My favorite budgeting app: You Need A Budget
A review of YNAB
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Every October 31, my husband Braden and I pay an annual fee of almost $100 for our budgeting app. But if the point is to SAVE money, why are we spending money?
When I started dating Braden, I was living paycheck to paycheck. I was always stressed about money and would eat ramen for dinner almost every day. Braden recommended an app to me called “You Need a Budget” (or YNAB, for short). Anyone can try YNAB for free for 34 days, but as a college student, I was able to try it free for an entire year.
YNAB is built on four principles:
- Give every dollar a job.
- Embrace your true expenses.
- Roll with the punches.
- Age your money.
Following these principles allowed me to stop living paycheck to paycheck. I never feel stressed when I have to pay off my credit card or when I make big purchases. YNAB has become an essential part of my daily routine and my financially healthy life.
In short, the $100/year is absolutely worth it for me.
If you want to learn more about how this system works, keep reading.
Principle 1. Give every dollar a job
When you first set up your YNAB budget and link all your bank accounts, you will have a grand total of available money. This money is called your “budget.” It will automatically go into a category called “Ready to Assign.”
From there, you can make Categories for the types of purchases you make. You can group similar Categories together in overarching Category Groups.
For example, we have a Category Group called “Bills” and our relevant categories include: “Rent,” “Electric,” “Gas,” “Internet,” and “Cellphone.”
For each category, you can set a “Target” of how much money you need. These can be monthly or weekly targets. Or you can set a specific date that you need the amount by.
For example, if you need $1300/month for your one-bedroom apartment, you can set a monthly target of $1300 needed for spending by the 1st.
In total, there are three types of targets:
- Needed for Spending (from the example above)
- Savings Balance (a large sum of money needed for something in the future)
- Monthly Savings Builder (a consistent amount of money that you save every month)
Once you have all your categories set up and your targets ready, you can start assigning your money. In our $6500 budget example, we can assign some of that money to “Bills” and we are left with $4920 to assign to other categories like “Groceries,” “Dining Out,” “Clothing,” “Auto Insurance,” “Student Loan,” etc.
A complete guide to YNAB categories can be found here.
When a transaction shows up from your bank, you can easily assign it to a category that it will be withdrawn from. You have to do this manually because it keeps you aware of what you are spending your money on.
Most budgeting apps only have you decide what you WANT to spend in each category and then track your spending.
In YNAB, you assign every dollar you ACTUALLY have to a category. You aren’t making numbers up, you physically have that money available to spend. Once it’s assigned, it’s like it’s already spent, so you don’t have to worry when your next rent bill comes up. You have the money set aside for it. You’re prepared.
Principle 2. Embrace your true expenses
You already have targets for regular expenses like rent, utilities, groceries, dining out, insurance, clothing, haircuts, etc.
But what if your car breaks down? Or you need a new computer?
These are called true expenses. They are big expenses that happen at random times, but you can still prepare for them. YNAB recommends setting a goal for how much you could need. For example, if you would need $1000 for a new computer. You can start savings towards $1000 in case your current computer breaks down or is stolen.
YNAB doesn’t really believe in an “emergency fund.” It wants you to think about all the types of emergencies that could happen and then start saving for them.
Principle 3. Roll with the punches
Imagine it’s July 25th. You buy a coffee from Starbucks only to realize that you don’t have enough money in your “Dining Out” category for July.
This is totally fine!
You have some money in the “Clothing” category that you don’t really need to use this month. You simply take money out of “Clothing” and put it into “Dining Out.” Easy.
This is called “rolling with the punches.” You don’t freak out when you overspend your money, you just move things around to account for it.
Your goal is only to avoid debt and save money, not to restrict your life.
Principle 4. Age your money
Imagine you’ve been budgeting with YNAB for awhile. You get a paycheck and you realize that you already have money assigned for everything you need this month. So, what do you do with the extra cash?
You can assign it to use in future months.
This brings us to the final YNAB principle: Age your money.
The goal of YNAB is not to assign money right when you need it. The goal is to have your current paycheck pay for next month’s bills.
YNAB does a fancy calculation for this called “Age of Money.” It will tell you how long your money has been in your budget before you spent it. Right now, My money’s age is ~60 days, which means I am 2 months ahead in expenses.
When I get a paycheck this month (July), I’ll be assigning that money to expenses in September. Pretty cool, eh?
Conclusion
This system has allowed me to live life confidently and prepared. The rising prices of inflation haven’t freaked me out. If I spend too much in food, I can steal some money from my “fun fund.” If I am consistently spending more than I planned, I can increase my targets for spending and assign more money next month.
YNAB isn’t about restricting yourself; it’s about saving money in advance, so you can buy whatever you want. YNAB can help you get the vacations you want or not feel guilty about spending $1000 in food every month (if that’s what you want to do).
If used correctly, it can change your life. Seriously.
There is a big learning curve to the YNAB system, but trust me, it’s worth it. Try your free 34-day trial and start saving money!
Comment with any questions, and I’d be happy to answer them.
DISCLAIMER: I am not sponsored by YNAB. I just really love their app!
Anna Everett earned her B.S. in Neuroscience in 2022. She is a researcher, mental health educator, and advocate for women and other marginalized groups. She writes about life, productivity, the brain, human behavior, & health.
Website | Twitter| LinkedInP.S. If you’re interested in signing up and want to give me a free month of YNAB, you can use my referral link HERE. Thanks! :)
