I’ve spent a lot of time talking about why I absolutely love YNAB and that it’s my favorite tool to budget. But I’m always just mentioning it while trying to drill down on another subject, so I wanted to take a little more time and explain why it’s my software of choice.
Look, it’s way more important that you choose a tool and take action. Taking action with an imperfect tool is better than not taking action while trying to find what’s going to be perfect for you. No matter how hard you search, no tool will be 100% perfect.
But until I find something better, and I’m sure I’ll continue to kick the tires on other methods, I’ll keep recommending YNAB.
As a person that can get obsessed on a certain subject and drive it in to the ground, I can say that I’ve definitely done some research into different ways to budget.
Before Katie and I had kids, when we were young and full of life(I promise that I love my kids), I would spend a ridiculous amount of time obsessing over our household budget. A lot of times, I spent more time obsessing over the budget when I should have been spending time working on the habits that would help us get ahead. Don’t fall into that trap.
But I’ve tried a lot of different programs and methods, from using cash envelopes, building a spreadsheet, using Mint, and trying EveryDollar.
All of these methods work if you do, but you’re here because you want to know my opinion.
Out of everything I’ve tried, I still believe YNAB is the best way to budget out there.
YNAB stands for You Need A Budget. They’re a great company that’s been around for a while now, and they just keep getting better.
I started with them back in 2013 when I saw a Facebook ad for YNAB. At the time, we were using a combination of a spreadsheet that had everything mapped out for us, and cash to spend.
That was when they were on YNAB 3 and it was a program that you dowloaded to your computer. I took advantage of their free trial, but in the end, I just felt like I couldn’t part with the money to pay for the program. I thought that I could continue to use the YNAB method, but create what YNAB offered on my spreadsheets.
Spoiler alert: I couldn’t, and about a year later I decided to give it another try. I haven’t really looked back and have been convinced ever since that this is the best way to budget.
YNAB is a little different in some capacities, and so I wanted to explain why I keep sticking with YNAB as my software of choice when it comes to our budget.
It Uses a Zero Based Budget
YNAB uses what’s called a zero based budget. That means that you budget all of your money all the way down to $0. You’re going to decide what every single dollar needs to do.
You could, for example, budget out all of the known expenses that you know you’re going to be spending this month and then realize, ok, I’ve got $500 bucks left to spend on whatever.
A zero based budget means that you take that $500 and you decide ahead of time that you’ll save $50 on personal spending money, $100 for the vacation with friends this summer, and then use $350 to pay down more debt.
There is no “left over.” You’re deciding ahead of time what every single dollar needs to do.
In YNAB, I’m assigning every single dollar to a job, no matter what that job may be. So if we’ve decided it’s on personal spending money, we know that those dollars can be spent guilt free without having any fear it really should be going somewhere else.
It Has a Ledger
With the account ledger, there’s a place to actually record your transactions. Here, you need to occasionally reconcile the balance that you have for your bank in YNAB with how much is actually in your bank. If you missed a transaction, which can happen, this is where you’ll catch it.
When I was building my spreadsheets, we were using cash, but I kept running into the issue of needing to have a way to update the actual numbers I had to budget when I used my card.
With YNAB, every transaction is reconciled with your bank, so you always know that you can trust those category balances.
What this comes down to is this: you’re never worried that your budget is off or inaccurate.
Millennials never really had to balance a checkbook. I was taught how to use it, but that was it.
In college, I was the first person in my family to get a debit card, and my method for reconciling my finances was to go up to the ATM to check my balance (my bank hadn’t gotten online banking yet).
Your ledger in YNAB works the same way as when people would balance their checkbook.
When you make a transaction, you record it. Then, as those transactions clear, you can mark them as cleared and reconcile with your bank. It makes for a much more accurate way to trust your category balances with YNAB.
You Only Budget Money You Have
With YNAB, you only budget the money that you have on hand. With many budget programs, they ask you how much you’re planning on making this month. So you put in your planned income for the month, which gives you how much you have to spend this month. You budget that out, and you’re good to go.
But if you haven’t earned that money yet, do you actually have the money in your account to spend on those categories?
The answer could be no, which is why I love the way YNAB handles income. You budget only what you’ve earned, so you know that you can always trust your category balances.
The question you always have to ask yourself is, what does this money need to do before I am paid again?
It gives you a real feeling of scarcity. If you get paid every two weeks, then you need to be thinking about what that money has to do for you these next two weeks before that next paycheck.
Now there are some ways that you can do some planning ahead and they actually want you to start thinking of your budget from a monthly perspective, even if you’re paid several times a month like I am. But that’s a conversation for later on down the road.
The important thing to know now is that YNAB has you budget out what you actually have money for now, which gives you a more accurate view of where you are today.
Different Budget Every Month
The thing that drove me nuts when we used Mint as our budget tool, or when I used the budgeter in our Wells Fargo online budgeter back in college, was that you set one budget. That budget could be tweaked, but there was no option for creating a budget for each month.
You need to create a different, unique budget for every month.
Our lives just don’t work out perfect like that for you to create a budget that works for every month.
Even if you plan on keeping a lot of those expenses the same, you must select a program that allows you to adjust for the individual months.
The YNAB Apps
The quality of the YNAB software is only getting better.
They didn’t have the app online like they do now. It was a program that you downloaded to your computer. Since you purchased each individual version, when they came out with a new version, you’d also have to either live without the new features or upgrade.
I like that now that they’re using a subscription model, whenever they come up with new features, it instantly pushes out to everyone.
They also have an awesome phone app that allows for budgeting and entering in transactions on the go.
I won’t dive into each feature of the software here. If you haven’t tried it yet, you owe it to yourself to give that trial a go.
I think what I love most about their software is that I don’t have to build it. When I was on the fence about getting started with YNAB back in 2013, I just felt like I could create what they were doing using my spreadsheets, and what sold me on coming back was that I don’t have to deal with the headache of building spreadsheets with them.
I really liked their system and I know that all of the numbers are correct when I’m using their software.
Adding Transactions as You Go
Some budgeters only import transactions after you’ve spent the money. You go on a shopping trip, and then when those transactions clear 2 days later, it updates in your budget.
With YNAB, the best practice is to add transactions as you go. So if you’re on a shopping trip with your friends, and you’ve made a few stops already, it gets hard to know exactly how much money you have left in your spending.
With YNAB, with each time you spend, just pull out your phone and record the transaction. There’s a small animation that shows you your updated total for that category and you know with confidence how much you have to spend there.
I think this is so important for staying on top of your budget. When you manually add transactions, you have a completely updated view of where you are with your finances, and I find that with most transactions, it takes me less than 10 seconds to add.
But You Can Also Import
But you can also import those transactions. YNAB now supports importing transactions, which is really great.
My take on the best practices? Add those transactions manually as you spend. That way, you always have the most accurate view of what’s going on.
Now, if you did an awesome job with your Manuel entry as you spent, each of those transactions will actually match the manually entered transaction, so you don’t have to worry about duplicates.
But what happens to me all the time is that we forget at least one transaction here and there. When that happens, that transaction also imports and it’ll immediately pop up as a transaction you have to categorize. This helps with not letting anything slip through the cracks on you.
Free Trial of YNAB
If you’ve read this far, you need to give YNAB a shot with their free trial.
Head over to youneedabudget.com and click that free trial button in the top right corner.
Now you may have noticed that if you use another budgeting solution, including cash, that your solution may share one or more of these same features. What I’ve found is that YNAB is the only one that shares all of these characteristics, which is why I am such a huge fan.
P.S. Also, let me know what you use to budget. Is it a method you really love? Are you still a holdout when it comes to budgeting? And why is that?
Until next time,
Jared
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