~This is not a sponsored post. This post is my own idea and my own opinions. YNAB has truly changed our lives for the better. If you choose to embark on your own YNAB budget journey by signing up through one of my links, I will receive a free month of YNAB service. Congratulations on taking the first step toward financial independence with these YNAB Budget Tips! -Stacy
A few days ago, I let you in on the little secret that my husband & I have been using a budget called You Need a Budget (YNAB) for just over a year, and that it has completely changed our lives. Today, I’m going to give you my tips and tricks to set up your YNAB budget & get started on the right foot. This way, you you don’t make some of the mistakes that I made.
It can be hard making a lifestyle adjustment like this, but if I can help to make it a little easier for you with these YNAB Budget Tips, you will be that much more successful.
First, if you haven’t already, take a moment to read through the Free YNAB tutorials. Learn about the 4 Rules:
- Give Every Dollar A Job
- Embrace Your True Expenses
- Roll With The Punches
- Age Your Money
YNAB has wonderful free webinar classes regularly to help users. Just last week, Jesse Mecham, the founder of YNAB, released a book called…wait for it…You Need A Budget: The Proven System for Breaking the Paycheck to Paycheck Cycle, Getting Out of Debt, and Living the Life You Want. I found it for free on my library’s e-book system. It’s a quick read that really illustrates the strategy so you can understand it. Highly recommend!
With that out of the way, let’s get to my tips to help you maximize your free trial days!
Stacy’s YNAB Budget Tips
After using YNAB for 15 months, these are the things I wish I had done at the beginning. In the 15 months, we’ve been using YNAB, we’ve only done a Fresh Start (completely start over) a few times, and we haven’t done one in about 10 months. Fresh Starts aren’t bad, but you do lose the historical data from the version of the budget you are using (its archived).
So here are my top tips to set up your YNAB Budget.
1) Do not start your Free Trial until your next Payday.
Since YNAB is all about budgeting the money you have right now, don’t start the program until payday. Payday is budgeting day. That is the day you assign your dollars. All the other days are for entering transactions. Starting your Free Trial in the middle of a pay cycle can get confusing. Just wait until Payday.
2) Plan Your YNAB Budget Out on Paper Before Signing up.
Planning your budget on paper will help you get over that “I have to start now itch” and help tide you over until payday. It will also help you when its time to set up your YNAB budget online.
3) Figure Out Which Accounts You want “On Budget” and “Tracking”.
On Budget Accounts should be accounts where money moves a lot to pay bills – checking, savings, credit cards. Tracking Accounts are ones you want to see the balance and how it affects your net worth, but that you aren’t using to pay bills now. Tracking Accounts are things like mortgages, retirement accounts, and other investment accounts.
This is a very important step, because its tricky to move accounts from Tracking to On Budget, and vise versa. This could result in having to make a Fresh Start. You want to get this part right when you first set up your YNAB Budget.
As a side note, its a good idea to go ahead and put ALL of your financial accounts in your YNAB, whether they be tracking or on budget. The reports function is really good at giving you a snapshot of where your net worth is, but its only as accurate as the accounts you have in YNAB. You can filter the reports to include or exclude accounts, but you cannot include accounts that are not already in YNAB. For this purpose, I set up Tracking accounts for our home and cars and just used the Zillow/market value estimate and Kelly Blue Book values and manually adjust them monthly. That might be overkill, though.
4) Are Your Accounts Working For You?
Do you have the same checking account you’ve had since college? Is your savings account only earning a penny in interest per month? If so, it’s a great time to change banks in order to make sure the money in the bank is working for you.
We’re big fans of Capital One 360 accounts. They are free, you can use the Capital One Bank Branches and ATMs for free, and you can transfer to and from the accounts immediately. This is great because we keep our House Projects fund in a separate 360 Savings account, and our contractor needed the first check so he could get started on our retaining wall project. I was able to log in move the money to my 360 Checking Account and the transfer was cleared immediately so I could write the check right then!
Across our 10 Capital One 360 Accounts (1 Checking, 6 Savings, 3 Kids Savings) we earned a little over $450 in interest in 2017! That’s a car payment for some people!
5) Plan Your Categories.
Take a look back at the last year of statements and figure out how you spent your money. Then, think about how you WANT to spend your money. What are those things you would like to do but never seem to have money for? Is it a shopping fund? Vacation? A New Car? College Savings? Whatever it is, make a category for it.
Don’t forget about things that you always forget about. What are those events that pop up where you never seem to have the cash? A new set of tires or a washing machine comes to mind. Make a category for those things so that you can start funding them now. That way, when they tell you its time for new tires, you already have the money to pay for them.
You don’t want to have too many categories, but you also don’t want to have too few. I like to group like things together, like electricity & natural gas into one category, but others like to track specific sub categories. Figure out what works for you.
6) Calculate Your Budget Amounts Per Paycheck.
Figure out your monthly spending per category, then, divide them by the number of times you get paid. That will be the amount you budget for each category, each pay period.
This works really well for things like utilities, rent/mortgage, and other items where you know the cost, or can figure out an average by looking at past bills.
For things that are more variable, like groceries, eating out, or other items, figure out an amount that is comfortable for you. This isn’t set in stone. You can always change it. In the YNAB community, that’s called WAMing or Whack a Mole. Went over on your grocery budget this month, but still have money in your eating out category? You can move the money from restaurants to groceries. It’s fluid.
Over the course of about three months, you’ll see where your spending naturally falls, and assigning jobs to your dollars will be second nature.
7) Get a Month Ahead.
This is Rule 4, Age Your Money. Pay this month’s bills with last month’s income. For some people, this seems like an impossible feat, but its not. I’ve got some tricks to accomplish this.
If you get paid 26 times per year (every other week), budget like you only get paid 24 times a year. This way, you’ll have 2 full paychecks per year that you can use to “buffer” or get ahead.
The other way is to set up a Buffer Category, and either fund the same amount each pay period, or put the leftovers there. Over time, you’ll build it up to where you have your buffer.
I don’t get a month ahead on everything when I set up my YNAB budget. I just concentrate on the mortgage & utilities. We also have a separate emergency fund as well.
Get Ready to Change Your Life!
Budgets can be hard to get used to. They are definitely a lifestyle change. But if you can set up your YNAB budget correctly the first time, it will definitely help you be more successful, and therefore, more likely to continue to use your budget. Hopefully, these YNAB Budget Tips will get you started on the right foot. After all, YNAB is life changing!
Check out our 4 year YNAB progress to see exactly how our lives have changed since using this system! Follow me on Instagram for a peek into my life and how I use YNAB everyday shopping in the real world!
Do you use YNAB? Are there any tips you would include? Let me know in the comments!
Get your budget started on the right foot by joining our Stacy’s Savings Weekly Savings Challenge!
Brian says
You had mentioned you use Capital one 360. With You need a budget, the true expenses are included. I personally would rather have those sinking funds in a seperate bak account, but that is not how YNAB works. Do you have any recomendations on how to handle that?
Stacy says
Hi Brian,
This is a great question, and it gives me an idea for my next budgeting blog post!
I 100% agree with you. For many of those sinking funds, its much better to have them in a Savings Account rather than a Checking Account. It can be tricky in YNAB, but I’ve found a way to make it work. It may be slightly different for you depending on your paydays. We get paid on the 6th & 21st, so one of those crosses the month. That makes it a little tricky.
Here’s what I do:
– I have 5 Capital One Savings Accounts. One reason I have 5 is to get around the 6 monthly withdrawal limit, but also, because I like to track some things in a separate account.
– All of these sinking fund accounts HAVE to be tracking accounts. You’re still budgeting this money, its just in a separate account. With a tracking account, you can transfer funds between tracking accounts without categorizing.
– Separate the categories for your separate savings account(s) into another “group”. I have mine under “Saved in Capital One Accounts”.
– Group the categories in that group by Savings Account. For example, my first 5 categories in that group all feed into my Annual Expenses Savings Account. The next 6 feed into my Variable Expenses Account. The last 3 each have their own savings account.
– Keep a notepad entry with those categories & keep a running tally of what you’ve spent in that pay period. This is my trick for not screwing it up with a pay period that is not exactly 1st & 15th.
– Only transfer money the day before pay day to pay the credit card bills. This way, you’re only transferring twice a month. On the day the money is transferred, your YNAB budget amount should match your savings account balance. By having your categories grouped together by account, you can easily add them up to match the balance.
I have an automatic withdrawal set up for each savings account to dump the sinking funds portion from checking to savings on the day after pay day. I keep sinking funds in my checking account that come out every month, like mortgage, utilities, and subscriptions, as well as more liquid things like groceries and household. My sinking fund savings accounts are for less regular charges, like Soccer Sign Up fees, vacation, car maintenance, as well as large balance items like car replacement and home improvement projects.
So there you go! That’s how I make that work. I’ll definitely do a post on that in the future. I’ll have to figure out when the right time is for that. I appreciate the question!
Good luck with your budget!
~Stacy