Learn to Budget With You Need a Budget

It’s really hard for me to find a personal finance app that draws me in, as I think it probably is for most sane people. So when our previous articles about popular personal finance apps were overrun with comments about You Need a Budget (commonly shortened to YNAB), I knew I definitely had to give it a try. The love that Appstorm users have for YNAB was overwhelming … and boy am I glad I gave it a try!

YNAB is a fantastic app which helps you to create, track and maintain a budget based upon their four simple rules of saving and spending. The software, which syncs between the computer and mobile apps, is wonderfully designed and incredibly intuitive. If you buy into the premise of the app, you can see incredible results. The constant reader plugs for YNAB now make complete sense to me – stick with me after the jump to learn why.

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The Premise

In order to get the most out of YNAB it’s important to understand that, initially, it requires a bit of a commitment. I’d recommend starting out by reading up on the history of the app and the basic premise (the four rules). If you don’t want to read up right now, here are the basic rules:

1. Give every dollar a job.
2. Save for a rainy day.
3. Roll with the punches.
4. Build a buffer.

Really using YNAB means committing to this system, much like using Omnifocus effectively means using the GTD method. YNAB is set up in such a way that the program really isn’t useful if you aren’t striving for the goals set by the maker – that is, budgeting everything, saving money, and making it so you are living on the previous month’s income, rather than the current month’s income. They’re pretty simple and straight forward and really make a lot of sense – it’s not a bad thing to commit to.

Accounts and Transactions

Once you’re familiar with the rules, you can start to take a look at the app. You’ll notice from the beginning that YNAB really helps you through every step. In addition to the in-app tutorials the first time you use it, there are online tutorials and great service from the YNAB team. It can be an intimidating program at first, but if you take advantage of the resources you can get a lot out of it.

Setting up your first account is a piece of cake. You just enter a name, balance and date. Then select from a variety of account types – they range from basic checking and savings accounts to credit cards, mortgages, investment accounts and more. You can even add a PayPal account – the first time I’d seen that. Lastly, make sure you choose whether or not the account affects the budget. Likely, you want it to affect the budget, especially for your first account.

You can also add transactions to your account from the accounts page. Adding a transaction is easy as well – Just add the date, payee, category and any necessary memos. Then put the amount into inflow or outflow, depending whether it’s income or expense. Choosing a category is extremely important – that’s what affects your budget and ensures that you make sure your dollars are going to the right place. One incredibly handy (and rare) feature is the ability to split an expense across categories – e.g., your grocery store bill might be 80% groceries and 20% home goods. This feature ensures your ability to make sure your dollars go to the right place.

To gloss over a few other features worth noting on this screen – you can use the search function to go through all of your expenses in one go. You can input transactions manually or you can download and import a .ofx, .qfx or .qif file. You can set recurring transactions and transfers at intervals and dates of your choosing. Lastly, you can easily reconcile your account with your bank statement using the account reconciliation tool.

Budgeting

Ok, so you’re all ready to take the next step – giving every dollar a job, aka creating a budget. With YNAB, the eventual goal is to be living off of the previous month’s income, and the budgeting system is geared towards that. On the screen, you can see three months at a time – the goal being, of course, that you get to the point where the money you’re earning is budgeting for two or more months down the line.

At the top of the screen, you see an overview for each month. You can see the amounts owed from last month, the amounts you have leftover from the previous month, the income for that month and the amount budgeted for the month. This section helps you keep on track when planning budgets for future months and also allows you to get a quick overview of how well you’re covering your expenses in advance.

Below this section, you see the categories. This is the most important part of the budget, and it’s good to take the time at the beginning of your app setup to make sure the budget is accurate and truly fits your needs. The app comes preinstalled with a bunch of categories, but it’s easy to add and delete as necessary to make sure your budget suits your needs. Once you’ve got the appropriate categories set up, estimate how much you’ll spend per category. Don’t forget about things like saving, credit card payments, and of course some fun money!

YNAB also makes it incredibly easy to track and adjust your budget from month to month. Any over or under spending is highlighted and carries over from month to month. It’s up to you to adjust as needed when setting the budget for the upcoming month. Once you get through the initial set-up, it’s easy to continue on from there. Each month should take just a minute or two to adjust.

Reporting

The last section to cover is the reports section. It’s important to keep up to date on how you’re doing – whether you’re over or underspending, how you’re spending your money and so on. Luckily, YNAB offers a pretty great report section. Within the section you can choose to view reports about spending by category or payee, income v. expense and net worth.

The reports are a great way to track how well you’re doing – and an amazing way to get a swift reality check when you first start utilizing the application. You can view the reports within the app, as well as print and export them. Don’t hesistate to take advantage of these valuable tools.

Worth the Investment?

In a word – yes. I think YNAB is absolutely, hands down a solid $60 investment. I’ve not found myself previously excited about a personal finance app like this. YNAB exceeds my expectations in many ways. First, the premise is solid. The four basic rules are something I can really buy into. They seem practical, achievable and a great way to get my 22 year old finances in order, now that I’ve been on my own for over a year. It’s about time I stuck to a budget.

So what else is great about YNAB? The design is amazing. It’s cute without being cutesy, appeals to a wide audience and somehow manages to make a finance app look not frightening. Rather than ugly color schemes and hard to read numbers paired with a confusing user interface, YNAB has bright colors, noticeable labels and directions to guide you every step of the way. The budgeting system is easy to use from month to month. Most importantly, YNAB really helps you to feel immediately empowered – more so than any other personal finance app that I’ve used.

Lastly – the support for other devices is good and improving. YNAB offers an iPhone and Android app which allows you to access your budget on the go. Everything syncs via Dropbox, ensuring that you won’t lose your valuable financial data. It all plays well together, and at $5 the app is fairly affordable.

Even The Best Isn’t Perfect

Are there things to improve? Certainly. I hope that at some point, YNAB is able to integrate directly with my bank account information so that I don’t have to manually input transactions or download/sync the transaction file from my bank. Is it a big deal that it doesn’t? Not really.

There’s also a whole lot of set up at the beginning. It’s absolutely frustrating – but totally necessary. Same with the learning curve. It’s a bit steep, but necessary and totally worth it. Even if you find yourself getting frustrated, power through. It’s worth it. It’s a definite negative, but one that I don’t really see a way around.

In order to help eliminate disappointment, you also need to keep in mind what YNAB is made for when considering whether or not to try it. If you find yourself in debt, struggling to stick to a budget or just don’t make a lot of money and like detailed spending plans, YNAB is going to likely be right up your alley. If you make more money, live well within your means and have lots of savings/investment type accounts to track, then YNAB probably isn’t right for you. Make sure you consider what you’re looking for in your finance app of choice. All in all, however, if you think YNAB is right for you in any way, go grab the trial. Right now.

Your Thoughts?

Once you’ve set it up and tried it out, come on back. Let me know what you think. Or share what you already know … have you tried YNAB? Are you an avid user? Do you absolutely hate the app? Share your thoughts in the comments below.