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With a cult-like following, YNAB (stands for “You Need A Budget“), which started as a custom spreadsheet, has turned into a complete budgeting solution, helping users “save over $6,000 in their first year using the software!“
But is all the hype true?
I've been using YNAB for over a year, and wanted to give a fair and honest review, so keep reading to see if YNAB is the best budgeting app for you!
What Is YNAB?
YNAB is the brain-child of Jesse Mecham, a spreadsheet nerd (like myself) who built his budgeting spreadsheet in 2003, and started selling it. After 3 years, he partnered with a developer and created the first stand-alone software version of YNAB.
It grew quickly, and based on their 4 Rules of Budgeting, has helped thousands and thousands of people take back control of their money.
How Does YNAB Work?
YNAB is a zero-based budgeting software that gives you (almost) complete control of your budget, and is probably my favorite budgeting software on the market today.
It requires you to ONLY budget money you actually have, and to give every dollar a job. And it is built on the principle of “living on last month's income”, which is exactly what I teach others to do in my Personal Finance 101 Guide.
YNAB is designed to follow the Four Rules Of Budgeting
Rule # 1 – Give Every Dollar A Job
This rule is simple. Every dollar you bring in has a job.
Most of this will be toward your expenses (bills, spending, debt, etc.). The rest goes toward your Savings Buckets and Goals.
This is what it means to create a “Zero-Based Budget”, since your “To Be Budgeted” amount should equal ZERO after giving all dollars a job.
And speaking of Savings Buckets…
Rule # 2 – Embrace Your True Expenses
This rule is the idea of budgeting ahead for infrequent expenses. Things like Christmas, Vacations, Car Maintenance and other non-monthly expenses can be real budget busters, but if you save for them ahead of time, the money is always there when you need it.
Here's how it works:
- Pick an irregular expense (like Christmas) and figure out how much you need monthly to save for it
- Create a Goal to fund it monthly
- When the expense arrives, simply pay for it (the money is already there)
You can read more about how I fund Savings Buckets HERE
Rule # 3 – Roll With The Punches
This is where I find YNAB is the MOST useful. They let you budget how REAL LIFE works.
When you overspend in any category, you can simply adjust your budget, and grab the funds from somewhere else in the budget. We'll cover this in more detail later, but YNAB makes this SUPER simple, simply allowing you move money from one budget to another.
Here's the bottom line: No budget is perfect, you can't predict the future, so roll with it, adjust, and move on!
Rule #4 – Age Your Money
This concept seems a bit abstract, but it simply means you want to live on last month's money.
I preach this ALL. THE. TIME., as the first taste of Financial Freedom comes when you no longer live Paycheck to Paycheck, and can get ahead of your money!
They built this feature into the software, and you can see your current “Age of Money” in the upper right corner of the web app (or “Reports” section of the mobile app).
YNAB Features
YNAB is a robust budgeting software, and allows you to customize almost anything you want. It is the budgeting system that most closely mirrors how your transactions and money ACTUALLY work in real life. Here's an overview of the features and how they all work together.
Budget
This is the heart and soul of YNAB. It is a VERY well organize budgeting system, that works the way your money works in REAL LIFE.
YNAB does NOT allow you to budget money that you don't have, and is a “Zero-Based” budgeting system that is built to assign every dollar to a category.
You can set your budget up on the Mobile App, but I find it far easier (and quicker) to do this on the desktop currently.
Once your budget is set up, you can do most everything through the YNAB App (I don't use the desktop for months at a time, the app is really THAT powerful).
Here's a sample of what it looks like:
One great feature of YNAB is that it will NOT let you overspend. Here's what it looks like if you do:
YNAB turns red when you overspend in any category, and then forces you to cover that overspending from somewhere else in the budget. This is a POWERFUL feature that I have not seen in any other app yet.
Reports
YNAB doesn't have as robust a reporting section as Mint, but the web app definitely has improved over the years.
You can see your spending totals & trends and track your net worth over time. The most powerful feature (in my opinion) is the “Income v Expense” section where you can see your income and spending in EACH CATEGORY over a specified period of time. This allows you to see a breakdown of your year in detail, and see how your expenses fluctuate month-to-month in every category.
The mobile app only shows you your “Age of Money” and “Net Worth”, which is kind of worthless in my opinion.
Accounts
YNAB used to require you enter all your transactions manually. But the move to YNAB 5 and the web-based budget also added the ability to sync with your bank accounts.
Adding accounts is simple, and you can sync with most major financial institutions. Simply find your account, enter the online login info, and YNAB will sign in and pull in your account data.
You can choose from “Linked” or “Unlinked”, but if you're paying for this app, I don't see why you would bother not linking your accounts.
YNAB also gives you the option of adding accounts for “Tracking” purposes only, like investment accounts or a mortgage. This is to help keep track of your net worth, but I use Personal Capital and Mint to track my investments and net worth, as they give a MUCH better picture on how I am tracking toward retirement.
Goals
YNAB does not have a separate section to track your goals, they are built into every budget category. I like this method, as it allows you to create a goal amount for everything in your budget.
YNAB has two type of goals, “Spending” and “Savings” goals.
For infrequent expenses such as Christmas, Vacations, and Property Taxes, you would use “Spending” goals, because the money will be spent during the year.
For larger goals like buying a new car, a house down payment or maxing out a Roth IRA, use the “Savings” goals feature.
To set up a goal, simply click on a category, and on the right side select “Create (category) Goal”. Then input the total amount you want to save, and select a method to track and input the date you want to save by.
This will automatically tell you how much you need to save each month to hit the goal!
Example Spending Goal:
As you can see, YNAB will tell you exactly how much more you need to budget each month to stay on track for hitting the goal.
This is a great tool for helping you hit those short and long-term goals, by breaking them down into smaller chunks that you can save for each month.
Investments
YNAB does not help with your investments at all. The most they can do is track the transactions and balance of your investment accounts, but give no other information here.
And this is OK, because YNAB is designed for one thing; To be the best budgeting tool around.
This is why I always recommend Personal Capital as a great companion app for YNAB (or any other budgeting app). It's a free service that give LEGIT helpful insights into your investments, and helps you see if you are on track toward retirement.
Personal Capital is free, give it a shot!
Making A Fresh Start
There's not a lot to set up, YNAB is pretty focused on making this a great budgeting experience. But one tool in the settings that can help is the “Make A Fresh Start” option.
If you select this option, it will save an archived version of your current budget (which you can open later if you need to), and then opens a new budget. This new budget keeps many of your old settings:
- Account Names
- Scheduled Transactions
- Goals
- Notes
- Payees
- Categories
- Account connections
But transaction data and budgeted amount will disappear.
I've used this feature on the old YNAB software (YNAB 4) when I would get behind on transactions, but since my financial accounts are now synced, things pretty much stay up to date.
I recommend using this feature if your life and priorities are drastically different than before, and you just need to start anew.
How Does The YNAB App Work?
The YNAB App got a HUGE upgrade when YNAB released their web-based platform update in 2018. Since then, I have almost NEVER needed to log into the website on my laptop for anything to keep my budget up to date and on track.
Once you download the App (available for iOS and Android), simply log in to your account, and open your budget. If you haven't created one with your account yet, check out my full tutorial on How To Set Up A Budget In YNAB.
You can also create a NEW budget right within the App if you want (though I prefer setting up your first budget on the website).
There are 5 Main Sections within the App.
Budget
This section is where you will see the actual budget, and is the main homepage of the app.
You can quickly get a pulse on your money, and see how much you have available in each category. YNAB is also great about HUGE INVASIVE NOTIFICATIONS when something is wrong in your budget.
As you can see above, I accidently overspent somewhere, and YNAB will not stop bothering me until I do something about it.
I. LOVE. THIS.
This is how YNAB helps you change your behavior and deal with overspending in REAL TIME without going further into debt. You simply tap the notification, then on the overspent category, and pull money from somewhere else in the budget.
MAGIC!
Accounts
This is a list of your accounts that you have connected to YNAB. You can easily edit or add more accounts on this page. It's also a quick snapshot of you total financial picture, and if you have EVERYTHING connected, will show your Net Worth as well.
This is also where you troubleshoot issues with LINKED accounts, and reconnect to your financial institution if needed (notice the yellow Triangle next to my credit card…)
Transaction
This tab is the “add a new transaction” section, and is the most frequently used button in YNAB (IMO).
To successfully add a transaction, you need the following info:
- Amount (hit the upper-left toggle to switch between expense and income)
- Payee (where you spent money)
- Category
- Account (what card did you swipe?)
- Date
- Repeat? (for recurring transactions)
You can also input some notes, and for you visual learners, you can color-code each transaction as well!
YNAB saves every place you input under “Payee”, so you can select from a list once you shop there again. We frequent many of the same places, so it's a time saver to have that list.
It also remembers categories for those places, so it will auto-categorize the next transaction when you shop at the same place.
YNAB also lets you “Split” Transactions, meaning you can take a single transaction and split it between multiple categories. This helps keep things organized in the budget, instead of holding up the checkout line while splitting your items into 3 separate purchases (…. anyone else…. no?…..just me then….)
You can add as many categories as you'd like, and even multiple transfers (though I cannot imagine the insanely complicated singular purchase that would require this….).
Reports
This section only shows you 2 things. “Age of Money” and “Net Worth”.
I think this section is mostly worthless, and the only value I see is tracking your “Age of Money” to get yourself a month ahead of your expenses.
But you can also just set a Goal in the app for a month worth of expenses, and track it there too.
Help
This section connects you to the YNAB documentation. YNAB has a pretty robust database of Help docs, and they are very user friendly.
But if you need HUMAN help, you can select “Message Us” and you can chat directly with YNAB support staff.
The YNAB staff is limited, and will only reply when available (read: not 24/7), but they are YNAB experts and happy to help find the answers needed if you ever get stuck.
I've only ever contacted them once, but no one was available, and I got an email reply with the answers needed, so it was a pleasant experience.
App Summary
Overall, the YNAB App is really impressive, and powerful to keep you on track with your budget. There are a few worthless features (ahem…. reporting), but it does its main job (Budgeting) EXCEPTIONALLY WELL.
This is why I still personally use YNAB today for my day-to-day budgeting, and highly recommend trying it out to anyone who wants a budgeting system that works.
8 STEPS TO START A BUDGET IN YNAB (FOR BEGINNERS)
Now it’s time to roll up your sleeves and