The Ultimate Guide on How to Use YNAB

If you’ve read my blog before, then you might know that I spent most of my life not budgeting, and really having no idea what budgeting even was. 

In 2019 I racked up over $20,000 in credit card debt, and found myself starting off 2020 completely in the hole. It hit me like a ton of bricks that something needed to change. 

I experimented with many different budgeting methods. You can read more about the top methods I tried here.

Ultimately, I stumbled across YNAB’s youtube page and found myself clicking with their system. 

Since then, I have learned the ins and outs of YNAB, and want to share what I have learned from trial and error with you!\

Disclaimer: this page includes affiliate links that help keep content here at the Avocado Toast Budget free and frequent! Thank you for your support. 

History of YNAB

I think it’s important to have a bit of background on the company you are working with, especially when it comes to something like budgeting that is so personal and important to your life. 

Jesse (the founder of YNAB) and his wife, Julie, were looking for a way to manage their money back in 2003. At the time, they knew that they wanted Julie to be a stay at home mom, so Jesse wanted a way to balance their finances to make that a reality. 

Ultimately, Jesse decided to develop a software, and ended up selling it to friends and family.

Over time, that software grew from a small side hustle to a full grown business.

Now YNAB offers not only their budgeting software, but they also have an entire method, YouTube channel, podcast and daily workshops to help you budget.

Now YNAB has over 21,000 users who save an average of $6,000 in their first year of budgeting with YNAB. 

YNAB Method

I mentioned that YNAB method, but what does that really mean? 

With YNAB, you not only are provided a budgeting software, but they also have 4 rules they have implemented in order to help you save more money and get out of debt. 

Rule 1: Give Every Dollar a Job

The founder of YNAB, Jesse, often mentions when talking about the four rules, that they all pretty much come back to this one, give every dollar a job.

If you have any experience with budgeting, or have been looking into budgeting methods, you may have heard about the concept of a zero-based budget. 

Giving every dollar a job is just like a zero-based budget. Once you get paid, you allocate every single penny you have toward a category. 

This gives your money purpose and meaning. 

You are never left with a large sum of money sitting in an account wondering what you are going to do with it. With the YNAB method, you KNOW where each of those dollars is going. 

This makes sure that your money, and how you budget it, is aligned with your goals and what is most important to you. 

Rule 2: Embrace Your True Expenses

YNAB is big on true expenses. In fact, when you start your first budget, they have a whole category of possible true expenses you might want to include in your budget.

You might be thinking “Okay that is great. But what is a true expense?”.

True expenses are all of the non-monthly expenses that we KNOW will happen eventually, but often forget to budget for. 

If you know what sinking funds are, they are similar concepts. YNAB encourages its users to start saving monthly for all of the non-monthly expenses in their life.

This way, you are less tempted to use a credit card for big purchases and less things become “emergencies” because you have planned for them. 

Here are some examples of True Expenses:

Christmas

Car maintenance 

Pet vet bills

New car

Birthdays

Back to school

Vacation

Annual subscriptions

Medical copays 

Rule 3: Roll with the Punches

YNAB is all about flexibility. Your life is never normal and never goes as planned, so why should you expect your budget to be stagnant? 

Rolling with the punches is all about understanding that your budget can and should change with your life. 

If you overspend, you shouldn’t feel bad about it or feel like a failure. YNAB easily allows you to cover overspending in one category with money from other category.

Just roll with the punches and move on. 

This prevents you from feeling frustrated with your budget, and will hopefully keep you budgeting for the long run! 

Rule 4: Age Your Money

The way YNAB works, they want you to increase the amount of time between earning your money and spending it. 

You know that feeling 5 days after payday where you felt rich 4 days ago, and now you realize you only have $5 to your name before you get paid again?

Yeah, me too. YNAB wants to change that. They are all about aging your money to break the paycheck to paycheck cycle.

They even have a counter on the top of your budget that shows you the age of your money.

How old your money should be depends on a lot of factors, but ultimately rule 4 wants you to focus on widening that gap between money in and money out. 

How to Get Started with YNAB

Log in here and create your free account! YNAB is free for the first 34 days, no credit card required.

Download the mobile app. I suggest that you set up your account on the desktop, and use the mobile app for on the go. 

Click on the top left corner to start a new budget.

Give your budget a name and choose the settings! 

Go over to the left sidebar and add an account. This can be linked or unlinked. I recommend starting with unlinked and linking your accounts later once you get the hang of the system.

It will ask you to put in your account balance. Add in any bank accounts and credit cards that you have.

Decide on your categories. YNAB gives you some suggestions, you can delete those and create your own, or edit them to mix it up. 

How to edit a name:

How to delete a category:

How to delete an entire category group:

How to undo a deletion or mistake:

How to add a category group:

How to add an individual category:

Example of my budget:

Add goals to your categories:

YNAB has 3 types of goals.

Needed for spending: this is perfect for groceries, monthly bills, rent, etc. You can spend from this along the way. 

Target Savings Balance: Save amount over time and take from it if you need. Think emergency fund, moving costs, down payment on a house etc. 

Monthly Savings Builder: perfect for savings goals without an exact number. Just add some to it every month until you reach your goal

Give Every Dollar a Job

Once you’ve create goals for your categories, you can start to give every dollar a job. It’s okay if you don’t have enough to cover all of your goals in full, just make sure you prioritize your budgeting. Remember, you can always move things around later. 

Here is how to fund categories based on your goals:

Here is how to manually add/change your budget target for each category:

Once you get the “to be budgeted” number down to zero, you are good to start budgeting! 

Here is a glimpse at tracking your expenses in YNAB:

That’s the basics for starting your first budget! Here are some other features that YNAB has to offer.

Credit Cards and YNAB

Personally, I love how YNAB handles credit card spending. You assign that spending to a category, just like you would for spending from a debit card. 

YNAB will alert you if you have overspent on your credit card and don’t have enough in your budget to cover the expenses. 

They also have a way to track your credit card debt payoff process. If you ever have any questions about using credit cards, they offer workshops on how to use credit cards with YNAB. 

Once you get the hang of it, it makes perfect sense and is really easy! 

Related: How I Paid Off Over $20k in CC Debt in a Year

Investment Account and YNAB

To be honest, there are no special features with tracking your investments in YNAB. YNAB is worried about being the best budgeting software out there.

And let’s be real, there are so many other awesome investment apps out there that specialize in investing. For me, that is totally fine. Use YNAB for what it does best, budgeting.

YNAB won’t give you much insight into individual investment accounts in terms of modifying the account, but it helps you keep track of your net worth and watching your investments grow! 

YNAB Reports

In YNAB, there are three different reports that they provide: Spending, Net Worth, and Income vs. Expenses

Spending

The spending report gives you a nice visual of what categories you spent money in through a doughnut chart. It’s a nice way to glance at your spending and see if it is aligned with your overall goals and what is important to you. 

There is also a spending trend tracker in the form of a bar graph so that you can compare your spending month to month.

This is a great report for a quick glance at your budget overall.

Here is an example of mine from June-August:

Net Worth

The Net Worth report tracks your assets – liabilities according to the information you have given YNAB.

While it doesn’t take all of your assets into account outside of investment accounts and your bank accounts, it is a nice way to see if your net worth is generally going up or down. 

It compares your net worth between months that you have been using YNAB. 

Income Vs. Expenses

This report is much more detailed than the other two. It breaks down all of your inflow and outflow each month per the categories they were assigned. 

This is great at getting an up close and personal look at your budget for the month and also across months. 

There is a breakdown of each individual transaction so you can compare your income vs. expenses.

Pros of YNAB

1. Provides free webinars and YouTube videos to help you learn the system and create more efficient budgets
2. The 4 rules make budgeting easy and flexible
3. Provides linked and unlinked accounts for you to decide how you want to import expenses
4. App allows you to input expenses on the go
5. Budget only the money you have. Rather than assuming you will get paid a certain amount and risking the chance that your payment may not happen, with YNAB you only budget what you have.
6. Allows you to create an unlimited amount of budgets for starting over and creating new budgets for small business, joint accounts, etc. 

Cons to YNAB

1. There is a learning curve to understanding their system and how to use the software
2. Some banks won’t link so you would have to go with the unlinked option (in my opinion, unlinked is easier to keep up with anyway. It’s good to get in the habit of inputting all of your expenses).
3. Does not give you information about making different investment decisions. The investment part is pretty basic. 

My Thoughts on YNAB

Honestly, I absolutely love YNAB and don’t see myself switching to any other software anytime soon. I tried Mint, and it just didn’t make sense to me. YNAB clicked with me and I have saved SO much money since I started using it. 

I truly believe that I hit the financial goals that I have due to YNAB. I have learned so much about my finances and budgeting, I would highly recommend YNAB to almost anyone. 

In less than 2 months I saved over $6,000. Yeah, I know. Crazy!

In contrast, pre-YNAB I had no savings and tons of CC debt. 

And now, I feel confident using credit cards with YNAB. So I can use credit cards to my advantage now! 

If you’re thinking about trying YNAB, click here to get 34 days free with no risk and not credit card info needed!

Let me know if you need help or have any questions!