The Problem with Traditional Budgeting
We've all heard the advice to track our spending and create a budget. But for many people, traditional budgets just don't work.
It's difficult to keep track of every expense, especially when using cash or multiple credit cards. And even if you do track everything meticulously, it can be hard to stick to your budget when unexpected expenses pop up.
Coming from Mint? See my article about why I recommend YNAB over Mint.
The Solution: YNAB
Enter YNAB (You Need A Budget), a budgeting tool that helps you take control of your finances and make your money work for you. YNAB is an app that's available on both desktop and mobile devices, making it easy to track your spending no matter where you are.
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How YNAB Works
At its core, YNAB is based on four simple rules:
- Rule 1: Give Every Dollar a Job
- Rule 2: Embrace Your True Expenses
- Rule 3: Roll With The Punches
- Rule 4: Age Your Money
These rules help you prioritize your spending, plan ahead for expenses that may not happen every month (like car repairs or holidays), adjust your budget as needed throughout the month, and build up a buffer so you're not living paycheck-to-paycheck.
The Benefits of Using YNAB
With YNAB, you'll be able to:
- See exactly where your money is going
- Prioritize what's important in your life
- Stop living paycheck-to-paycheck
- Save more money than ever before
In the next sections we'll go over how to set up your account and start using YNAB to take control of your finances.
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Setting Up Your YNAB Account
Creating an account
Before you can start using YNAB, you'll need to create an account. This is a simple process that can be done online in just a few minutes. Once you've created an account, you'll be prompted to set up your budget.
Setting up your budget categories
The key to successfully using YNAB is setting up your budget categories correctly. You'll want to create categories that match the way you spend money, such as groceries, rent/mortgage, utilities, entertainment, etc. Once you've created these categories, you'll assign a dollar amount to each one based on how much money you have available.
Remember that these numbers may need to be adjusted throughout the month as expenses come up or priorities shift. Setting up your budget categories is crucial for effective use of this tool, but don't overthink it...it's easy to add categories on the fly. Setting up appropriate categories also plays a vital role in monitoring daily expenses and allocating funds accurately.
Linking your bank accounts and credit cards
One of the best features of YNAB is its ability to link with your bank accounts and credit cards. This means that any transactions made on these accounts will automatically appear in your YNAB budget. To link your accounts, simply follow the prompts within the app and enter your login credentials for each account.
Manually entering transactions
One of the best things about YNAB is how easy it is to manually enter your transactions. You can do this directly from the website or the mobile app. Simply go to the account you want to add a transaction for, and click on "Add Transaction".
From there, you can enter all of the details of your purchase, including the date, payee, amount spent, and which category it falls under. This method is particularly useful for adding cash purchases, which may not show up in your bank transactions.
Importing transactions from linked accounts
If you prefer not to manually enter every transaction into YNAB, no problem! You can link your bank accounts and credit cards to YNAB so that all of your transactions are automatically imported into the app. This makes keeping track of your spending even easier.
To link an account, simply go to "Add Account" and follow the prompts. It's that simple!
Splitting transactions between multiple categories
Sometimes a single purchase may need to be divided up between multiple categories in your budget. For example, if you buy groceries at a store where you can also purchase gas and household items, you may want to split that one purchase between three different categories. To do this in YNAB is easy - simply click on the transaction you want to split and then choose "Split".
From there you can allocate specific amounts towards each category involved in that purchase. Overall adding transactions in YNAB has never been easier - whether it's importing them automatically or doing it manually yourself - with both ways available at any time depending on what works best for you!
Budgeting with YNAB
Allocating funds to each category based on the money you have
The key to successful budgeting with YNAB is allocating your funds to each category based on the money you have. Once you've set up categories for all of your expenses, and added you accounts, you will know how much money you have available to budget. With YNAB you allocate money from your available funds to each category until you don't have any money left to budget. We call this budgeting all the way to zero.
Adjusting budgets as needed throughout the month
Allocating funds is just the beginning - things will always come up unexpectedly that may require adjusting how much money you have allocated to certain categories. Maybe you have a flat tire or a medical bill that wasn't planned for.
The beauty of YNAB is that it allows you to easily adjust budgets throughout the month without derailing your entire financial plan. Simply subtract money from one category and add it to another when needed. This is what Rule 3 refers to as rolling with the punches.
Using goals to help you save for specific expenses
YNAB offers several different types of targets or goals that can help motivate and guide your spending habits. For example, there are "target balance" goals which allow you to set a goal for how much money you want in a particular category (such as an emergency fund or vacation savings), and then track progress towards reaching that goal over time.
Another type of goal is "monthly funding" which helps ensure that certain categories are funded every month (such as car repairs). Using YNAB for budgeting allows for greater financial control and peace of mind knowing exactly where every dollar goes!
Tracking Your Spending
One of the most important aspects of budgeting with YNAB is tracking your spending. Fortunately, YNAB makes it easy to do this.
Every time you make a purchase, simply log it into the appropriate category on the app or website. This will help you stay aware of how much money you are spending in each category throughout the month.
Monitoring spending in each category
It's critical to monitor your spending in each category to ensure that you're staying within budget. YNAB's color-coded system makes it very easy to see which categories are over spent and which are still under funded.
If a category is over spent, this means that you've spent more money on that category than you had allocated at the beginning of the month. By keeping a close eye on your spending throughout the month, you'll be able to avoid overspending or roll with the punches when you want to overspend a certain category and stay within your budget.
Identifying areas where you may need to cut back
By monitoring your spending in each category, you'll be able to identify areas where you may be overspending and need to cut back. For example, if you notice that you're consistently going over budget on dining out every month, it might be time to reassess your habits and consider cooking at home more often. Or, maybe you just need to allocate more money to dining out because that's a priority for you! Identifying these problem areas can help prevent overspending and keep your finances on track toward your larger goals.
Using reports to see where your money is going
YNAB offers several reporting features that allow users to see exactly where their money is going. For example, the Spending Report shows users how much they've spent in each category for a given time period, while the Net Worth Report shows users how their net worth has changed over time based on their income and expenses. By analyzing these reports regularly, users can gain valuable insights into their financial habits and make adjustments as necessary.
Tracking your spending is a crucial part of budgeting with YNAB. By monitoring your spending in each category, identifying areas where you need to cut back, and using reports to analyze your finances, you can stay on top of your budget and achieve financial stability.
Tips and Tricks for Maximizing YNAB's Potential
Check out this list of the best YNAB tutorials.
Utilizing the Mobile App for On-The-Go Tracking
One of the best things about YNAB is its mobile app. You can easily track your spending and budget on-the-go, making it easier to stay on top of your finances.
The app allows you to add transactions, view your budget categories, and adjust your budget as needed. You can also see how much money you have left in each category and get alerts when you're close to overspending. Plus, the app offers location-based hints on pre-filling transactions, which makes it faster to enter transactions at places you frequently spend.
Taking Advantage of the "Age of Money" Feature to Help Prioritize Spending
The "Age of Money" feature is a unique aspect of YNAB that helps you prioritize your spending based on how old your money is. Essentially, it tracks how long it takes for the money you earn to be spent.
The longer the "age" of your money, the more financially stable you are. By focusing on increasing the age of your money, you can prioritize saving and reduce living paycheck-to-paycheck. You can increase the age of your money by consistently spending less than you earn.
Creating Custom Categories to Fit Your Unique Budget Needs
Custom categories are a great way to tailor YNAB to fit your unique budget needs. For example, if you have a lot of medical expenses or travel frequently for work, creating custom categories for those expenses can help you better track them and allocate funds accordingly. You can also use custom categories for savings goals or debt repayment plans.
These tips and tricks can help maximize YNAB's potential and make budgeting easier than ever before. Whether it's utilizing the mobile app for on-the-go tracking or creating custom categories to fit your unique needs, there are many ways to make YNAB work best for you.
So why not give it a try? Your bank account (and peace of mind) will thank you.
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Why You Should Use YNAB
Now that we've covered the ins and outs of how to use YNAB, let's talk about why you should give it a try. If you get stuck, consider working with a budget coach.
Budgeting Made Simple
YNAB takes the stress out of budgeting by providing an easy-to-use platform that helps you track your spending and stay on top of your finances. With tools like automatic transaction imports and customizable budget categories, managing your money has never been easier.
One of the biggest benefits of using YNAB is its real-time insights into your spending habits. By tracking every single transaction, you can see exactly where your money is going and make adjustments as needed to help you reach your financial goals.
Perhaps the most exciting benefit of using YNAB is the freedom it can provide. By helping you get a handle on your finances, you'll be able to save more money for things like travel, hobbies, or even retirement. Plus, with less stress about money weighing on you, you'll be able to enjoy life more fully.
Ready To Give It A Try?
If you're ready to take control of your finances and start living life on your own terms, then it's time to give YNAB a try. With its simple interface, helpful tools, and real-time insights into your spending habits, there's no better way to bring clarity to your finances.
So what are you waiting for? Sign up for YNAB today and start taking control of your financial future!
Disclosure: I am a YNAB Certified Budgeting Coach. I offer coaching services for those wanting to accelerate their financial progress. This article contains referral links to begin a free trial of YNAB. If you use one of these links to sign up for YNAB and choose to subscribe, we will both get an extra free month added to our subscriptions.