Are you tired of the traditional budgeting that practically feels like a failure at the end of every month? Moving away from it is definitely the right decision that you have made. So, now when you are looking for better and effective ways, we might introduce you to the YNAB and how to budget savings in YNAB.
Wondering What YNAB Is?
Simply put, it stands for You Need a Budget. Keep in mind that our goal is to devise a budget plan that makes you control your money instead of driving it the other way round.
As YNABers, we consider money in a different sense down here. We all know that traditional budgeting involves making categories of different expenses and putting a certain amount of money in each of them. However, there had been no restrictions on us – and we pretty much messed it all together.
Hence, what we need is a more intuitive and foresighted budgeting model. What YNAB does is that it assigns the money to your chores even before you have spent it. So, whenever it does not feel right, you can call all your money back at any time. Sounds assuring?
The Four Rules of YNAB
Just as YNAB gets you to set goals, it also has its rules that guide us on how to budget savings in YNAB. The four rules of YNAB are as follows:
1. Give every dollar a job
It involves allocating a specific purpose to literally every dollar that you earn. Add it to your savings if it’s extra, but use it! In this way, you will have a plan to keep you in line. This will act like a restraint keeping you from spending too much on unnecessary things.
2. Embrace your true expenses
The second rule demands you to accept the expenses that you have to bear. Because even if you stress over them, you still have to pay them. So, break off your extensive and less-frequent expenses into smaller and manageable parts and deliver them without even realizing it in a series of months.
3. Roll with the punches
Give yourself enough space to move some money around in case you need to spend a little “extra” some month. Anticipate and adjust the spending, and stay on track every month. We understand how the expenses tend to pile up, and it is always challenging to manage an unavoidable expense that gets you by surprise. So, prepare for it even before it strikes!
4. Age your Money
Be consistent about spending less than what you earn – and prepare for tomorrow. That’s the key to successful budgeting. As long as you keep the money in your pocket, you will realize that you feel safer and comfortable. Hence, this will help you develop the habit of saving before spending on things that can wait.
4 Steps to Budget in YNAB
There are three critical steps on how to budget savings in YNAB and not only the savings – but the other categories as well. Follow the steps below, and you will find them very convincing.
Step 1: Fund the Budget Sources
General budgeting is hectic and not a fun thing to do (who likes to think of spending money with so many restraints). But the good point is, YNAB budgeting is nothing like a traditionally tedious budgeting process. It’s super exciting and fun too.
So, first things first, you are going to add your accounts that will fund your budget. This can be your current account, savings account, credit cards, cash, etc. You can link or unlink your accounts any time you want. You give YNAB the permission to import data from your accounts – it cannot, however, use the amount without your consent.
Moreover, the best thing about YNAB is that you can manually do the transactions and budgeting on the YNAB principles. The advantage of this is that you are aware and always in charge of all the transactions that you have made.
On the YNAB software dashboard, you want to find “Add Account” on the left side. You have two options here – having linked accounts or unlinked accounts.
Linked accounts directly link with your bank and get data of your transactions, while unlinked accounts require you to enter the transactions manually. Additionally, the unlinked account lets you have a better insight into your budget and how much you are spending, and where.
You can set up your credit card with YNAB as well. It will ask you to do a couple of things before getting started – like creating a goal to pay the balance or budgeting for the entire balance – or maybe just skip it for now. You will have two options to choose from
● Paying off over time
● Paying off the credit card every month
Step 2. Set up the Budget Categories
The next step is setting up the YNAB categories for efficient budgeting. You can either enter your own budget categories – or just go with the ones set up by YNAB itself. Don’t worry – you can change or alter them later if you want.
In my opinion, naming the categories with due dates is a better way of categorizing the expenses. For example, if your student loan is due on the 1st of every month, you can name this category as “Student Loan.”
However, don’t forget to set a category for the savings, and the article will explain how to budget savings with YNAB in the latter part of this article.
Since we can’t fund all of our categories at once because of the little money that we have, we might prioritize the things and let them get financed accordingly. Moreover, even without assigning the money, we can set out the goals for different categories. This will remind you about the coming expenses while you have sufficient time to make arrangements.
Step 3: Budget your Money
Now when the accounts have linked and the categories are set, let’s come to budgeting them. Make sure that you control every single dollar that comes into your account.
So, in the beginning, your money will just be a whole figure in your checking amount. However, as you will assign it into different categories, the central figure will change, subtracting that amount from the main one. You’ll keep it down until your budget down to zero!
Now you have to prioritize the categories. Decide what is more important and what can wait for a while. For example, you need to pay the rent, get groceries, pay the bills, and a birthday gift to purchase for a really close friend. Assign how much money you need for these chores.
If some of your money goes for your insurance – or any other fixed charges, you can earmark your money to one particular category. Each time you get your salary, you will allocate the funds to different classes.
Step 4: Budget your Saving
For some people, savings are not that important. But every wise person needs to know the importance of savings and realize why he needs to save. Putting a certain amount into a separate place just for the purpose is way too “boring” and uninteresting. So, how to budget savings in YNAB effectively and interestingly?
Here is the answer: saving money with YNAB is something else. It explains savings as designating a specific amount of your money for using later in time – for anything like buying a phone, a television, or even to fund a trip. Isn’t it more compelling? Now you have a good reason to “save.”
Making a YNAB transfer to savings accounts from one of your checking accounts would not require a category change or anything in your budget. However, if you transfer the money from the “To be Budgeted” category – the amounts will change.
What if Things Go Wrong?
If budgeting were this easy that you tell every dollar its job and it performed it, we’d have lived a relatively peaceful life. But the reality is quite different. We tend to overspend and regret it for the whole month.
Hence, YNAB saving goals somehow save you from doing this. It shows red and orange numbers before the situation is out of your hands. Whenever you see the RED or ORANGE numbers, you should stop and check if you overspent on chocolates or groceries, or maybe something else?
So, what do the red and orange numbers tell you?
Red: The red numbers mean that you have overspent out of your accounts.
Orange: The orange number with a credit card symbol next to it means you put an extra burden on your cards.
So what now? You need to “fix” the overspending, even before you have actually spent it.
Pros & Cons of YNAB
● Gets your financial information automatically
● Does not require a restart when switching between multiple budgets
● Flexible and smooth data export
● Collaborate with more than 12,000 banks
● Synchronize with multiple devices
● Efficient tracking of your expenditures
● Offers you a free trial period for 34 days
● Customizable budgeting categories
● A monthly fee of $11.99 or an annual fee of $84 for the software
● There is no feature to pay or track the bills
● No option to follow the investments
● It has only Email supported customer service
● Lacks the essential reporting about budget calculations
● Does not give an accurate and clear picture of your overall financial state
YNAB Vs. Traditional Budgeting
A traditional budget will simply direct you on a path to spend the money that you might get that particular month. This is all an estimated value, and you can never be sure of it. A list of traditional categories has an assigned amount of money that you plan to spend.
Sadly, such budgeting has miserably failed us because our actual spending never matched our earnings. Since there hadn’t been any apparent categories, we did not quite realize how much and where we spent the money.
Moreover, on the other hand, YNAB sets prominent categories and uses every dollar that you earned. It also keeps track of all your spendings and earnings, thereby telling you how to budget savings in YNAB. It gives a more far-sighted analysis and warns you before things go out of your hand. Therefore, the YNAB approach is definitely better and more efficient than traditional budgeting.
YNAB Vs. Mint
The following are the factors that can decide which budget app is best for you:
Usually, it takes time to get to know about using YNAB because it teaches you how to budget your finances and expenses. On the other hand, Mint is user-friendly, but you will have to spend some time learning about other features like investing goal setting, and budgeting.
The Winner: So, YNAB is more user-friendly than Mint because it provides you easier budgeting techniques.
YNAB charges $84 per year or $11.99 per month with a free trial period of 34 days. On the other hand, Mint is free-to-use, and there are no hidden charges or fees for using the services of Mint.
The Winner: Mint is clearly a winner because it is free-to-use and you don’t have to pay any charges.
YNAB supports multiple currencies. However, Mint only supports the US or Canadian currency. So, YNAB offers you diversity in terms of currency so you can manage your budget in your own currency.
So, YNAB is better for you if you want to budget your savings in currency other than US or Canadian dollars.
Reconciliation is an important part of budgeting. YNAB allows you to easily reconcile your transactions. However, Mint doesn’t allow you to reconcile your transactions.
The Winner: In terms of reconciliation, YNAB is better than Mint because Mint doesn’t provide you transaction reconciliation option.
YNAB vs. Mint – Is There A Clear Winner?
It depends on you what you are expecting from a budgeting tool. YNAB is better at budgeting than Mint because YNAB only focuses on budgeting and provides you multiple features relating to budgeting.
On the other hand, Mint is not only a budgeting app, but it also offers you other features. However, YNAB is worth the cost because it is more specialized in budgeting than Mint. Now, it depends on you to choose the one which is best for you!
Frequently Asked Questions
How do I budget my savings?
Following the YNAB definition of saving, you can simply defer the use of a certain amount of money and put it in a designated category instead. However, it depends on you that whether you want to buy a new phone out of it – or go on a vacation.
How do you set saving goals in YNAB?
Going by the YNAB goals, you can make five different categories of your goals – three for spending and two for credit card payments. Creating a goal is very simple; all you have to do is select the category, then click create a goal, pick the type of goals, fill in the details, and save it. And you’re done!
How do goals work in YNAB?
It’s simple that setting up individual goals helps you stay safe in budgeting. The main focus is to save some amount at the end of the day. It really does not matter if you pay your electric bill with it or go out to your favorite restaurant. However, it’s just a way for you to feel good when you reach your goals, and you prevent the YNAB savings account off-budget.
Nobody can deny the fact that budgeting is quite essential to keep discipline in life – in terms of both expenditures and savings. It doesn’t matter how much you earn; you must have an idea of how to budget savings in YNAB – or even manually in your own spreadsheets. Moreover, nothing can accurately work, and you might end up using all your money on some unimportant task that you regret later.
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