YNAB Tutorial/Overview from a Former Mint User (1 of 2)

Hi, everyone.  This is Lara Hammock from the Marble Jar channel and in today's video I'll do the first part of a two part overview and tutorial of YNAB, a popular budgeting app.

I've been doing some research on different budgeting apps for my volunteer job as a financial mentor and for this channel.  I presented my overview of the pros and cons of the 3 most popular budgeting apps, Mint, YNAB, and EveryDollar in a previous video.  

In this video, I'll give you a tutorial/overview of the YNAB app from the perspective of a long-time Mint user.  I'll tell you what I like about the app and what could use improvement in my view.  So let's get started.

First of all, YNAB is an acronym that stands for You Need a Budget and it is a paid service.  It's about $7/month.  They do give you a month to try the service out for free before you need to commit and there is really nothing even remotely manipulative about this trial offer.  They don't ask for your credit card and then charge you automatically like many services.  Instead, once your time is up, you just can't access your accounts until you put in a method of payment for the service.  If you are crafty, you can even find a deal for a longer trial period.  Alex Tran has a deal for a three month trial on his blog.  

Okay, once you create an account and start your trial, YNAB runs through some welcome questions that are designed to determine a little bit about your reasons for and style of budgeting.  I'm assuming these questions help to tailor the information that YNAB feeds to you both through the app and through email.  So here we are at the main page of YNAB.

Budget

By default, this is how YNAB sets up a budget.  You can see we are on the budget screen right here.  These blue bands represent budget category groups.  Each group has a bunch of categories within it.  Here is what they have set up for you by default: Immediate Obligations (which are immediate necessities like rent, bills, and groceries), True Expenses (which may not be happening this month, but that you'll need to pay for eventually like insurance, maintenance for car or house, and medical costs), Debt Payments (self-explanatory), Quality of Life Goals (are financial goals that you are saving for), and Just for Fun (is like dining out and entertainment).  The good news is, if these aren't exactly to your taste, YNAB has a ton of flexibility in deleting categories, adding new ones, and essentially setting up your budget exactly how you want it to look.  For example, my budget is set up totally differently.  I essentially have my whole monthly budget including immediate expenses and upcoming maintenance type expenses in one budget group called "Monthly Expenses."  Then I have a group for Savings, one for Investments, and one for Reimbursements.  Suffice it to say, you can set it up however you want.  Let me demonstrate.  By clicking on the group name, you can change it to whatever you want.  I'll call this Monthly Expenses.  Okay -- now you can easily change the categories under the group.  Clicking on this line selects it.  Clicking on the name allows you to change the name.  Now if I want to delete this line I just hit the delete button.   Adding a category under a group is easy too.  Right next to the Budget group name is a plus sign.  Hit that to add a category under the group.  You can also add new groups up here by choosing this plus sign next to Category Group.  Okay -- so you can organize your budget any way to want.  So far, this seems just like any other budgeting app, right?  Let me now tell you how YNAB is different.

With typical budgeting apps, you would go through and budget what you think you might need for each category each month right?  So, $1,000 for rent, $200 for utilities, $400 car payment.  You are basically forecasting how much money you will have each month, determining how to spend that money across your budget categories, and then tracking your expenses against that forecast.  With YNAB, you can only budget money that you actually have in hand.  There is no forecasting for income at all.  AND more than that, you are required to budget all of the money that you have, not just what you think you might have in income for the month.  

So, let me give you an example.  Say I have a checking account with a balance of $500 in it and a savings account with a balance of $1,000.  Today, I just received my bi-weekly paycheck of $3,000.  Let me show you how to set these up.

Accounts 

Down here under All Accounts, you can see that I don't have any accounts set up.  We are going to manually add these example accounts in now.  These will be unlinked accounts, since I am adding the balances and transactions manually, rather than pulling them directly from my bank.  Pulling transactions directly requires that you link your accounts by signing in with your online credentials.  It's super easy, but we won’t go through that now. 

Okay — so first I’ll put in the checking account with a starting balance of $500.  Next I’ll do a savings account with a starting balance of $1,000.  So, now that I have my 2 accounts set up, I’m going to enter my paycheck from today of $3,000.  In order to add a new transaction, you need to go into the All Accounts screen.  That's where all of your transactions will live.  So, right up here there is a tiny little button that allows you to add a transaction.  Choose that, this paycheck will be going into my checking account, today, the category is To Be Budgeted (more on that in a sec), make sure you put it in the inflow column to indicate this is a deposit and not an expense and done.  

Okay -- let's go back to the category we chose for this transaction -- To Be Budgeted.  This is a YNAB thing.  All income should go into this category.  You’ll notice back here on your budget screen, there isn’t a line item for To Be Budgeted. That’s because all the To Be Budgeted income goes up here into this big green To Be Budgeted banner.  This is all of the money that you have to budget now. You can see it is a combination of the balances of my two accounts and the paycheck that I just put in, for a total of $4,500.

Okay — let’s pause for a sec to talk about how this works. I like to think of the To Be Budgeted fund as a big pitcher.  Then your budget categories are a bunch of glasses that need to be filled with — let’s go with lemonade.   Your rent cup needs a lot of lemonade since it’s $1,000 a month.  Your utilities cup needs less since that’s only about $200 a month. Your job is to fill up each cup with enough lemonade to last it through the month.  Not too much, not too little.  Right now, we have a ton of money since we are budgeting with my balances from savings and checking.  YNAB has 4 rules, two of which are relevant right now: Rule 1 is give every dollar a job — what that means is that you have to ensure that you have poured out all of the lemonade from this pitcher into glasses - whether its for things you are spending this month or things you are saving for later.  Rule 4 is to age your money. What that means is to the extent that you have money left over, you want to start filling your budgets for next month. You really want to live on money that you made a while ago.  That’s how you break the cycle of living paycheck to paycheck.  So here, I’m going to distribute all of this money among the very simple budget that I put together.  In addition, I’m going to set aside $1,000 for a baby emergency fund (as Dave Ramsey would say).  You can see that every time I fund a category, my To Be Budgeted balance goes down.  If I still have money left over at the end of the month, I'm going to start funding next month's budget, so that I'm not living on today's money.  Since I'm just starting out, I can't quite do that, in fact, with this first paycheck, I don’t even have quite have enough to fund all of my -- what YNAB refers to as --

True Expenses

These are your expenses that you may not have to pay this month, but you know they are coming up.  YNAB really encourages you to embrace all of these expenses and fund them monthly.  This is YNAB Rule 2. For example, Christmas only comes in December, but it’s a big expense.  So, you should be putting a little aside every month.  Let’s use the pitcher analogy again.  Every month you put $50 in this category for Christmas.  And it builds up each month until December when you have $600 to spend without having to go into debt or steal from your groceries budget or god forbid, your retirement.  Same goes for bigger medical expenses (like contacts), insurance that is quarterly or semi-annually, and other things that are sporadic, but unavoidable.  

So, you may have noticed one other thing and that is, YNAB does not prepopulate the amounts for you.  Since you can only put in the money when you have it in hand, it sets your categories all to zero each month.  So, I learned a bunch from Nick True’s videos on this.  For ease of use, Nick puts two things in the budget category title - the normal monthly amount you spend and the date that the bill comes due.  For example, say my rent is $980.00 and is due on the 1st of the month.  So, I would make my budget category title look like this. That way I know that when I get paid, if my rent is due in the next two weeks before I get my next paycheck, I need to fund my rent account for $980.  This makes funding this category much easier than having to refer back to a previous month or dig into the goals section.  

Join me in my next video where I finish up this overview by talking about goals, budget columns, credit cards, every day use of YNAB, and reporting.  Comments are always appreciated and thanks for watching!