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Everyone knows they should be doing some kind of monthly budget. Even though that is fairly common knowledge, creating and then implementing a budget is really hard.
What about that yearly subscription fee that hit your account? How do you manage all of those expenses, debt, and savings in an effective way? It is time-consuming and no one has time for that.
My family stumbled upon YNAB (pronounced “why-nab”) in 2012. Standing for “You Need A Budget,” we certainly did need a budget at that time. Like many families, we had student loan debt, some consumer debt, and life circumstances that made it difficult to save or pay anything down.
However, through using YNAB, we were able to finally break the paycheck to paycheck cycle, pay off our student loans, and become debt free a few years later. Using YNAB has been the single most impactful financial decision we have ever made because it has fundamentally transformed our relationship with our finances.
The YNAB Philosophy
YNAB is more than just a budgeting program. It is really a philosophy based on Four Rules for how you should treat your money:
- Give Every Dollar A Job
- Embrace Your True Expenses
- Roll With The Punches
- Age Your Money
Using these rules, you allocate every dollar that comes into your account to make proactive spending decisions, rather than react to the spending you’ve already done.
1. Give Every Dollar A Job
YNAB is a zero-based budgeting system. You only budget the dollars you have in your account today. What do those dollars need to do or pay for before you get paid next? Those are their jobs.
When you get a paycheck, you think through all the bills and expenses you will have to pay for between now and next payday. Your budget gets based on that money.
This method is so nice because you are not relying on future income to pay today’s bills. You use your actual cash on hand to figure out what you can afford. While YNAB does not discourage the use of credit cards, this helps you to eliminate any possibility of credit card debt. If you spend money, it is already in your account ready to be used.
2. Embrace Your True Expenses
How often do you register your cars and forget how expensive it is because you haven’t paid for that expense in a year or more? What about that yearly subscription fee you completely forgot about until it shows up on your credit card statement? Guilty.
With YNAB, you make a budget line for everything. Everything. And, you start saving. Some of my budget lines get $1-2 a month that is saved towards an expense far down the road. It seems silly, but it’s nice to get a bill and just pay it, rather than scramble because I’ve completely forgotten. YNAB helps me be more proactive with my money, choosing to set aside some of today’s dollars for expenses that might not get paid for until next year.
3. Roll With The Punches
Life happens to everyone. Sometimes, things happen and you need to change your budget. Suddenly, paying an emergency vet bill is more important than saving up for a new computer. Shifting priorities is important in life and it should be important in your budget, too.
YNAB helps eliminate stress by showing you where all your money is. When (not if) emergencies happen, you can easily see what categories could take a hit to help cover them.
4. Age Your Money
What would it feel like to get a paycheck and not touch it? You don’t even need it. Bills are already paid, groceries are already purchased. That paycheck can just lounge in your checking account for the next month or two when you need it.
That is the concept behind aging your money. When you get paid, your dollars sit around for awhile, waiting to do their job. Eventually, you’ll get a month or more ahead.
When the first of the month rolls around, you will already have a month’s worth of money sitting there, waiting to be used. Those paychecks you get throughout the month can be set aside to cover the following month’s expenses.
Why do you want to do this? Because then you are no longer living paycheck-to-paycheck. Something happens and your pay gets delayed? No big deal. You’ve got a few weeks to figure it out. Work a job with variable income? This is a great solution since you live on what you already have earned.
It is amazingly freeing to have that much control over your finances.
How It Works
YNAB has easy-to-use, beautiful interface packed full of features to help you make the most of your budget. If you are unsure about learning the software’s features, YNAB offers free, daily live workshops to help.
1. Entering Account Information
YNAB works with over 12,000 banks and credit unions to securely sync your transactions to your budget. Simply log in, then your transactions show up, ready to be categorized into your budget.
Right now, you can only sync to financial institutions located within the United States and Canada. Overseas users can still use YNAB, but will just need to manually enter transactions. Multiple currencies are available to use within the software.
Personally, I do not use the sync feature because I like the accountability of manually importing all of my transactions. I reconcile my accounts every couple of days, so it does not take a lot of time. However, you can sync everything up if you want to.
Accounts may be made either on-budget or off-budget. If they are off budget, you can use them to track accounts you want to keep an eye on, such as your mortgage or retirement accounts, but don’t necessarily want to impact your daily spending decisions.
Transactions may also be split between categories. If you buy groceries, a new top, diapers, and some school supplies at Target, you can easily split that up between whatever categories you have in your budget to more accurately account for your spending.
When you have your accounts all set up, you’ll log your transactions, then reconcile YNAB with your actual accounts as frequently as possible to make sure everything stays accurate to your spending.
Similar to a checking account register, you’ll mark off the transactions in YNAB that match the ones on your account or statement. YNAB will let you know if something is off, preventing mistakes or overages.
I’ve put in duplicate transactions, transposed numbers, or completely forgotten to add a transaction. Mistakes happen, but reconciling helps make sure you are covered to spend what you need, pay bills on time, and make sure you’re budgeted accurately.
Need to spend more than you budgeted? No problem. Simply move money around (remember – Roll With The Punches). YNAB has calculators built in to make it super easy.
3. Credit Cards
A lot of people avoid using credit cards because it can be really hard to manage them with a traditional budgeting method. Usually, you put something on a card, then plan to pay it off when you get paid next. That ends up easily causing debt.
Even if you pay your card off monthly, if you have to wait on a paycheck to pay it, you are technically in debt until you get the money to pay it off. YNAB fans call this common scenario the “credit card float.” And, it’s really easy to prevent.
YNAB takes any spending on credit cards and holds the money you’ll need to pay the bill in a special category that will equal your balance (as long as you’re not overspending). If you have credit card debt, you can budget additional money to this category to pay it down, even if you do not spend anything extra on the card.
Say you have $1000 in your checking account and have $200 of that budgeted for groceries. You go to the store and spend $100. YNAB will deduct $100 from your grocery category and set it aside in your credit card category.
Much like an envelope budgeting system, YNAB simply says that the $100 needs to be moved to the credit card category to do the job of paying off that bill.
You log in to your credit card account and see you have a balance of $100. You simply pay it, record the transaction, and YNAB will record that $100 as spent.
If you have objections to using credit cards, you certainly do not need to use them to make YNAB work for you. But, if you enjoy using credit cards for rewards or other perks, YNAB makes it incredibly easy to use them responsibly.
Want a newer car? Need to save up for next year’s vacation or Christmas? YNAB makes saving for whatever you want really easy. Honestly, before YNAB I had never really considered saving up for birthdays, Christmas, or other long-term expenses.
We just waited until the last minute, then bought what we needed. It ended up putting us in debt, though and left us feeling guilty for spending even a modest amount.
In various categories, you can set savings goals. Save by allocating a monthly amount you wish to set aside or set a date by which you need a certain amount saved. Color-coded cells help remind you every month how much you need to save to meet that goal.
YNAB includes a wide variety of reporting features to show you how you’ve spent your money, how you’ve done with saving money, and how much your net worth has changed.
Frequently Asked Questions
I absolutely think one of the most helpful parts of YNAB is the control you have over your money. Budgeting the dollars you have today rather than the dollars you plan to get was a life-changing concept. But, with any type of new program, there are lots of questions that should get answered.
1. Is It Easy To Use?
There is a bit of a learning curve. I think this can be a downside to YNAB. The software itself is fairly easy to use, although some features, such as the built-in calculator are harder to locate. Understanding the philosophy behind how YNAB is meant to be used can be a bit overwhelming to new users.
If you try to use a forecast budgeting mindset with YNAB, it will be frustrating. You do not need to go back and fill in transactions from the past or try to budget a whole month in advance if you only have $300 in your account today. It is simply not meant to work that way, and that is okay, but I think it can be a bit intimidating.
To avoid this, I recommend taking full advantage of the free workshops. You can take them as many times as you want. I recommend taking one before you begin, then take them as questions come up. They’re free and taught by YNAB enthusiasts trained by the company. They’re absolutely worth the time.
Also, there are several online communities meant specifically for free support for YNAB users. Take advantage of that if you are stuck and don’t want to wait on a workshop.
Lastly, YNAB offers a 34-day free trial so you can check it out fully before committing.
2. Is It Worth The Time?
I think it’s definitely worth the time if you want to use it. Like anything, YNAB will not be a good fit for everyone. If you are extremely busy, YNAB could end up being a bit overwhelming. Even if you sync your bank, you really need to be checking in frequently to make sure everything is accurate and reconciled.
I spend very little time reconciling if I do it daily. It might take five or ten minutes to log in, check everything, make adjustments, and move on with my day. If I wait one or two weeks before checking in, it will definitely take longer. What is this transaction? What did I buy at Walmart two weeks ago?
Only you can decide if it’s a good fit for you.
3. Are There Downsides?
While I absolutely love YNAB and will be a loyal customer for life, YNAB does have a bit of a learning curve. If you are interested in using it, I do recommend the workshops and finding an online group or person in your life that would be willing to help you.
My only real complaint about YNAB would be surrounding the bank syncing. I did try it out and had trouble with my bank not staying connected. If you have two-factor identification security for your bank, it could make using YNAB’s sync feature a bit trickier. That is actually one reason that I manually import everything.
Another downside is that YNAB is meant to function the best when you are fully “buffered” or a month ahead, as they suggest. While that is amazing, it also takes time to get there and there are few features to help you along the way.
Having a per-paycheck feature to help you split bills based on checks would be really helpful to new users. You can do this manually if you would prefer.
As with anything, YNAB won’t work for everyone or every situation. Try it, ask questions, and see if it works for you.
4. What If I Need Help?
As mentioned above, utilizing the free workshops, joining online groups, and reading through the YNAB blog are very helpful places to start. Most questions can be answered through those sources.
Online groups are particularly helpful as you can post questions and receive answers very quickly. Another benefit to online groups is many of them have a search feature. Type a keyword from your question and see many solutions to your question pop up instantly.
5. What Does It Cost?
YNAB is billed annually at $83.99. This breaks down to be $6.99, so you can always start a budget line for it once you start to save up for the next year’s billing. YNAB is free for 34 days if you want to try before you buy.
Students get a year of YNAB for free. If you are currently enrolled in school, contact YNAB Support for details.
I certainly love YNAB and have found it to be immensely valuable in my own life. My family has truly gained so much financial freedom by having our mindset about finances changed.
While there may be a learning curve involved, once you’re around the curve and see what is peeking out on the other side, you’ll wish you started sooner. No matter what your budgeting experience has been until now, YNAB
If you’re one of the many people who know a budget would be helpful but you feel unsure about how to start, definitely check out YNAB. With the free workshops and support, you will have all the help you need to be successful. A year from now, you’ll be glad you did.