What I Love About You Need A Budget (YNAB)

Today we have a special guest post from FI Pilgrim at FIJourney.com. You Need A Budget or YNAB as it is known for short, is a very popular budgeting tool that many people have found success with. I have not had personal experience with using it, but I asked FI Pilgrim if he would share with us his experiences.


I’ve had a budget ever since I was a little kid. I admit, though, that it wasn’t by choice. My dad helped me to split up any money I earned or was given into several envelopes, or “categories.” It was a valuable lesson in how life works, and that lesson has stayed with me.

As an adult, I’ve been budgeting for myself and my family for around 10 years now, and wouldn’t go without one. We try to run a tight ship so that we can pursue some aggressive financial goals (like paying off our house in 3 years), which means that we need to know where every dollar is going!

I’ve always looked for computer software that would help me run the best budget. Microsoft Money, Intuit Quicken, Mint, Adaptu, Yodlee, Mvelopes and others…I’ve put most of the big names through their paces. I’ve even built my own envelope style budget utility in both Microsoft Excel and Microsoft Access. But none of these offered me a “complete” solution that matched my budgeting style.

Let me explain what I mean:

Going back to my childhood, I’ve always loved the envelope style of budgeting. The money comes into my categories and stays there until it’s spent. If I don’t spend it this month, it will be there next month! Unless, of course, I make a conscious decision to move some money from this envelope to that one in order to cover a necessary expense.

My most extensive experience was with Quicken, which I used for around 7 years. Quicken allows you to download your transactions from your bank or credit card, but has no way to “store up” money in categories, so I had to use Excel as my “envelope” tool in order to track other parts of my budget. Groan!

Introducing YNABYou Need A Budget

Then in 2012 I found YouNeedABudget, or “YNAB” for short. Right from the start I was hooked! Their website and educational emails will get you started in hurry, and it’s really simple to use.

Here are a few of my favorite YNAB features so that you can see what I mean.

YNAB Helps You Think Ahead, But Not Too Far

Most budgeting software is based on preset numbers (often annual amounts). You set your budget up so that each month the amount is the same. YNAB, on the other hand, requires you to enter your budget amounts each month, and those amounts are recorded permanently. And don’t worry! You can “copy” last month’s budget over to this month, or this month’s to next month, so you don’t have to enter it each time. But having the flexibility to think about each month’s budget separately is an awesome feature.

Plus, when you notice that you’ve overspent in a certain category and you’re in the red, you can “move” budgeted funds from one “envelope” to another to cover the overspending. You can’t ignore overspending—you’ve got to fix negative amounts or else it deducts from next month’s budget. Strong!

YNAB Helps You Build A Buffer

YNAB’s philosophy is that you should budget based on income you’ve already received, which is different from any other software I’ve seen. So, for example, if I earned $2,000 this month but my budget for next month adds up to $2,500, you’ll see red numbers at the top of the screen, indicating that you’ve over-budgeted. I had never done a budget this way before, but having this built-in feature really helps me to make sure we’re not presuming upon the future to provide for our budget.

YNAB Keeps The Whole Picture In View

Most of the time you’ll just be working with your bank or credit card account data, since those will be your “on budget” accounts. But you also have the ability to enter off-budget accounts like a mortgage or other loans, a 401k or other investment accounts, and more.

Using the easy built-in reporting features you can get a clear picture of what your Net Worth is, or how your income and expenses have looked across all accounts through the months.

YNAB Gives You Access From Anywhere, For One Price

Using Dropbox.com’s cloud sync service, YNAB will automatically sync your budget to multiple PCs, Macs, tablets and smartphones so that you can access your data from anywhere. But there’s no extra charge for those features, you can install the desktop software on yours and your spouse’s computers for the same price!

Many people will say “oh, I use Mint.com for my budgeting and it’s got an app too”. While that’s a true statement, there’s a big difference! Mint.com has to make money somehow, which they do through advertising and advising you to purchase services. They don’t allow you to edit the categories in the system because that would take away their ability to report on your data. YNAB allows you complete control over your data, the ability to customize categories to your heart’s content, and still gives you the same on-the-go access that Mint does.

I strongly encourage you to give YNAB a try. There’s a free trial available on their website: http://ynab.com

YNAB was built on a unique approach to managing your budget and finances and over the last year+ I’ve found it to be exactly what I’ve been looking for. Maybe it will fit your philosophy too!

FI Pilgrim loves talking about budgets and telling stories that help illustrate sound financial principles. You can find him dreaming about financial independence over at his blog, http://FIJourney.com


Photo credit: TownePost Network (creative commons)

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