It’s been six months since I started religiously using the You Need A Budget app. Here is my YNAB review and budget organizing tips I have learned along the way. This post is sponsored by You Need A Budget
My YNAB Review
About 6 months ago, the You Need A Budget (YNAB) team reached out to me to review their budgeting software. I set things up and gave it a month-long test run using their 34-day free trial. You can learn the basics of how the program works and my initial thoughts in my first post here: YNAB Review. I finished the post thinking: “Like it! But not sure if I’ll use it long-term.”
(Please note all examples were created in a fake budget for this post 🙂 )
I am back now to tell you that after using YNAB for half a year, I am OBSESSED! I absolutely love it. When the opportunity to share more of my thoughts in a follow-up post presented itself, I had the post written in my head in five minutes. It’s so easy to write about something that I use everyday and love.
5 Things I’ve Learned Using The YNAB Budgeting App
I have learned why living off last month’s income makes so much sense.
YNAB works best if you let your income accumulate in the “to be budgeted” area throughout the month and then allocate these dollars on the first day of the next month. In the past I just left a significant buffer in my checking account so that there was never a risk of dipping below zero if a bunch of bills autodrafted before I was paid. But as a freelancer, I had to do a lot of predicting when I would get paid.
If you budget on last month’s income, then there are no moving parts. You know how much you get to spend on day one of the month and that’s that. And at the beginning of the month when you get to divide your income between all of the categories is such a fun task. It leaves me feeling quite organized!
Separate Fixed, Variable, And True Expenses
I have my budget broken down into “fixed,” “variable,” and “true” expenses so I can easily calculate what percentage each category plays in my spending. YNAB is completely customizable, from the categories you create to the order in which they appear. To make spending analysis as simple as possible, I created five major parent categories.
My 5 big budget categories
- Taxes (ugh)
- Savings (retirement, personal savings, etc.)
- Fixed living expenses (things like mortgage, bills, health insurance, etc. that I have to pay each month and don’t really change much)
- Variable living expenses (things like groceries and babysitting, which I could save money on if needed)
- Fun stuff (shopping, beauty, out to dinner allocations. All things I could cut out if I needed to save more)
- True expenses (those once-or-twice-a-year expenses that are necessary)
Why these simple budget categories work
Having these big major categories makes it easy for me to quickly calculate the percentage of my income that is going towards wants and needs. Sometimes this isn’t so good if I notice that the Fun category is over its budget. But sometimes this is good because it means that I can fund my Fun category and spend it without feeling guilty knowing I am meeting my Tax, Savings and Living expenses goals. I have actually created a separate category called “Oops I Spent Too Much” that I budget a little into each month so that if I do go over in any one category I can steal those dollars without guilt.
Put Savings At The Top
I moved my savings category to the top of my budget to emphasize that I need to save first, spend second. I changed the order of my budget to rank categories in terms of importance. Putting savings first keeps it at the forefront of my mind and allows me to trickle down money each month from most to least important. So if my “To Be Budgeted” bubble says I have $5,000 to budget for the upcoming month, I immediately put a percentage for taxes, retirement and savings into those categories, then fill in my fixed expenses, then variable, then true expenses and finally fun money. By taking out your important stuff first you realistically see how much you have left to play with.
Be honest with true expenses
My savings weren’t really savings because I dipped back in for True Expenses. This is one of the biggest lessons that YNAB has taught me. There are a lot of things that I pay for once a year: my gym membership (I get a free month by doing this), my auto insurance (I think I get a 10% discount), etc. I’m saving a lot of money by paying for these once a year, but I have to remember when these big expenses come up and to plan for them. I have a lot of these once-a-year-guys, and I used to pay for them out of savings. My savings each month would look falsely high before I’d take money back out of savings to pay for these bigger one-time expenses. My savings account was going up and down in kind of a two-steps-forward-one-step-back effect.
How YNAB helps track True expenses
YNAB accounts for these True expenses by having that money accumulate throughout the year. Funds accumulate in your account so that when it’s time to pay you have the money ready to roll. The first year you do this there is more planning because you might have a bigger bill due in less than 12 months time. You have to figure out how much to budget to “catch up” to that savings goal. But after a year, this should be so easy to do!
Tracking Spending Forces Honesty
Having the accountability of tracking spending works like a food journal in that it forces you to be honest and aware but gives you the flexibility to change. I can’t tell you how many times I have changed and adjusted my budget, but that’s all part of the fun! The YNAB app is so great because it does all the math for you. You can easily move money between categories, split transactions, move categories, re-order things, and fiddle with things to make your budget work for you. I can’t tell you how fun it is on the last day of the month to move any categories that I have extra money in to savings. I love how organized the app makes me feel.
From my experience, YNAB takes a little getting used to and the first month or two is a little tricky. I recommend watching this YNAB video on how to set up your budget. Once you get a feel for how this app works for your lifestyle, it gets better and better. You might need to re-think how you do your budget math and change some of your systems to get the program to work for you, but in time, it really will be life changing. Give it a free try!
Wealth Building For Women
If you’re interested in another course designed for women + wealth building, I recommend this one: The FI Women Bundle. It’s a collection of courses and trackers bundled together for $97.