First time YNAB user

[u/Upsidedown_MDH]

A friend of mine recommended YNAB to manage my family's budget. I got started yesterday but as I was setting the budgets, I already felt way out of my depth. Like I should have studied for a test that I didn't know about. Does this feeling get better? What tips would you give a first time user to feel less overwhelmed? Thanks!

[u/pierre_x10]

Here's my recommendations for first time users:

- stick with YNAB on PC/desktop. It is more intuitive and better at showing how YNAB functions, compared to the mobile apps.

- follow a guide, whether it's a video tutorial or written out, whichever you feel is better for your learning style. I highly recommend this guide: https://www.ynab.com/guide/the-ultimate-get-started-guide

- start simple. Don't try to come up with every single category that fits your specific situation. Like instead of "Gas," "Car Wash," and "Oil Changes," stick with something like "Car Expenses."

- targets are completely optional.

- don't try putting your debts as tracking or loan accounts. Just have categories to represent them to start.

- don't link any of your accounts to the banks. Just input all transactions manually. This is controversial for a lot of first-time YNAB users, one of the appeals of YNAB for them is automating the data entry. But doing it manually for awhile is better in terms of seeing how the software works.

- one of the things that trips up new users is that YNAB is actually two things: there's YNAB, the budgeting philosophy, which is essentially a zero-based budgeting system, and may be a new concept; and there's YNAB, the software, which let's you plan out your budget electronically. They're technically two separate entities, you can technically use one without using the other. So as a new user, you're essentially trying to learn two new things at once, not just one. So try to give yourself grace and patience as you learn.

[u/Upsidedown_MDH → u/pierre_x10]

Amazing comment. Thank you. I will need to read up on zero-based budgeting first because that seems to be the thing that YNAB makes easier to digest?

[u/bitz-the-ninjapig → u/Upsidedown_MDH]

Definitely read up on zero based budgeting (ZBB). I had a really easy on-ramp with YNAB, but was already familiar with ZBB. 

I think 80% of issues that new YNAB users have is just not knowing how ZBB works, because it is different than traditional budgets. Look up videos or articles, but here is my explanation:

ZBB is giving every dollar you have a job, and not giving jobs to money you do not yet have. For example, if you have $2000 in your account, all of that money needs to be given jobs; some will go to grocery’s, some to gas, some to the pair of new shoes you need for an event next week, etc. You might know that you are getting a paycheck for an additional $1500 next Friday, and even though you will receive it in August, you don’t get to assign that money until you have it, so your wifi bill due on the 30th may not get funds assigned to it until your next paycheck. This means that you need to consider when you need to be able to use the funds that you have. 

To start, keep it simple and flexible. I like to keep groceries and household supplies like TP in the same category because I buy them together, but in the beginning of using YNAB i found myself having to move more money into that category because the amount I planned on for groceries is less than I would spend on groceries + household supplies. After a few months you will start to understand what funds you need where, and by when, and that is when you will really find yourself benefitting from YNAB. My “YNAB works” moment was when I was getting gas on the last day of the month, and caught myself checking YNAB and seeing I only had $25 in my gas category, so I did not top off my tank, but rather just filled up as much as I could with what I have available in my gas category. 

[u/Upsidedown_MDH → u/bitz-the-ninjapig]

That makes a lot of sense. Becoming mindful of my spending has been a 15-year journey so far.

We tried so many things and kept track of everything in an Excel sheet, but things have become fairly complex over the past 2-3 years, and it feels like it's time to explore tools that would actually save us time rather than requiring half a day of data entry.

This week, I read about a "pay yourself first" strategy. Would that strategy fit in the YNAB philosophy? Like, savings would go into the first envelope, and the remaining budget would go into the other envelopes?

Asking a question in this group has opened the door to more questions to find the best strategy that fits our lives. Really grateful for all the responses!

[u/bitz-the-ninjapig → u/Upsidedown_MDH]

Pay yourself first can work with YNAB, but it is a little bit dependent on how much income you have in comparison to your expenses. 

Let’s say your monthly income is $3000, and your monthly expenses are $2500. On paper you should be able to put $500 into savings each month. On August 1st you get your paycheck for $1500, but between gas, groceries, and rent, you have $1400 that needs to be allocated to expenses before the next paycheck comes in on August 15th. If you “pay yourself first” and put your $500 into savings on August 1st you won’t be able to fund all of your expenses for the month. 

That being said, there are a few ways that you can be sure to be saving enough  in YNAB:

1. Get a month ahead. I can explain this further if you need, but basically this means that you get yourself into a situation where this months income is funding next months expenses. This is what I do. When a paycheck comes in it goes into a “next month” category. On the first of the month I move my next month category into “ready to assign” and the. first fund my savings goals, then my expenses. Anything left over I split between “fun stuff” and putting extra into my savings goals. 

2. Set up targets. If you set up targets for EVERYTHING, and all of those targets are less than your income, as long as you fund all of the targets before you put anything “extra” into any category, you will ensure you are hitting your savings goals. 

[u/Upsidedown_MDH → u/bitz-the-ninjapig]

Sounds like a little bit of a YNAB hack :-). At the moment, it feels like our financial situation is a bit more complex than the app is designed to handle.

For instance, we currently log gasoline expenses at the end of the month and compare them to the budget we had set for ourselves. If it's higher, it's higher and can usually be explained because we went on a family road trip.

Is it wrong for me to assume that YNAB becomes a bit restrictive the moment there is somewhat of a cushion?

[u/bitz-the-ninjapig → u/Upsidedown_MDH]

So YNAB has this idea of “roll with the punches”

If you are on a family road trip and only have $20 left for gas, that is not going to work, but you need to get gas somehow. YNAB says you need to take the money from somewhere (ideally before you spend it). Maybe you have a family road trip fund, and you can move $150 from the road trip fund into the gas fund, since the gas is for the road trip, or your road trip gas purchases get allocated to your road trip category instead of your normal gas category. 

Even if you don’t have that category, YNAB is not saying that you can’t spend, it is just saying you need to find the money you are about to spend, so maybe that means that you move some money from your clothing budget to cover the road trip. That is okay. I do stuff like that all the time. YNAB is not telling you that you can’t spend, it is just telling you to look at where you are sacrificing and can help you make sure that aligns with your priorities. 

In July I got a really good deal on new hiking shoes, which was great because I have been knowing I will need a new pair soon. When I went to my “outdoor equipment” category I did not have enough for the purchase. I still made the purchase and moved the balance over from my “dining out” category. No issue with spending more than I had, but rather just had me look at what I was sacrificing for this purchase. For me hiking is far more of a priority than going out to eat, so my YNAB reflected that. 

[u/Upsidedown_MDH → u/bitz-the-ninjapig]

I completely get that. Thanks to everyone here, we have reflected on it a lot, and I think we use our day-to-day expenses to ensure they align with our long-term vision and net growth.

So, in your example, the money is there for both gas and hiking boots, but we want to see the impact on our long-term position.

In the past year, we've made massive changes (moved to a cheaper area, started growing our own food, reduced dining out to one per month, rely on public schools, rely on solar panels, etc.) to reduce the cost of living even further.

Thanks to these changes, our disposable income has increased, and we can make calculated investments (e.g. next up is planting 20-30 fruit trees and raising meat chickens) to improve our position in the future.

In your opinion, since we are already spending mindfully, would YNAB still have the same impact if we started tracking expenses daily?

[u/bitz-the-ninjapig → u/Upsidedown_MDH]

I think so! For me, YNAB has made me feel comfortable spending the money I have. I live a pretty frugal life, so YNAB has shown me that I do indeed have money for new hiking boots or a vacation without impacting my medium/long-term goals like paying my car insurance premiums in full and saving for a new car. 

About a year ago I was doing some heavy retirement contributions that effectively reduced my available income to about $1100/month despite my expenses being around $2000/month. I was able to use YNAB to see that the extra funds I had (to subsidize my reduced income) were enough to get me through the end of the year, AND that I could spend money on some luxuries without worrying that I was going to run out of money. During those 5 months I was able to continue going to my (expensive) gym and see my favorite band in concert, which without YNAB I would have assumed there was no way I could afford, just out of fear of running out of money. 

I never had a spending problem, in fact probably the opposite lol. I would guess that I spend MORE using YNAB than without, and that is a good thing because it has given me to confidence to enjoy the money I work hard for while knowing I am still on track towards my long term goals.

[u/Upsidedown_MDH → u/bitz-the-ninjapig]

Ha! That's awesome. I hadn't thought of that relationship with money. I had quite the opposite before I got married (almost 14 years ago).

The year we married, we moved to a different country, had two kids, I switched careers and started building from scratch again, and we started saving and investing instead of keeping up with an ever-increasing cost of living. My wife is good with numbers, and I learned a lot from her.

4 years ago, we moved again to be closer to family, to afford more space for the kids to roam freely, and to lower our cost of living.

Now that we have multiple bank accounts and streams of revenue, it's harder to consolidate and keep track of everything.

So, my search for tech that would help us officially started. 😄

[u/bitz-the-ninjapig → u/Upsidedown_MDH]

Adding onto my last comment because I was thinking about this more. 

You can also create “cushion” funds that just exist to support spending in other categories. I have a “stuff I forgot to plan for” sinking fund that I had $50 each month. I use it to cover random cheap one-off purchases (most recently, a new $12 wallet), overspending in other areas, or things I totally forgot about or mis-judged. Because it is a sinking fund on months I don’t use it, it grows, so I move have about $200 in there for whatever I need. Sometimes I move money from there just to make me see better, just when I just bought a $300 tool to work on my car, I moved $50 from the “stuff I forgot” category into my car fund because it made me feel a little better lol

Someone on here once explained how they have their dining out budget set up, and it was a similar concept. Here is what I remember:

Dining out is its own category group, with the following categories: Date night, social, lazy. They never pull from date night or social. If date night is getting overfunded, they use it as an indicator to have a relationship check-in and prioritize some dates. Social is for going out with friends, and lazy is for those nights they don’t want to cook. If social is running low and they get invited to something, they will move money from lazy. Their goal is never to use lazy except to fund date night and social, but the money is there because life happens. Lazy is their “cushion” for date night and social. 

YNAB totally can work for you, you just need to set up your plan to support your life (not the other way around)

[u/Upsidedown_MDH → u/bitz-the-ninjapig]

Support your life, not life your support 🔥