Why Am I Writing a YNAB Review?
First and foremost I am writing this YNAB review because it is software that I currently use everyday to manage my budget. YNAB stands for “You Need a Budget” and it is true that everyone needs some type of budget in their life.
My wife and I struggled for years to get our spending under control and to stop constantly living paycheck to paycheck. We are not perfect at this point, but YNAB allowed us to really get serious and sort out the issues that we were having and get control of our financial life. We had some fits and starts in the beginning with limited success, but once we both got on board with the system we got RESULTS.
There are dozens of popular apps and services out there that help you to create a budget. I’ve used a few of them, but I plan on taking a look at other options to see if there is something better. In the future I may end up using another service, but for now we are really enjoying the benefits that YNAB has provided to us and it serves as the benchmark that we will use while evaluating any other software.
Overview of the pros and cons
- Very customizable
- Manage multiple accounts/loans etc
- Available on PC, Mac, iOS, and Android (no device limit)
- Your budget is backed up on the cloud and syncs across devices
- Future planning and savings goals
- Great tutorial support
- Very customizable – can take a while to set up
- Requires constant input/updating
- Credit cards can be confusing
- Not free
- You’ll need a Dropbox account to back up your budget on the cloud
Basics of the YNAB philosophy
One of the coolest things about YNAB is that it isn’t just a piece of software. Any YNAB review should point out that the creators worked very hard to craft a philosophy around how and why to use their product so that it has more meaning and benefit in your life. Their philosophy defines how you will set up your budget and use it on a day-to-day basis. It also shows you how to deal with the common pitfalls that people face when dealing with budgeting in general. They have four rules:
Rule #1 – Give Every Dollar a Job
YNAB is a zero-dollar type of budgeting system in that you only budget dollars that you have actually earned and have sitting in your bank account. You aren’t budgeting with “future dollars” that could change or simply not materialize. This forces you to prioritize your money and really start making tough decisions about what it is that you want to spend your hard-earned money on. Should you really be budgeting and spending $400 a month on restaurants?
You will have to make that decision based on the money you have.
Rule #2 – Save for a Rainy Day
Once you’ve specified your earned dollars you’ll then assign all of them a “job”:
- Jobs can describe our routine expenses like: Rent, power bill, and gas money.
- They can also describe future savings goals and rainy day funds like: Vacation Fund, New Tires for the Van, and Christmas.
- You can also describe more general emergency savings like: Car Repairs, Medical Expenses, and Home Repairs
In this way all of your dollars are assigned something; they all have a job to do. The beauty of this is that you can create savings over time for unexpected events. For instance, nobody knows when they will need to replace the transmission in their car, but it’s likely that it will happen sometime in the future. With this in mind, you can assign $25 per month to Car Repairs and after a year you will have $300 to go towards any unexpected repairs you might encounter. That’s $300 more than you would have had otherwise!
Rule #3 – Roll with the Punches
Rule number three tries to eliminate the “I failed at the budget and now I’ll just give up” reaction that most people get once they make a few mistakes or don’t get the results they want. At the beginning of the month you make the best decisions you can about how you will be spending your money, but it’s impossible to see the future and sometimes things come up. When you are rolling with the punches you’ll be able to take a step back, move money from another category, and budget on.
Rule #4 – Create a Buffer
This idea pops up a lot in the budgeting world, but the basic idea is that when you are living paycheck-to-paycheck you are spending your money as soon as you get it. The more money you have built up in your various saving categories the longer your paychecks get to sit in the bank before they are actually used. This means that you are creating a buffer between when the paycheck hits your bank and when you actually need to spend the money.
Once you have a month’s worth of income in your “buffer” then you’ll be officially off of the paycheck-to-paycheck cycle!
Benefits that YNAB can provide
If you are using YNAB correctly you’ll find that it can provide a lot of benefits to you such as:
- A sense of purpose for your money
- Ability to plan for future goals like vacations
- Security of knowing that you have money saved for emergencies
- Real-time knowledge of how much you have left to spend in any category
- Reports on how and where you are spending your money
- Saving money by reducing the amount you spend on less important things
Obstacles YNAB can create
Even if you are using YNAB correctly it can create some issues because of the way it works like:
- Constant need to update for every purchase – missing several can discourage you to add them later
- It’s a bit tricky to get everything set up just the way you want it
- You have to have all spenders (such as your wife) on board and updating on their own
- Amazing results can take time to build – this is the nature of slowly building savings
Experience using YNAB over the past year
I’ll be honest with you. I first started using YNAB well over a year ago, but I’ve had a couple of fits and starts with budgeting during that time period. I started off hot and got everything set up, saw where we could save some money, and got strict about our budget. Unfortunately, I let a few things get in the way of my family’s success:
I took complete responsibility for the budget – including my wife’s spending. This created issues where I did not update her spending as often as I updated mine. I also unconsciously felt a little resentful that I was the only one doing it even though I had never asked her to help. This was my own pride and lack of teamwork shooting me in the foot.
I did not have a good habit of immediately updating the budget with any purchases I made. This meant that I would have to go back and add a bunch of purchases at once later on. It also meant that I would often forget how much went in which spending category from a place like Walmart. You could be using several categories at an all-in-one type of place like that.
I did not talk about the budget much with my wife and she was not really involved with the decision-making process. At the time she really didn’t have much interest in it, but what I learned later is that unless we are both committed and believe in what we are trying to do then any type of budget is doomed from the start.
All of that changed once I talked to my wife about the budget and asked her to help me help us stick to it. She was wonderfully helpful and once I showed her how to update her spending in the app on her phone she has been more on top of it than me! As with anything else that you do with your spouse, you’ve got to work as a team in order to master your marriage and finances.
I can confidently say that YNAB has helped me get our spending in check and definitely allowed us to tackle budgeting in an effective, if sometimes complicated, way.
For anyone interested in using YNAB
It is important to me that I help others that are struggling with their own journey towards financial independence. I am not there yet myself, but I do know what is currently helping me. If you are interested in using You Need A Budget after reading my YNAB review then I urge you to check out the YNAB 34-day free trial that they offer. They have a lot of great tutorials and explanations of how to use the software as well as lots of help getting your started with setting up a budget that works for you.
It is a bit of a chore getting everything set up, but I honestly think that it is better that way. Having that extra level of complexity also means that you have more options to customize the budget to your individual needs.
I haven’t quite finished up my article (and video?) on how I personally use YNAB, but once I have it up I will link to it here for your convenience.
Let me know in the comments how you feel about budgeting and any questions you might have about YNAB, other budgeting software, or budgets in general. Don’t let your reservations get in the way of improving your personal finances!!