YNAB For Beginners - Updated Start Guide (2022)

Getting Started with YNAB

In this section, the speaker introduces themselves and their experience with coaching people on setting up budgets in YNAB. They emphasize the importance of understanding that YNAB only allows budgeting money that you currently possess.

Introduction to YNAB

• YNAB does not allow budgeting money that you do not currently possess.

• Budgeting is based on the dollars you have in your bank accounts at the moment.

Importance of Mindset Shift

• Budgeting based on current funds can be a mindset shift for users accustomed to budgeting based on future income.

• Understanding this feature is crucial for harnessing the power of YNAB.

Step-by-Step Beginners Tutorial

The speaker explains that they will cover a lot of content quickly to complete the beginner setup. Viewers are encouraged to pause, rewind, or slow down the video if needed.

Screen Sharing and Creating a New Budget

• After signing up for YNAB, create a new budget and give it a name.

• The screen will display various sections related to setting up accounts and budgets.

Adding Bank Accounts

• It is recommended to start by adding bank accounts as it intuitively makes more sense.

• A checklist provided by the speaker can be downloaded from the video description for reference.

Setting Up Linked Bank Accounts

The speaker demonstrates how to add linked bank accounts in YNAB, which automatically pulls transactions from your bank.

Choosing Linked or Unlinked Account

• Decide whether to link or unlinked your account.

• Linked accounts connect directly with your bank and import transactions automatically.

• Unlinked accounts require manual input of all transactions.

Adding a Linked Account

• Click on "Linked" and follow the process to connect your bank account.

• Provide username, password, and permissions to establish the connection.

• Once connected, all bank accounts will be visible in YNAB.

Adding Savings Accounts

The speaker explains the different types of accounts in YNAB and recommends starting with as few bank accounts as possible.

Understanding Account Types

• YNAB has three overarching account types: budget accounts, mortgage and loan accounts, and tracking accounts.

• Budget accounts are for day-to-day expenses, savings for short-term goals, while mortgage and loan accounts track debts.

• It is recommended to start with minimal bank accounts (checking account) when beginning budgeting.

Rethinking Savings Accounts

• Holding money in savings accounts may not be necessary if using YNAB's category structure effectively.

• Savings can be achieved by allocating funds within the checking account itself.

• This mindset shift may take time for users accustomed to traditional savings accounts.

Embracing Category Structure

The speaker shares their personal approach of holding all their money in checking rather than using separate savings accounts.

Benefits of Category Structure

• YNAB allows users to fully embrace the category structure for budgeting purposes.

• Separate savings accounts may not be needed if funds can be allocated within categories effectively.

• Users are encouraged to consider this approach even though it may require a mindset shift from traditional banking methods.

Setting Up Accounts

In this section, the speaker discusses setting up accounts in YNAB and differentiates between budget accounts and assets. They also provide recommendations on which accounts to add initially.

Adding Budget Accounts

• Budget accounts in YNAB are for money that can be categorized and used for different purposes.

• Assets, on the other hand, are only for tracking purposes.

• Consider adding assets like college savings as an asset rather than a budget account.

Initial Account Setup Recommendations

• For the first few weeks, it is suggested not to add longer-term savings accounts like retirement or emergency funds.

• Start by adding one savings account called "short-term savings" for things like Christmas savings or a new car.

• Only add credit cards that you actively use and avoid adding ones with existing debt during the initial setup.

Setting Up Credit Cards

This section focuses on setting up credit cards in YNAB and provides recommendations based on usage patterns.

Adding Credit Cards

• Only add credit cards that you actively use for new charges.

• If you have credit cards with existing debt that you're paying down but not using for new charges, consider not adding them initially.

Setting Up Wallet (Cash)

The speaker discusses whether or not to set up a wallet (cash) account in YNAB and provides guidance based on individual circumstances.

Considering a Wallet Account

• It is recommended to consider not setting up a wallet account unless you frequently use cash or live abroad where cash is commonly used.

• If needed, create an unlinked cash account and enter the current amount of cash as the balance.

Verifying Balances

This section emphasizes the importance of verifying balances entered in YNAB to ensure accuracy.

Checking Balances

• When entering starting balances, use the posted or cleared balance from your bank account, excluding any pending transactions.

• Take a few minutes to triple-check that the balances in YNAB match the posted or cleared balances at your bank and do not include pending transactions.

Navigating to the Budget Screen

The speaker introduces the budget screen in YNAB and explains its significance in making financial decisions.

Accessing the Budget Screen

• The budget screen is where you will make daily decisions about allocating your money.

• The "Ready to Assign" number at the top represents the total of all on-budget accounts (checking, savings, cash) that have not yet been assigned a job.

Zero-Based Budgeting and Giving Every Dollar a Job

This section explains zero-based budgeting and emphasizes assigning every dollar a job in YNAB.

Zero-Based Budgeting

• YNAB follows a zero-based budgeting system where every dollar is assigned a job.

• Even if you don't plan to spend money from certain accounts (e.g., savings), assign those dollars a category called "Don't Touch This" or similar.

• Every dollar should have a purpose, even if it's just sitting there until you decide what to do with it.

Customizing Category Groups and Structures

The speaker discusses customizing category groups and structures in YNAB based on individual preferences and needs.

Default Category Structure

• The default setup provided by YNAB can be customized according to personal preferences.

• Right-click on categories to rename them, drag and drop sections, or rearrange entire category groups.

Recommended Category Structures

1. Paycheck-to-Paycheck Method: Categories are organized based on due dates to ensure enough money is allocated for bills and groceries.

2. Simple Budget: Lump categories together, such as debt, bills, and fun spending, under one category group.

The speaker mentions a third overarching structure but does not provide further details in the transcript.

These are the main sections covered in the transcript.

Getting Better Reporting with YNAB

The speaker discusses the importance of structuring your budget in a way that focuses on the underlying value behind a purchase rather than when it's due. They introduce the concept of category groups and explain how they can be changed over time based on different life phases and goals.

Setting Up Budget Structure

• The speaker demonstrates their own budget structure, with categories grouped under headers such as "Joy" for fun spending and "Health and Wellness" for appearance and health-related expenses.

• They emphasize that category structures can be changed over time based on personal preferences and goals.

• The speaker explains how to set up a budget using the template of paycheck-to-paycheck or due date budget, which is a good starting point for understanding the basics of YNAB.

• They demonstrate how to delete default groups in order to create a custom structure.

• The speaker sets up high-level category groups including inactive, reimbursements, long-term savings, short-term savings, irregular expenses, kids' monthly living or lifestyle expenses, fun spending, and bills.

Adding Individual Categories

• Hovering over the bills group, the speaker adds individual bill categories such as car loan, gym membership, phone bill, car insurance, internet bill, credit card payments (for non-YNAB cards), hulu subscription, discover miles (another credit card), spotify subscription, netflix subscription, trash bill,

water bill,

natural gas bill,

electric bill,

pet insurance,

mortgage payment.

• The speaker mentions that it's okay if you miss adding some categories initially as you can always adjust them later when importing transactions into YNAB.

• They move on to adding categories for fun spending, including a cash/ATM category for tracking cash withdrawals.

• The speaker adds all the remaining categories without going into detail but mentions that they will explain the strategy behind their choices.

Category Structure and Strategy

• The speaker explains that they have broken down each bill separately, but it's possible to combine some categories like utilities or entertainment subscriptions if desired.

• They mention having separate categories for eating out, takeout, guilt-free spending money for themselves and their spouse, and monthly living expenses (groceries, household items, big box stores, Amazon).

• The speaker acknowledges that putting all Amazon purchases in one category may not be detailed enough but suggests revisiting it later once more comfortable with the software.

• They add transportation expenses, essential clothing, fun clothing items, pet expenses, haircuts and grooming, self-care items,

ties,

offerings,

charitable contributions,

credit card interest,

unexpected expenses (things forgotten to budget for).

Timestamps are approximate and may vary slightly.

Understanding Category Groups in YNAB

In this section, the speaker explains the different category groups in YNAB and how to organize them effectively.

Creating Category Groups

• Categories can be grouped into different groups for better organization.

• The first group mentioned is "Immediate Obligations," which includes categories like rent, groceries, and utilities.

• Another group is "True Expenses," which includes irregular expenses like home maintenance, car repairs, and medical expenses.

• The speaker also mentions "Short-Term Savings" and "Long-Term Savings" as separate category groups.

• There is a group called "Reimbursements" for tracking money loaned out or received from friends, family, or work reimbursements.

• Lastly, there is an "Inactive" group for categories that are no longer needed but still want to keep track of.

Importance of Personalization

• Personal finance is called personal finance because it should be tailored to individual needs and preferences.

• It's important to customize the category groups based on one's own situation and priorities.

Setting Targets for Categories

• Targets in YNAB are plans for each category that help achieve financial goals.

• Targets should align with what matters most to the individual.

• By setting targets, users can ensure they are allocating funds towards their priorities.

Overall, this section provides an overview of category groups in YNAB and emphasizes the importance of personalizing them. It also introduces the concept of setting targets for categories to align with financial goals.

Understanding Target Types

In this section, the speaker discusses the four main target types in YNAB and provides an overview of when to use each type.

Target Types

• Needed for Spending: Used for expenses with a specific date, such as monthly bills or holidays.

• Monthly Savings Builder: Recommended for variable expenses where a conservative approach is preferred. Helps set a consistent budget amount each month.

• Savings Balance: Suitable for saving up for one-time expenses that require all the money at once, like a down payment.

• Monthly Debt: Used to track balances of specific debt accounts.

Differences Between Needed for Spending and Monthly Savings Builder

This section explains the differences between "Needed for Spending" and "Monthly Savings Builder" target types.

Needed for Spending vs Monthly Savings Builder

• Needed for Spending: If you don't spend all the money allocated to this category in a month, the leftover amount will be applied towards next month's target. Useful for expenses that vary but need an average monthly budget.

• Monthly Savings Builder: Forces you to budget the same amount every month to hit your target. Provides extra money in future months if you have higher spending.

Irregular Expenses and Monthly Savings Builder

The speaker discusses using the "Monthly Savings Builder" target type for irregular expenses like home maintenance or auto maintenance.

Irregular Expenses and Monthly Savings Builder

• Use "Monthly Savings Builder" target type for irregular expenses like home maintenance, auto maintenance, medical costs, etc.

• Set aside a fixed amount each month to be prepared when these expenses arise.

Needed for Spending by Date

This section explains how to use the "Needed for Spending by Date" target type for expenses with specific due dates.

Needed for Spending by Date

• Use "Needed for Spending by Date" target type for expenses that have a fixed date, such as life insurance premiums or annual payments.

• Set the due date and frequency to calculate the monthly amount needed to stay on track.

• YNAB will recalculate if you don't allocate enough money in a month, ensuring you're prepared to make the payment on time.

Using Targets to Plan Ahead

The speaker highlights the benefits of using targets to plan ahead and save up for future expenses.

Benefits of Using Targets

• Setting targets helps you come to grips with the reality of what you need to do financially.

• Helps actively save up for future expenses like life insurance, Christmas spending, vacation, etc.

• Allows spending down from categories over time as expenses occur gradually.

The transcript ends here.

New Section

In this section, the speaker discusses the concept of the underfunded number and its significance in relation to income. The underfunded number represents the amount of money needed to fully fund all budget categories.

Comparing Underfunded Number to Income

• The underfunded number is the total amount by which one is underfunded, meaning it represents the money that needs to be assigned to categories for full funding.

• It is important for the underfunded number to be less than one's income. If it is significantly higher, there may be a problem as it indicates planning to spend more than what is earned.

• Ideally, the underfunded number should be roughly close to one's income. If it aligns with or is slightly lower than income, it is considered acceptable.

• If the underfunded number exceeds income by a significant margin, it may require reviewing and adjusting budget targets.

New Section

This section addresses scenarios where individuals are paid on different cycles and emphasizes breaking free from paycheck-to-paycheck living.

Breaking Paycheck-to-Paycheck Cycle

• YNAB aims to help users achieve financial stability by getting one full month ahead and breaking free from living paycheck-to-paycheck.

• Instead of focusing on monthly pay cycles, YNAB encourages considering monthly expenses and working towards being one month ahead financially.

• Being one full month ahead reduces stress and anxiety related to money management regardless of pay cycle or how money flows in.

New Section

This section highlights the process of assigning dollars in YNAB based on upcoming expenses.

Assigning Dollars for Expenses

• To assign dollars for expenses, start by considering upcoming payments such as bills or subscriptions.

• Click on the assigned column and enter the amount needed for a specific expense, such as a Spotify payment.

• This action moves money from the "ready to assign" category to the designated expense category.

• Repeat this process for other expenses, ensuring that each category is fully funded based on upcoming payments.

New Section

This section explains the assigned, activity, and available columns in YNAB and how they are used in budgeting.

Understanding Assigned, Activity, and Available Columns

• The assigned column represents the amount of money allocated to a specific category for spending.

• It reflects the funds set aside for that purpose and acts as if it were physically separated from other funds.

• The activity column automatically populates with transaction data as transactions are imported and categorized.

• Transactions linked to a specific category will affect the activity column by either increasing or decreasing its value.

• The available column shows the remaining balance after accounting for both assigned amounts and activity. It indicates how much money is still available to spend in that category.

New Section

This section emphasizes using YNAB's budgeting system rather than relying solely on bank accounts for spending decisions.

Moving Away from Bank Account-Based Decisions

• YNAB encourages users to shift their mindset away from using bank account balances as indicators of available funds.

• Instead, focus on assigning dollars within YNAB's budgeting system based on predetermined categories and goals.

• By categorizing transactions accurately within YNAB, users can track their spending more effectively without solely relying on bank account balances.

Assigning Money to Credit Card Payments

In this section, the speaker explains the process of assigning money to credit card payments in YNAB. This step is important for those who pay their credit cards in full.

Assigning Starting Balance for Credit Cards

• When paying credit cards in full, it is necessary to budget for the initial starting balance on the card.

• The speaker demonstrates how to assign money from the "Ready to Assign" category to a specific credit card by entering the amount in the "Assigned" column.

• The "Available" column indicates whether there are sufficient funds to make a payment towards the credit card balance.

Handling Credit Cards with Balances

This section addresses individuals who do not pay their credit cards in full and have ongoing balances that they are trying to pay down over time.

Skipping Credit Card Payment Assignment

• If you are not paying your credit cards in full and are only making partial payments towards the balance, you can skip assigning money specifically for credit card payments.

Matching Available Payment with Current Balance

The speaker emphasizes the importance of matching the available payment amount with the current balance on a credit card.

Budgeting for Starting Balance

• For individuals who pay their cards off in full, it is crucial to budget for the starting balance on each card.

• The goal is to ensure that the available payment matches or exceeds the current balance on each credit card.

• The available column acts as a miniature checking account specifically for managing credit card payments.

Assigning Money from Savings Account

This section discusses how to handle savings accounts within YNAB and suggests an approach for assigning money based on actual savings account balances.

Connecting Savings Account with Budget

• The speaker acknowledges that there are different approaches to handling savings accounts in YNAB.

• To maintain momentum and ease of use, it is recommended to assign money to savings account categories based on the actual balance in the savings account.

Assigning Money from Short-Term Savings Group

The speaker demonstrates how to assign money from a short-term savings group based on specific savings goals.

Example of Assigning Money

• Using an example scenario, the speaker assigns $1,350 from a physical short-term savings account to various categories within the short-term savings group.

• Each category represents a different saving goal, such as Christmas, summer vacation, kayak purchase, and small trips.

• The assigned amount should match the balance in the physical savings account.

Funding Bills and Remaining Categories

This section focuses on funding upcoming bills and allocating remaining funds to other spending categories.

Automatic Funding with Targets

• By clicking on the underfunded number within the bills group, YNAB can automatically fund all upcoming bills based on predefined targets.

• After automatic funding, there may still be remaining funds available for allocation.

Allocating Funds Before Next Paycheck

This section addresses budgeting decisions when there are funds left before receiving the next paycheck.

Prioritizing Spending Categories

• Considering when the next paycheck will arrive, allocate funds accordingly to essential spending categories such as eating out, individual spending, entertainment, Amazon purchases, gas expenses, Uber rides, etc.

• Be mindful of any upcoming expenses like an oil change and allocate remaining funds accordingly.

• The goal is to assign all available money down to zero in preparation for day-to-day spending decisions.

Importance of Negative Numbers in Budgeting

The speaker explains the significance of negative numbers in the budget and why it is important to avoid having negative balances.

Negative Numbers Impact Positive Balances

• Having a negative number in any part of the budget, whether at the top or within specific categories, affects the reliability of positive green numbers.

• Trusting positive balances becomes challenging when there are negative numbers present.

Conclusion and Ready for Day-to-Day Use

The speaker concludes by emphasizing that all money has been assigned down to zero, making the budget ready for day-to-day spending decisions.

Using YNAB on a Daily Basis

• With all funds allocated, users can now utilize YNAB on a daily basis to make informed spending decisions.

• It is essential to remember that future income should not be used to fully fund categories ahead of time, as this may lead to unreliable budgeting.

Understanding Available Column and Conscious Spending Decisions

In this section, the speaker discusses the importance of using the available column in making spending decisions and highlights the need to avoid over-assigning money that is not physically available.

The Available Column and Making Spending Decisions

• The available column helps in making conscious spending decisions.

• It shows how much money is available for different categories.

• However, it's crucial to remember that the available column does not reflect the actual balance in your bank account.

• Over-assigning money can lead to accidental overdrafts.

Trusting the Numbers

• To ensure accurate budgeting, it is important to assign all your money down to zero.

• This means not having any negative balances anywhere in your budget.

• By doing so, you can trust the numbers in your budget and make informed spending decisions.

Understanding Budget Colors

• Red indicates overspending on a checking account or over-budgeting money that you don't have.

• Yellowish/orangish color represents targets that have not been fully met yet.

• Green signifies fully funded categories where you have hit your target for the month.

Overspending on Credit Cards

• Overspending on a credit card shows a yellowish orange color with a credit card exclamation point symbol.

Daily Routine Checklist and Importing Transactions

This section covers establishing a daily routine for managing transactions in YNAB and importing, approving, and categorizing transactions efficiently.

Establishing a Daily Routine

• Incorporate checking YNAB into your daily routine as a non-negotiable habit stack.

• Use an existing habit like brushing teeth or making coffee as a trigger to check YNAB.

Importing and Categorizing Transactions

1. Record, import, and categorize transactions daily.

2. Click on the white dot next to the account to see transactions that need attention.

3. Click on "Two Transactions to Import, Approve or Categorize" header to filter for those transactions.

4. Double-click each transaction and assign the appropriate category.

5. Save the changes.

Efficient Transaction Management

• By consistently managing transactions daily, it takes less than five minutes even for couples with multiple accounts and activities.

• Over time, YNAB learns your typical routine and can automatically categorize recurring transactions.

Covering Overspending in the Budget

This section focuses on identifying overspending in the budget and taking necessary steps to cover it.

Identifying Overspending

• Check the available column in your budget to identify any overspent categories.

• It is crucial to address overspending promptly to maintain accurate numbers and avoid credit card debt.

Taking Action

• Allocate funds from other categories to cover overspending.

• Adjust budgets accordingly to ensure all categories are fully funded.

The transcript does not provide further sections beyond this point.

Daily Basis: Checking YNAB Categories Before Spending

In this section, the speaker emphasizes the importance of checking YNAB categories before making any spending decisions. This helps ensure that spending aligns with financial goals and avoids overspending.

Checking YNAB Categories Before Spending

• It is crucial to check YNAB categories before spending to make informed decisions.

• By reviewing available funds in each category, one can prioritize spending based on their goals.

• This step helps prevent overspending and ensures that money is allocated towards more important objectives.

• Before making any purchase or going out, it is recommended to check YNAB on a mobile device and assess the available funds in relevant categories.

• If there is insufficient money in a category for a desired expense, one must either choose not to proceed or reallocate funds from other categories to cover the expense.

Understanding Credit Card Handling in YNAB

The speaker explains how credit card transactions are handled in YNAB and clarifies any confusion regarding credit card balances and budgeting.

Credit Card Handling in YNAB

• When using a credit card for purchases, the assigned activity and available columns work differently compared to cash or debit card transactions.

• For example, if $750 is assigned for groceries but $100 is spent using a credit card, the checking account balance remains unchanged while the credit card balance increases by $100.

• The assigned activity reflects both the amount spent on the credit card ($100) and what remains available for groceries ($650).

• To accurately represent this transaction, YNAB automatically moves $100 from the groceries category to the credit card payment category.

• This ensures that budgeted dollars are used to pay off credit card expenses rather than being counted as available for other spending categories.

• YNAB handles credit card transactions in a way that encourages budgeting for credit card expenses and helps users avoid credit card debt.

Weekly and Monthly Routines

The speaker discusses the weekly routine in YNAB, which includes reconciling accounts, covering overspending, and assigning extra money to zero out budgets.

Weekly Routine

• Reconciling accounts is an important part of the weekly routine. It involves verifying that YNAB's records match the actual bank account balances.

• Moving money around to cover any overspending is another task during the weekly routine. This ensures that all spending aligns with allocated funds.

• Any additional income received since the last routine can be assigned to different categories or used to zero out budgets if necessary.

The transcript does not provide information about monthly routines.

Fully Funding Targets and Having Money Left

The speaker discusses the satisfaction of fully funding targets and still having money left. They present two options for handling the surplus funds.

Options for Surplus Funds

• Option 1: Some people prefer to put the extra money into a "one month ahead" category.

• Option 2: Others choose to allocate the surplus towards budgeting for the next month's expenses, allowing them to get further ahead financially.

One Month Ahead Category or Budgeting for Next Month

The speaker explains the two approaches individuals can take with their surplus funds - creating a one month ahead category or budgeting for next month's expenses.

Creating a One Month Ahead Category

• Allocate surplus funds towards a "one month ahead" category.

• By doing so, individuals can start budgeting for future expenses, such as next month's mortgage payment, using their current paycheck.

• The goal is to eventually become fully funded by the beginning of each month.

Budgeting for Next Month's Expenses

• Instead of creating a separate category, individuals can directly allocate their surplus funds towards budgeting for next month's expenses.

• This allows them to get even further ahead financially and work towards achieving one full month ahead status.

End-of-Month Routine and Decision Making

The speaker highlights the importance of an end-of-month routine and making conscious decisions about leftover money.

End-of-Month Routine

• Complete your weekly routine by reconciling accounts, covering overspending, and assigning all available money down to zero.

• Watch a dedicated video on end-of-month routines for more detailed guidance.

Decision Making with Leftover Money

• Take a few extra minutes to decide what to do with any leftover money at the end of the month.

• Review the available column from the previous month and make a decision on how to allocate the surplus funds.

• Consider moving leftover money from one category to another based on personal goals, such as paying down debt or saving for specific expenses.

Assigning Extra Dollars and Moving into Next Month

The speaker explains the process of assigning extra dollars and preparing for the next month.

Assigning Extra Dollars

• After making decisions about leftover money, assign any remaining extra dollars towards budgeting for the next month's expenses.

• This helps in getting ahead financially and prepares for future budgeting needs.

Returning to Daily Routine in February

• Once all necessary allocations are made, return to using the daily routine in February.

• YNAB (You Need A Budget) is praised for its ability to help individuals consciously use their money to achieve their goals and prioritize spending on what matters most.

Power of YNAB in Achieving Financial Goals

The speaker emphasizes how YNAB empowers individuals to align their spending with their goals and achieve financial success.

Utilizing Money Effectively

• YNAB helps users become conscious about using their money effectively towards achieving personal goals.

• It encourages spending more on things that matter most while also prioritizing savings, debt repayment, or other financial objectives.

Further Resources

• Check out other videos in the YNAB tutorial playlist for a deeper dive into using YNAB effectively.