Thoughts on (Almost) a Full Month of YNAB

I’m just about finished with my first month of YNAB, and I love it. It’s such a different way of thinking about budgeting and spending — I’ve already written about how YNAB’s “give every dollar a job” method turns your available income into a financial runway, so I’m not going to recap that idea here, but I will share three more lessons I’ve learned over the past month:

It’s okay to spend

So the big thing with YNAB is that you set up your anticipated spending by category, both in terms of what you plan to spend this month and what you hope to spend in the future. In other words, your monthly budget might include $40 for the internet bill that’s due on the 15th and $50 for the vacation you plan to take next summer.

Then you start actually buying things, and as you go through the month you discover that you’re spending more in some categories and less in others. Which, in YNAB, is no big deal — in fact, it’s literally Rule #3: Roll With the Punches. You’re supposed to be tweaking and updating your budget in real time, and you can use the underspending in one category to cover the overspending in another category.

This creates an environment in which it becomes okay to spend, as long as you are satisfied with where your money is going. Other budgeting softwares reward either A) spending as little as possible or B) spending exactly what you budgeted in every category — and the latter, at least, is not realistic. (Who else has updated their budgeted amounts just to get the budgeting software to stop giving them a bunch of red icons?)

In the past, I’ve been a proponent of “spending as little as possible,” but with YNAB there’s no particular reward for doing that. Instead, you’re asked to give those unspent dollars new jobs. YNAB switches the budgeting concept from “how much can you save” to “how are you going to spend what you have?”

It’s a completely different mindset, and I love it.

You have to be aware of how today’s decisions affect the long-term

If YNAB has one flaw, it’s that you don’t get a good picture of how this month’s spending affects next month — or six months from now.

Here’s an example: I completed my ACA application last week, which means that I now know my health insurance premiums for 2019. (More on that tomorrow.) Since I have a decent financial runway, I’ve already got dollars doing jobs in 2019, including the job of paying this monthly premium.

When I went into my January 2019 budget and gave more dollars the job of paying my health insurance premium, YNAB did not send up any flags letting me know how this change would affect me long-term. There wasn’t any message like “okay, here are the jobs, further down the road, that these dollars are no longer doing.”

This is less of an issue for something like a health insurance premium, which generally has to be paid, than it is for something like overspending on restaurants (or buying more holiday gifts, or whatever). YNAB will let you pull money from another category within the same month to cover that overspending. It’ll also let you pull money from next month, assuming you already have enough money in your accounts to cover next month’s expenses. What it won’t do is tell you “if you spend an extra $150 now, you won’t have enough to cover rent in February.”

This is probably because YNAB assumes that you’ll earn more money between now and February, and you can always tab over to February’s budget to see which jobs are no longer being covered by dollars — but I wish it were a little easier to make that connection.

Still, YNAB is the first budgeting software I’ve used that acknowledges this connection even exists; that if you spend more now, you’ll shorten your long-term financial runway, and if you spend less, you’ll extend it.

You still have to do the work

Just like productivity software can’t actually make you do things, YNAB can’t actually get you to spend in accordance with your budget. It’ll tell you when you’ve overspent, but it can’t physically stop you from swiping your credit card (and then having the cashier remind you that they’re all chips now, you don’t need to swipe anymore).

Which means that it’s really easy to tell yourself that you’ll take money out of your vacation goal to buy this other thing you want now, because now is now and your vacation hasn’t even been scheduled yet. (Yes, that was me this month — but I managed to cover the overspending by spending less in a different category, keeping my vacation goal intact.) I’m guessing it’s just as easy to spend more than you earn, if that’s your particular financial issue. YNAB isn’t going to stop you.

So you still have to do the work of monitoring your spending and making sure your choices match your needs and goals — plus, since YNAB lets you give dollars jobs now even though you might not spend those dollars for another year, you have to be very committed to making sure those dollars keep their jobs. (Don’t fire your dollars! Keep ’em busy and then take ’em on vacation!)

But I still love YNAB, so very much more than my previous budgeting software program. If you’d like a YNAB of your own, use this affiliate link to get two months free. If you already have YNAB, have you been tempted to take money out of your long-term goals to buy non-essential stuff you want today? Also, do you keep track of how this month’s spending affects six months from now?

Photo credit: YNAB.

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