Budgeting Using YNAB – Does it really help? Week 2


by Don Smith

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Budgeting using YNAB on cell phone

For those of you just joining this series, last week I migrated from Quicken to You Need a Budget (YNAB), and am tracking to see if it helps or not.

This change was initiated by a course that I took from one of our affiliates, Budgeting for Budget Haters by Adam Hagerman, who is a CERTIFIED FINANCIAL PLANNER™ professional and Accredited Financial Counselor®.

This first week was quite an adjustment for a long time Quicken user like me.

It takes some getting used to in order to budget using the YNAB system.  In Quicken, I set up the budget for a month and then just copied it to every other month and made some adjustments here and there.  Worked pretty good for tracking, but it really wasn't influencing our day to day behavior that much if we didn't use cash which really defeats the purpose of a budget.

YNAB is more hands on and in your face when it comes to spending versus what you have in your budget.  When income comes in, you assign it to a category.  It is like taking cash out and putting it in an envelope for each expense like Dave Ramsey's Financial Peace University recommends.  This way you always have the money in hand before you spend it.

Adam has a very specific way to set this up to help make this easier.  I started out doing it on my own, attempting to copy what I had in Quicken into YNAB.  Of course, as with any new piece of software, I screwed things up a bit.  I attempted to fund stuff in the future rather than setting funding goals (a mindset change from Quicken's budgeting process).

Sample budget from YNAB
Step 1 from Adam – Scrap This Layout

I have since completely rearranged the budget based on Adam's category structure such as monthly bills with due dates and periodic expenses.  I really like his method as it makes it easy to see what's coming up and the priority order of what to fund as income comes in.  He starts with walking you through setting up an annual budget and then shows how to translate that into YNAB which seems like an excellent way to do it.

This week so far I have noticed a few little changes in my habits.  I'm more conscious of spending and have taken the time to reevaluate some of my monthly bills that were set up as automatic recurring transactions.  My wife, even with her technology phobia, has even entered her transactions, and she can see the budgets as well which I feel like is keeping us on the same page a little better.

It's hard to say at this point how much we've saved, but it has definitely been worth it.  There has been at least once this week that we opted to stay in and watch a movie with the family rather than taking everyone out to eat after glancing at our phone and realizing that we really wanted to use that money elsewhere based on our long-term priorities.  Considering a meal out with 7 of us in my family is a major expenditure, I know I saved at least $50 on that one decision which will cover the YNAB subscription for the year.  Who knows how much more I'll save from moments just like that one, and we probably had more fun at home than we would have eating out anyway.  Going through Adam's course forced me to take a hard look at some recurring expenses, and I should easily save $500 or more from changes on those over this next year.

I believe that if you implement even a few of the items in his list of 40 Ways to Save on Monthly Expenses or 30 Ways to Increase Your Income, your savings from that alone will more than pay for the course.  He also walks you step by step through setting up YNAB as a long term planning tool so that you can reach your long term goals like traveling the world, retirement, or whatever else you dream of doing.

My question from last week was “If I take the Budgeting for Budget Haters course and switch to YNAB will it change some of my behaviors?”  I believe it already has, certainly enough to pay for the subscription and course.

I'll keep you updated on how it is going over the next few weeks.  As with any new toy, I'm well aware that the newness can wear off quickly, so I'll be watching to see if this really changes our habits in the longer term or if we slip back into old ones.  So far, it has at least paid for itself and I'm money ahead on what I've invested in the second week, that's a pretty good investment in my book.

Update:  Budgeting Using YNAB Does it Really Help Series Conclusion

About the Author 

Don Smith

Happily married with five kids, Smith owns a technology company, is the founder of this site, has served on the board of directors for multiple companies, and loves playing soccer, hiking, and mentoring.

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