A few months after our wedding, we decided to really take a hard look at our finances and determine why we seemed to be hemorrhaging money. We got old school with some pen and paper and wrote down all our bills and debt we owed.
And the numbers were nauseating.
We knew that we needed to get organized if we really wanted to turn this ship around. That is when we stumbled upon You Need A Budget (YNAB).
What is YNAB?
YNAB is an online budgeting software accessible from both your desktop and via an app on your mobile device, including Apple Watch, iPad, and Alexa devices. You can easily connect your bank accounts and credit cards, and the software will import your transactions automatically. It also has a shared featured so that your spouse and kids can contribute as they are on the go. 🙂
What I love about this budgeting platform is that it doesn’t focus on being restrictive. YNAB will teach you how to prioritize and plan, so you have money for the things that are most important to you—whatever they are.
What’s the cost?
YNAB costs $6.99/month, billed annually at $83.99. Before that scares you away, there is a 34-day free trial (no credit card required) to determine if you like it.
On average, new budgeters save $600 by their second month and $6,000 during their first year. How? Because they started paying attention to where their money was going. During our first year, we were able to pay an additional $10,000 towards our debt by using YNAB.
Through budgeting with YNAB, your money starts working for you instead of you working for your money that seems to disappear the second it hits your bank account.
So give the free trial a shot and take the following steps to simplify your finances once and for all.
Step 1: Learn the method
The main reason YNAB is so life-changing is that their Four Rules to Budgeting create a mental shift in how you think about managing your money.
YNAB Method + Software = Success!
Rule One: Give Every Dollar A Job
So prior to YNAB, I would take a piece of paper or create a spreadsheet (when I felt like getting fancy with it) and do something like this:
Income $2500.00
- Rent – $700
- Utilities – $100
- Groceries – $200
- Car – $300
- Gas – $75
- Student Loan – $250
- Insurance – $75
- Eating Out – $100
Remaining: $700 (feeling super excited that I have $700 leftover)
But then at the end of the month, I am completely broke. That was because I assumed that I was doing really well financially by only looking at my true bills and spending money with no clear plan.
Sound familiar?
With Rule One, you budget every dollar down to zero. Take that $700 and budget it out as well so there is no second-guessing how much money you have floating in your accounts after you pay your bills.
Rule Two: Embrace Your True Expenses
Want to know what else was missing from that example above? All my true expenses.
Most of the time when we sit down to create a budget for the first time, we only think of the bills, bills, and more bills. However, we forget about the times when we run to the store for a last-minute birthday gift, our dog’s annual vaccinations, up-coming car tag renewals, the gym membership we keep meaning to cancel, or the new tire that I need after hitting a curb yesterday. Yep, the list could go on and on.
That is where all your money goes – the unexpected, yet predictable true expenses. You most likely know they are coming but not sure when or how much.
YNAB reminds of your true expenses and helps you embrace and plan for them. Do you normally spend around $600 on Christmas? Plan to budget $50 every month in your Christmas category so when the time comes, you have the money instead of charging your credit card.
Rule Three: Roll With The Punches
Now this is my favorite rule. It is also the most forgiving. So you spent too much on groceries. No biggie. Just pull from your clothing fund and all is right in the world. Remember that you’re the boss and budgets are about what you consider important.
Rule Four: Age Your Money
The goal of rule four is to spend the money you earned last month on this month’s bill. In doing so, you are breaking the paycheck to paycheck lifestyle.
Budgeting Tip: If you are paid biweekly, two months out of the year, you receive three paychecks instead of two. Use that third paycheck to budget ahead and by the end of the year, you will have aged your money by a month. Win, win.
With the help of the other three rules, you’ll be more purposeful about your spending, consistently spend less than you earn, and be more than prepared for the future. Eventually, you’ll be able to cover May’s rent with dollars from April. Your money will be at least 30 days old and you’ll wonder how you ever lived without the Four Rules.
Step 2: Watch the videos and join the community
YNAB has a wealth of training videos, podcasts, *insert affiliate link* and other resources to help you make the most out of your budget. Do you work off commissions and have a fluctuating income? That’s ok, YNAB has a video for that.
We have also found an incredibly supportive community through the YNAB support forum and Facebook group. If you need help, just ask. If they can’t resolve your issue, YNAB’s stellar customer service with walk you through any solution.
Step 3: Add all your accounts and current balances
To truly get an understanding of your financial health, we recommend that you add all your accounts in. Every checking account, savings, credit cards, loans, mortgage, etc. YNAB gives you the option to securely sync to your bank accounts for direct import or you can disregard that step and manually enter transactions as you go.
Step 4: Create your categories
YNAB is customizable so create the categories that work for your lifestyle. Are you a comic book enthusiast? Add a Comics category.
Remember that your budget is based on your priorities and true expenses.
Step 5: Determine your goals
One of my favorite features of YNAB is the Goals function. You can create funding goals for each category. Are you saving up to buy a new couch by March? Create a Furniture category and set your savings goal. YNAB will then tell you how much to budget every month to reach your goal.
Pretty awesome, right? Yes, yes it is.
Step 6: Budget your dollars
Once your categories and goals are set, remember Rule One and give every dollar a job all the way down to the penny.
The beauty of YNAB is that you can start RIGHT. NOW. Don’t worry about waiting until the first of the month. Budget the money you currently have and for your up-coming expenses before you get paid again.
Do not budget future income that you will make that month. If you do, your category balances with be inaccurate and you risk the possibility of overdrafting or overspending.
Step 7: Add your transactions
Utilize the YNAB app on your mobile device to enter transactions as you go. This helps you stick to your budget and prevent overspending. You can also set-up recurring transactions for automatic payments like your mortgage, car payments, insurance, etc.
I recommend setting a schedule to check and reconcile your budget. I do this every couple of days to make sure I didn’t miss a transaction and that my categories are accurate.
Step 8: Reevaluate and adjust
When you are first starting out, you are going to forget about things and make mistakes. That’s ok! YNAB makes it easy to adjust your budget as your needs change.
If you feel like you need to completely start over, YNAB has a feature for that, too. It is called the Fresh Start button. It saves your previous budget and creates a new one with your account info and category names.
So what are you waiting for? Start simplifying your finances today with YNAB.