto-distribute can offer the rest of the share again, when that growth still has unassigned money. Check the amounts, change any of them, then select Save.

A rule uses only the growth of the policies you link to the category. Link at least one policy. IBC Tool will not let you save a rule with no policy behind it.

When you start with a large amount

The first snapshot of a policy counts its whole available loan amount as growth. If you then select Auto-distribute, IBC Tool offers to split all of that amount by your rules. That can be a much larger split than a normal month.

A fixed-amount category gets one period from that first split. It can get more when something earlier makes the gap longer than one period, for example an old recurring loan you recorded before the snapshot.

Read the proposed amounts before you select Save. Set a Target Amount on a category when you want to limit what it can take from this first split.

Recurring expense categories

A recurring expense category is for a cost that comes back, such as a car every few years or the annual premium. The funding rule matters more here than on other categories, because it also sets the loan payment later.

• Choose % of growth or Fixed amount. With None (manual), you cannot record a loan against the category. The loan payment is calculated from the rule, so there is nothing to calculate from.
• While a loan in the category is open, the rule sets how much of your paid-up additions payment goes toward the loan each month. A fixed amount is spread over the months of the premium period. A percent is that share of your monthly paid-up additions payment, so the policy needs a Current PUA Payment.
• While a loan in the category is open, Auto-distribute skips the category. The rule is already being used for the loan payment, so it does not also fill the category.
• If you change the rule while a loan in the category is open, saving can add an Adjust … PUA payment item, unless you turn on I’ve already adjusted this with my insurance company. See Use the Agenda.

For one full cycle, from the first loan through the payoff and the next time you save for the cost, see Fund a recurring expense.