It has, however, gained more popularity than most other budgeting packages despite being a paid tool. And with many alternatives even being free.
The reason for this is because the YNAB approach to budgeting works, as can be confirmed from the hundreds of thousands of customers who are able to take control of their finances.
If you are wondering whether YNAB can also help you take control of your finances, then read on.
An Introduction to YNAB
YNAB started in 2004 when founder Jesse Mecham needed a way to manage his and his new wife’s finances.
They came up with rules to help with money management and these rules boiled down to four major ones that would become the core of the YNAB system.
YNAB stands out because it focuses on how you intend to spend the money you currently have, not the money you are expecting.
This helps you to create a debt-free lifestyle. And one, in which you always have some money in the bank.
A zero-based budgeting system lets you make use of every single dollar you earn. So there is nothing left at the end of the month.
However, this doesn’t mean spending your money carelessly. Rather, you dedicate different amounts to different needs based on priority. For instance, you can dedicate a part to saving for a holiday, another part to an emergency fund, a wedding, shopping, and so on.
Then, if you happen to overspend money on one category for the month, simply move money from a different category to that overspent category. So you can balance off your budget.
The Four Rules
The four rules that make YNAB stand out from other personal budgeting software are:
- Give every dollar a job. Every dollar in the YNAB system must have a job, a purpose. It could be the payment of electricity bills, saving up for a vacation, or paying the rent. You must assign every dollar to make the best of your money, and this refers only to the money at hand.
- Embrace your true expenses. This rule teaches you to make monthly contributions to once-a-year large payments that often come as a surprise to many, like insurance and subscription payments. By setting money aside for it each month, you will avoid the often heavy and stressful impact of such bills.
- Roll with the punches. If you overspend in one category, simply move money from a less-important category to cover your overspending. This maintains the zero-sum in your budget.
- Age your money. Try to let your money sit for about 30 days before using it. This rule will help you to forget about paydays and escape from living paycheck to paycheck.
How to Use YNAB
Setting up your YNAB budget is fast and can take as little as 20 minutes of your time. First, make a list of all the things you need to pay for each month and how much they cost. Even if only approximately.
Then follow the steps below.
Step 1: Register an account
Make use of the 1-month free trial. Then decide if you want the annual or monthly billing option.
Step 2: Create your first Budget
First, select a name for it. Then choose a currency, number, and date format. The system is flexible, so you can customize it as you like. Click on ‘Create Budget’ to finish the setup.
You need an income to be budgeted and categories to direct that income to. Set up as many categories as you need and name them to suit your needs.
Step 3: Add your Bank accounts
To get the best results, add all your active bank accounts. You can decide to link the accounts for automatic syncing, but this is only available for US and Canadian accounts.
Step 4: Add Credit Cards & debts
Yes, this is also important if you want to know where you stand. YNAB then lets you choose how to pay off the debt.
Step 5: Update your spending
YNAB automatically pulls in data for linked bank accounts. But you can also upload bank data exports easily or just enter each transaction manually, for a fast and updated view of your finances at all times.
Categories with money left for the month display green figures, while over-spent categories display in red. To change any category from red back to green, you will need to transfer money to it from a green category.
Other features and benefits
Following are more features that help to make ynab a worthy investment:
- Proven Method: YNAB is tested and proven by thousands of users.
- Shared Budgeting: This allows you to be on the same page with your partner.
- Track Goals: Set and track goals over the long term.
- Provides Reports: So you can see how things are going.
- Includes Personal Support. Ynab offers an impressive level of customer support.
- Secure Infrastructure: Ynab uses banking-grade security.
- Multi-device Compliant: Works on the web, iPhone, Android, iPad, Apple Watch, and Amazon’s Alexa.
- Transaction splitting. Easily split one large transaction into its different budget categories.
- Search Function. Makes it easy to find things by category, payee, or other words.
You Need A Budget uses top of the line security to guarantee your privacy and the confidentiality of your information. So, there is little or nothing to worry about.
All connections to the YNAB server are 128-bit encrypted. The password is salted and hashed many times over. The YNAB team will not touch your data, and the Amazon Web Services infrastructure that YNAB uses enjoys multiple accreditations.
Ynab will sync with US and Canadian bank accounts to upload and process your transactions. International users can use the file-based import function, which can be equally effective.
Please note that transactions may take up to 24 hours to reflect in your bank statements. So, while syncing is a great feature, it won’t provide you with as much up-to-date overview of your assets as manually entering the transactions.
You can also do both, as ynab will highlight any double transactions that were both entered manually and imported, so you can delete one.
YNAB does not offer a free plan, but you can try it free for 34 days to see if you like it or not. If you do, then you can choose one of its two plans, which offer the same features but differ in their costs and billing periods.
- Monthly Plan. Costs $11.99 per month and billed monthly, for a total of $143.88 per year.
- Annual Plan. Costs only $84 per year with a one-time payment and annual billing.
9. YNAB cons
Following are a few cons of the system:
- Non-US/Canadian syncing. The automatic account linking feature is only available for US & Canadian bank accounts and credit cards.
- Limited Multi-currency Features. Although you can select a currency at setup time, YNAB is exclusively a single-currency system. So, it does not work with multiple currencies and exchange rates.
We have come to the end of this closer look at the ynab budgeting tool and you will agree that it is indeed an impressive software package.