One of the things all three of us have in common here at Modern Mother Cubbard is our use of YNAB. YNAB is not only a budgeting software; it’s a different type of budget philosophy. YNAB stands for “You Need a Budget”. It’s true. You do. Everyone does. You’d be amazed at what can happen when you really put your money to work.
What’s more amazing is the freedom that comes with budgeting. Yes, that’s right – I said freedom. When you are in a good spot financially, you can afford to make more guilt-free choices, you can worry less about the future, and you can roll with the punches much better. Yes, budgeting requires rules, some self-control, and sometimes denial of self-gratification, but it can bring much more good with it.
What I love about YNAB (that is besides the philosophy, free online classes, and all the info available on the YNAB website) is that it’s digital. Currently, you have to have a desktop or laptop computer to perform the initial set up, but YNAB is available for your phone, tablet, and iPad. You can sync your account on the go. I can check out at the store, enter my transaction in YNAB, and all the devices are updated. My hubby immediately knows where we stand on our “fun-money” budget.
So how does it work? Once you install YNAB, you’ll need to set up a tentative budget. If you don’t already have a budget, websites like Mint are a good way to figure out what you are spending on average. That last sentence may have you asking, “Why not just use Mint?” Budget trackers are a passive way to see where your money is going. YNAB is actively putting your money to work for you.
Once you know where your money is going and you set up a budget, you can make informed choices about how to change where your money is going. The first time my husband and I made a budget, we were appalled to see how much money we spent on groceries and eating out. (Now, as a family of 3.5, we spend half that total and we haven’t suffered at all).
The first items you should budget are your financial obligations: your bills (minimum debt payments included). You should include bills/expenses that are not monthly also. For example, we get a discount to pay our insurance every 6 months instead of monthly, but we include it as part of our monthly budget. This way when the bill comes it’s no surprise. We also use this method for pet meds (those are purchased twice/year) and car taxes. Next, you should set up all your general spending categories: food/groceries, entertainment, fun money, gas… Whatever categories work for you and your family. It can be a shocker to see what’s left over. Finally, you should set up a “rainy day fund”. These are just-in-case line items. For example, maybe you want to have a line for car repairs and Christmas gifts.
While the budget in YNAB is flexible and it can be changed at any time, it does remind me a bit of an electronic “envelope system”. The money is set aside for different things. When it’s out it’s out, unless you take it from somewhere else. Technically, it’s all in your bank account as one lump sum, but in YNAB it’s predestined for different categories. If you don’t spend it, then it sits there for next month. This part is really great for more flexible spending items like clothes or fun money. Perhaps the last few months we haven’t needed any new clothes, but suddenly the weather has changed and my son’s had a growth spurt. I can buy what’s necessary and not feel bad or worry bills won’t get met because that money is already there. This built-in savings allows you to roll with the punches. The eventual goal of YNAB is to get ahead of your paychecks and live on last month’s income.
Things can get way more complicated. You can choose to snowball debt, to add to savings, create a new savings. I could literally go on for days about YNAB, but I’ve tried to give you a pretty good idea about how it all works.
There is a 35-day free trial available on the YNAB website. While this is enough time to get set-up and learn to use the program, in my experience it takes at least a month to get results. Current purchase price is $60 (get $6 off with this link!). I have yet to meet someone who tried it and found it “wasn’t for them.”
Have you used YNAB? What’s your budget preference? Let us know what you think!
(note: we are not affiliated with YNAB. We just love it so much we had to talk about it :-D)