YNAB Rule 1: Give Every Dollar A Job

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Budgeting is an essential part of managing your finances, and the YNAB (You Need A Budget) app is an excellent tool to help you take control of your money. YNAB's budgeting method consists of four simple yet powerful rules that can help users achieve financial freedom. In this article, we will take an in-depth look at the first rule of the YNAB budgeting method.

Check out my comprehensive guide on YNAB's 4 Rules and these great YNAB tutorials.

What Is The First Rule Of YNAB?

The first rule of YNAB is "Give Every Dollar A Job." This means that as soon as you receive your income, you should allocate it towards specific expenses, such as rent, groceries, utilities, entertainment, or savings. By doing this, you'll know exactly how much money you have left to spend or save until your next payday.

YNAB Rule 1 follows the principle of zero-based budgeting. This means that you budget all of the money that you have until you don't have any money left to budget. The key word in rule 1 is "every." Give You give every dollar a job to do.

The Principles Behind YNAB Rule 1

YNAB's Rule 1 is built on the fundamental principles of scarcity and prioritization. The concept of scarcity acknowledges that money is a finite resource, and once you spend it, it is gone forever. The finite nature of money means that you need to prioritize your spending, focusing on what is most important to you. Prioritizing your spending requires you to make tough choices about where to allocate your money, which can help clarify your financial priorities. By following YNAB Rule 1, you can gain more clarity about your finances and reduce money-related stress.

How To Implement YNAB Rule 1 In The YNAB App

Following YNAB's Rule 1 has never been easier, thanks to the app's intuitive design. Whenever you begin a new budget or receive income, the YNAB app displays the total amount of money you have available at the top of your budget in a lump sum. This amount is highlighted with a bold, green label, making it easy to identify the funds available for assigning jobs.

A red arrow pointing to the money in YNAB that is Ready To Assign

As per Rule 1, it is essential to assign every dollar a job until the number in this box equals zero, no matter what. YNAB offers two main ways to achieve this: manually and automatically. This is a feature you won't find in some other budgeting apps like Mint.

How To Manually Assign Money In YNAB

There are two ways to manually assign money in YNAB. First, you can click on the Assign button, choose manually, then type in the amount of money you want to assign and the name of budget category you want to assign it to. The second way is to click on the field in the "assigned" column and type in the amount of money you want to assign to that category.

Arrows showing how to manually assign money in YNAB

How To Automatically Assign Money In YNAB

The ability to automatically assigning funds to budget categories saves time and effort, making it easy to stay on top of your finances while minimizing stress. There are three ways to automatically assign money in YNAB.

Auto-Assign By Underfunded In YNAB

This method relies on the targets you have added to your budget categories. It prioritizes which categories to fund based on the date you told YNAB you need the money available. Following the due dates and amounts of your category targets, auto-assigning by underfunded will fund each of these categories until there is no more money left to budget.

YNAB Auto-Assign Preview: Underfunded

Auto-Assign By Assigned Last Month In YNAB

If you are a fan of budgeting the exact same amount of money into your categories every month, this is the feature for you. Just like it sounds, auto-assign by assigned last month looks at how much money you assigned to each category in the previous month and assigns that same amount to each category this month.

Arrow showing how to auto-assign by assigned last month in YNAB

Auto-Assign By Average Assigned Or Spent In YNAB

This mode is particularly helpful for variable expenses like utility bills. It calculates how much you assign to each category each month on average and assigns that much money to each category.

Assign Mode In the YNAB Mobile App

On the YNAB Mobile App, you can enter assign mode, which allows you to quickly assign money manually or automatically.

Assign mode in YNAB mobile app

Pro Tips: Auto-Assign In YNAB

Here are a few tips which are currently only available on the YNAB web application, and not on the mobile app. They are helpful for looking at your budget with a fresh pair of eyes, or if you want to start over.

Reset available amounts allows you to start over without deleting any data from your budget.

Reset assigned amounts removes all the money you've assigned this month, but leaves money that's rolled over from previous months.

You can also apply any of the auto-assign methods to certain budget categories by selecting only some categories or category groups to auto assign.

Auto-assign in YNAB by selecting specific categories

Why Can YNAB Rule 1 Be Scary At First?

When starting a budget, it's not uncommon to face a situation where there isn't enough money in your bank account to fully fund all of the categories you've added to your budget. You might even be riding credit card float. In the US, most households use credit cards, and a significant portion of these households carry credit card debt or are on credit card float, which means they are at least one month behind their spending habits. If you find yourself in a situation where you have run out of money to allocate before all of your categories are funded, there's no need to panic. Simply ask yourself, "What do I need this money to do until I get paid again?" and then allocate the available funds to those categories. When you receive more money, ask yourself the same question and allocate the funds accordingly. This approach helps to ensure that you're allocating your funds effectively and in line with your priorities, even if you don't have enough money to fully fund all of your categories at once.

Common Mistakes Following YNAB Rule 1

Rule 1 makes YNAB different from any other budgeting method and software out there. Here are some common mistakes people make when learning YNAB Rule 1.

You Think Your Budget Is Just A List Of Expenses

A budget is much more than a list of all your expenses. A list of all your expenses, their amounts, their frequency, and their next due dates might make a great budget template, but a real budget shows you how much money you actually have and compares that with how much you actually need. YNAB Rule 2: Embrace Your True Expenses takes this concept a step further and helps you start to see your budget as a tool for making your financial life more predictable.

You Use Your Budget To Forecast Future Income

Forecasting is when you assign jobs to money you don't have yet. The most common example of this is spending money on a credit card even though you don't have cash right now, knowing that you'll be able to pay that credit card off when you get your next paycheck. This common mistake often traps people in a cycle of debt, putting them constantly behind on their finances. Some budgeting apps like EveryDollar encourage forecasting, even though it can cause unnecessary work and anxiety when it comes to budgeting.

You Don't Assign All The Way To Zero

Some people don't like the idea of budgeting their available money all the way down to zero. They want to leave some money unassigned, just in case. This is an easy problem to solve with Rule 1. Just make a budget category called "Just In Case" or "Emergency Fund" and squirrel away a few extra dollars there.

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