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Review: Should you budget with YNAB?

YNAB is a budgeting app that can get you out of the paycheck-to-paycheck cycle and out of debt. A financial expert shares her take.

a phone displays a screen for budgeting

I’m a budget nerd. When I was twelve and babysitting, I wrote my earnings and little savings goals in a notebook. At fifteen, when I started working on a farm in the summers, I starting tracking everything in an Excel spreadsheet. But it wasn’t until college and my first summer internship that I found my favorite budgeting app. YNAB® – or You Need a Budget

Since sophomore year of college, I have used YNAB to track every dollar I’ve earned and spent. From my first apartment deposit to wedding invitations, our home down payment, and proving to myself that I could leave my corporate job to start my own business from home. YNAB has been by my side and in every one of our family budget meetings.

Clearly, I’m a bit of a fangirl. But I’m not alone. A YNAB fans group on Facebook, created by a single YNAB user, has over 30,000 members. It’s where people can go to ask questions, celebrate wins, and hang out with others who are working to be financially responsible.

So, how can an app about budgeting, of all things, create such passion in people? Because it can change your relationship with money.

What is YNAB (You Need a Budget)?

YNAB is a zero-based budgeting web-based app, which simply means you need to assign every dollar in your account to a budget category. Similar to the envelope method made famous by Dave Ramsey, but electronic.

Jesse Mecham created YNAB in 2004. When Jesse and his wife got married, they were broke. They were both students, no TV, no car, debating if they could afford a weekly donut kind of broke. And since they knew they wanted Jesse’s wife to be able to stay home with the kids eventually, they had to get better with money.

Jesse created a detailed spreadsheet to help them plan their expenses and savings. It helped them make informed choices about what they wanted to spend their money on, save for irregular expenses and ultimately reach their goals. What surprised both Jesse and his wife was the feeling of freedom budgeting delivered. They didn’t feel constrained; they felt empowered. When Jesse realized his system could help other people break the paycheck-to-paycheck cycle, get out of debt, and become conscious spenders he released YNAB to the world.

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How does YNAB make budgeting easier?

YNAB is the only budgeting app I’ve seen that expects – and celebrates – that there is no such thing as a normal month. The system is flexible to encourage you to roll with the punches. Unexpectedly blow a tire and don’t have enough in the car maintenance budget? Move $30 from takeout and $20 from your vacation fund to cover the difference. This is important since so many people give up budgeting the first time an expense throws off their plan.

Also, YNAB helps you prioritize. When you get a paycheck, you assign each dollar you earned to categories in your budget. Once you’ve tackled your needs, like a mortgage payment, you have to decide where to put your remaining funds. Do you want to put everything towards paying down debt? Or set $10 aside for a family pizza night?

In many budgeting systems, users cover their needs and stop. They say, “I covered when I need to cover and now I have $300 to spend how I want every month.” But they don’t plan what they want. Which means the money is more likely to go to waste. YNAB encourages you to make conscious choices about what you really want your money to do for you.

How does YNAB work?

YNAB is a multi-platform budgeting app that you can access online or via their mobile app. The company partners with secure data providers to allow you to directly import your bank and credit card transactions to the app. From there, you can build out your budget.

While YNAB will automatically categorize some expenses, you will have to verify each item. This is both to help avoid errors and make you aware of all your spending habits. It’s a little more hands-on, but the whole process takes me about 10 minutes a week. At this point, I enjoy that it would help me catch fraud easily, as not even small expenses can slip by unrecorded.

A powerful aspect of YNAB’s tool is the ability to select how you want to handle credit card balances. For each card, you can mark whether you pay it off in full each month, or if you are working on paying down your balance over time. Set a goal for how much you want to commit to your debt each month and track your progress. Getting out of debt and reaching a place where you don’t need to rely on a credit card for emergency expenses is a focus of the app.

However, YNAB is unique because it wants to help you change your relationship with money. YNAB aims to reduce money stress and help you reach your goals. To do so, the service operates on four fundamental rules.

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Rule One: Give every dollar a job

We talked about this a bit above, where you allocate every dollar in your bank account to a purpose. But the other trick of YNAB’s is that you only budget money you already have. No forecasting paychecks you expect to get in the future.

Instead, ask yourself what your money needs to do before you get your next paycheck. Cover the categories where you have bills coming due first, so you never catch yourself short when a paycheck comes in a day late.

Rule Two: Embrace your true expenses

The biggest budget-busting expenses are those we forgot were coming. They weren’t unexpected, or maybe just slipped our mind. Like saving up for holiday gifts, quarterly property taxes, or your Amazon Prime membership renewal.

In YNAB, you plan for those expenses. You create a category for them, set a goal of how much you need set aside by what date, and allocate money to them month-to-month. Then, when the bill comes in, you just pay it. No stress.

Now, you probably won’t be able to fund every category every month. My husband and I have a clothing budget we haven’t funded in six months. But seeing all your longer-term expenses in one place lets you prepare. No more ugly surprises.

Rule Three: Roll with the punches

No guilt. No telling yourself budgeting just doesn’t work. If something shifts or you get hit with an unexpected bill, adjust your budget and move on. Life happens.

When we bought our first house, I took a Friday off to tackle some unpacking. We had owned the house for three days. Coming downstairs, I saw water on the floor. I looked up, and the entire ceiling was wet. We had an ice dam and water was running from the attic, through the corner of our bedroom, and onto the first floor.

At that point, we hadn’t created a budget for insurance deductibles. We had just written the biggest check of our lives three days before. But I was able to move the money from a vacation we were saving for and pay cash without a worry. And from then on, we kept that budget.

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Rule Four: Age your money

YNAB’s final rule encourages you to break the paycheck-to-paycheck cycle. To do so, it calculates your money’s age, i.e., how long ago did you earn the money you are spending today? The system has a goal of spending money you earned at least a month ago, so you’re not stuck waiting for that paycheck.

If you’ve covered your needs for the current month and have cash left over, you can fund some of the next month’s needs. Keep planning ahead, until you have set aside money for a whole month.

YNAB doesn’t want to tell you to skip the lattes. It just wants to help you plan for it.

How much does YNAB cost?

You can currently try YNAB for free for 34 days, without putting in a credit card number. After your trial expires, it is a paid app. YNAB is billed annually at $83.99. While this is a little steep compared to the free apps out there, the company does offer a no-risk, 100% money-back guarantee.

As a long-time user, I think it is more than worth the cost. And YNAB states that, on average, new budgeters save $600 in the first two months using the app and over $6,000 in the first year.

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YNAB competitors

YNAB’s biggest competitor is Mint®, a free budgeting service now owned by Intuit. Mint is more of a hands-off service, automatically categorizing your expenses. It does a better job of tracking certain variable expenses, as opposed to giving you a full view of every dollar you spend like YNAB.

Other competitors include Personal Capital®, Tiller®, CountAbout®, EveryDollar®, and mvelopes®.

The drawbacks of YNAB

While I will likely continue to use YNAB for years to come, there isn’t a service out there that doesn’t have some drawbacks.

For YNAB, starting with the service takes an adjustment period. Getting out of the habit of trying to forecast your budget, instead of just budgeting cash you have today is hard for some people. Also, categorizing all your expenses can take some time when you’re new. It isn’t automatic, which goes against the grain when we are automating so many things in our lives. But that is why it helps so many people change habits. Luckily, YNAB has free live workshops every day to help you learn the systems.

Finally, the connections with banks don’t always work smoothly. Sometimes my transactions come in on the first click, other times the bank connections are down, and you either have to wait or manually input them. This is driven by the secure outside services YNAB uses, so while their customer service is excellent, they don’t always have control over getting things back online.

Why consider budgeting with YNAB

Starting to budget is hard. It’s developing a new habit that comes with many moving pieces, unexpected expenses, and multiple goals. But YNAB is designed to help you fight through those roadblocks and create a system that gives you more freedom, not less.

Using YNAB gives my husband and I a platform to make thoughtful decisions about our spending priorities as a team. All our savings goals are in one place, making it easy to discuss our options and make the right trade-offs for us. And when we want to spend money, instead of worrying about having enough, we just quickly check the app and enjoy ourselves knowing all our needs are covered.

None of us can do everything we want with the money we have, but we can do just about anything if we plan ahead.

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Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.

YNAB and You Need a Budget. are registered trademarks of Steine LLC.

Mint is a registered trademark of Intuit, Inc.

Personal Capital is a registered trademark of Personal Capital Corporation.

Tiller is a registered trademark of Tiller LLC.

CountAbout is a registered trademark of Countabout Corporation.

EveryDollar is a registered trademark of Lampo Licensing, LLC.

mvelopes is a registered trademark of IN2M Corporation.

The opinions expressed in this article are the author’s own. Haven Life, an online life insurance agency that sells term life insurance, offers this as educational information only. Haven Life does not endorse the companies or offer the products, services and/or strategies discussed here.

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About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

Read more by Adam Weinberg

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

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Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

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