You Need A Budget.
I am a self-proclaimed budgeting geek. And I’m proud of it. This is one of those topics that doesn’t get old for me. I like reading about it, talking to people about it, and now apparently, blogging about it.
What I talk about most is the software I use, called You Need A Budget, YNAB for short. You could probably call me a YNAB evangelist. I even talk about it in my business English classes. My students who work in finance and accounting get a good laugh out of it, because that’s the last thing they think about in their free time, and here’s this crazy American getting excited about it.
The company, started by Jesse Mecham back in 2004, was developed to help everyday people get a handle on their finances. It’s apparently much-needed, as it seems many American adults don’t talk about finances with their partners and a large number generally have no clue what’s going on in their money world. Understandably though – Americans face crippling debt from student loans, healthcare and credit cards and many aren’t saving for retirement. So the topic of money is a source of shame and embarrassment for many people. This article is an eye-opening look at the sad state of American finances, at least back in 2016. I’d like to optimistically think that YNAB has spread its joy to some of those people by now and they’re getting on track.
I first heard about it from a group of American language assistants in Spain. There’s a 34-day free trial, so I gave that free trial a spin back in 2014 and haven’t looked back since. Its annual subscription has a price tag of $84 per year and I consider it a necessity. Ever since I signed up, I’ve been hooked on entering my expenses each day in the mobile app and updating my categories in the desktop app. Previously I was using an Excel spreadsheet that worked pretty well but didn’t give an accurate reflection of my actual spending. I even enter things like a 2 euro ice cream. I’m a bit obsessed with making sure my accounts – even cash – are up to date.
The software has undergone some upgrades over the years, but I held on tight to the old version (YNAB 4) for a really long time. Finally this year I embraced the newest upgrade and am loving it.
Here are a few tips for success in YNAB.
- Actually entering expenses may not be your cup of tea as much as it is mine. So you can import transactions, especially if you have a US bank account. Maybe you want to import once a week or once a month. You can do it whenever you want!
- Setting up categories and funding them is a vital part of the software and really helps you get your head around where your money is supposed to be going. And now you can add emojis to each category for extra fun! Here’s what my categories look like.
- I gave myself a category called Investing in Myself (If I had the chance, I’d ask the world to dance, I’m investing in myse-elf… did not think of the similarity until just now!)
- Give yourself fun money. Part of the joy of this software is allocating funds to help you live the life you want. I gave myself 100 euros for “fun money” in July – my birthday month – to let me treat myself. That’s more than likely going to a musical instrument I’ve been eyeing! You can break down your fun money into subcategories like I did above. If you don’t spend it, you can move it to another category or you can set it aside for the next month of fun.
- Not only should you give yourself fun money, but also set up a Goals category. This really helps you visualize in real-time how you’re making progress toward, say, saving up for a down payment or a sweet bike.
- Getting a month ahead with your money: this one took me a while to get my head around. The idea is that you should try to “age” your money. That means not spending it as soon as you get it. And the longer your money ages, the more stable you can be – you don’t have to worry about having enough to make ends meet at the end of the month while you wait for your next paycheck. I can say openly that I was living paycheck to paycheck for a number of years, even here in Spain. But embracing this concept has really helped me build a cushion, especially in these uncertain times. Here’s a blog post explaining what it means to age your money.
Aging your money is Rule 4 in the list of YNAB’s Four Rules around which their software is built. These rules exist to help you maximize your finances!
Now that I’ve piqued your curiosity, do you feel like getting lost in a rabbit hole of YouTube videos? This guy, Nick True, has made a ton of helpful content on how to get the most out of YNAB.
Do you need to get your finances in order? What would that look like for you, and what are your goals?