GMR 122: YNAB - How good is this app at helping you manage your money?
YNAB (You Need A Budget) is one of the most popular budgeting software available today. In this episode of Getting Money Right, we’re going to put YNAB, the online and phone version, up against our 4 Foundational Principles of A Budget to see how effective it is at helping you manage your money.
Shownotes
Review: The 4 Principles of a Budget
Assign Every Dollar
Zero Based Budget - Spend on Purpose
Arrange Every Expense
7 to 9 Main Categories (housing)
Plus subcategories (rent, electricity, insurance, taxes)
Allocate It Evenly
Surplus & Deficits rollover
Looks ahead - Future Forecasting
Annual view, not monthly.
Adjust As Necessary
Tracking expenses often to ensure success.
Informal Survey: What do you use to manage your budget?
Things to consider if you’re using Excel
Make sure it’s not a static budget - no activity/tracking to compare to the plan.
Make sure it incorporates the 4 principles we discussed:
Assign every dollar - every dollar needs to be accounted for.
Arrange Every Expense - even if it’s a bucket category that includes several categories (ie. cash for eating out, entertainment, or miscellaneous expenses).
Allocate it evenly - we think this is easier to manage this way, but as long as your spreadsheet or app allows you to account for, and fund every expense, including the non-monthly expenses, you’re good.
Take into account non-monthly expenses and saving/replacement goals.
Adjust as Necessary - track expenses, whether it’s daily, weekly, monthly.
YNAB - YOU NEED A BUDGET
YNAB’s 4 Rules
Give Every Dollar a Job
Get some dollars.
Prioritize those dollars (give ‘em jobs!).
Follow your plan.
Embrace Your True Expenses
Find a big, infrequent expense. (X-mas)
Create a goal to fund it monthly.
Too many goals can seem overwhelming. If you have more than 3 goals, create a category, and fund it.
The use of the term “goals” is confusing instead of the term category.
When that expense arrives, just pay it!
Roll with the Punches
Choose a category with overspending.
Move funds from another category to cover it.
Move on with your life—no guilt!
Should be adjusting the budget as necessary so you don’t have to roll with the punches, you won’t get punched if you learn.
Age Your Money
Be purposeful in your spending.
Consistently spend less than you earn.
Watch that Age of Money grow!
One month ahead, use last month’s paycheck to pay for this month’s expenses.
Pros
I like the reporting feature a lot!
I love that it shows me what’s in my bank account.
I love that it allows me to import expenses for easier tracking.
I like that it’s accessible from my phone.
Cons
I can’t see the whole year or multi-month view at one time.
Keeps you on a paycheck to paycheck cycle. It doesn’t cause you to look out further in your budget.
It doesn’t automatically roll over your overspending in a category to the next month (it will rollover your surplus in a category to the next month).
When starting out in budgeting, people are always going to go over in some categories.
If you don’t see the negative amount carry over, then you’ll keep overspending in the categories you’re going over.
You need that feedback of being able to see the negative and allow the overspending in one month to limit your spending the following month when you have less than the normal allocated amount.
Bottom Line
YNAB is a great budgeting tool if you ignore their 4 rule methodology. Every rule with the exception of rule number one is less than effective in helping you do everything you should through your budget. If you follow the 4 Foundational Principles of A Budget, which we’ve outlined in this episode, and more in-depth in Episode 120, YNAB can be a great option.
Resources
Budget Forms and Tools
David’s New Book - Jesus on Money
David’s New Website - www.stewardshippastors.com