5 Questions My Mom Asked Me About Getting Started With YNAB


My Mom, the budgeting rock star (no joke), is currently experimenting with a transition from Quicken to YNAB. She’s already signed up for an intro class, but last night we spent a few minutes sharing screens and talking about her first pass with YNAB and the 4 Rules.

Five questions came out of the conversation:

1. How do I manage my car loan on the budget?

You don’t. Make the loan an off-budget account and budget the payent as a normal category and outflow.

(Yes, you technically can manage loans on budget, but it’s messy – with no benefit to your budgeting success.)

2. Is there a difference between a known, infrequent expense and a Rainy Day fund?

Nope. YNAB vernacular throws new folks a little. Traditionally you’d think of saving for a rainy day as something that only refers to unexpected expenses. For YNAB’s purposes, Rainy Day funds refer to any expense that gets paid less frequently than every month.

Your choice of jargon doesn’t help or hurt your ability to live the 4 Rules. Mom has a master category called “Known Infrequent Expenses” (or something to that effect), and another called “Rainy Day Funds.” That’s fine. She’s giving her dollars the right jobs; naming conventions don’t matter much.

3. Do I have too many on-budget accounts?

Okay, Mom didn’t actually ask me this question. Looking at her budget, I said: “Ma, you have too many on-budget accounts.”

Now, I realize having multiple on-budget accounts doesn’t break YNAB or any of the 4 Rules in particular. But it breaks simplicity.

I told her I’d only put accounts on budget if they were directly involved in my monthly outflows and inflows. Turns out she does have money flowing into and out of several accounts at any given time –  but out of habit, not necessity.

In my opinion, working with lots of on-budget accounts creates unnecessary mental overhead, and creates opportunities for mistakes.

I’m a fan of “as few accounts as possible,” so for me it’s:

On Budget:

  • Checking
  • Credit Card (zeroed monthly)

Off Budget:

4. Is it okay to budget a month in advance?


YNAB isn’t going to boot you off the software if you’re budgeting ahead of the current month.

But you are breaking Rule 1, and as a beginner, the practice of allocating money you don’t have (“forecasting”) is a threat to a successful budgeting habit.

The True YNABer keeps “Available to Budget” at a radiantly green $0.

Okay, but here’s the deal. I use next month as a placeholder for my typical category allocations. Am I breaking Rule 1? The shame of it.

5. Should I create a second budget for the rental properties or manage them in my main “Household” budget?

As far as I’m concerned, this could go either way. The key factor in Mom’s situation is that rental income and expenses flow into her personal bank accounts.

The mix of personal inflow and and outflows with property incomes and outflows told me she should manage the properties on her main budget, and use YNAB’s Payee field and slick reporting features (where you can filter by Payee and export to a spreadsheet) to pull relevant data out of the budget at tax time.

I’d be curious to hear how other YNABers deal with property management.

The beauty of YNAB is its flexibility. Could my mom go completely against my advice? Sure (it’s typically the safe move). What matters is finding a work flow that helps you make better, more thoughtful decisions about your money.

How would you have answered my mom’s YNAB questions?

31 Responses to “5 Questions My Mom Asked Me About Getting Started With YNAB”

  1. Christine

    Less accounts is the way to go. I had too many accounts and had to restart my budget again. I budget 3 months in advance – i know im breaking the rule but my income is stable and does not vary it helps with my savings goals

    • mark

      Interesting – how do you find it helps with your savings goals?

      • Christine

        I have about 5000 rand to spend each month after my expenses and savings which is about 500usd but instead of buying new things monthly or whatever my goal is – recently it was my license, a new dvd blu ray player and my quarter annual gas refill i split the cost of all 3 over 3 months. Once every 3 months i cross savings goal off my list. I feel like im in control because 3 months give me enough time to really decide if i want to really purchase the item and not monthly even though i can afford (some of the items) – monthly just feels like a rushed purchase and the time to think about it gives me confidence about my decisions. Maybe its just psychological. I have 3 months to take the plunge before i buy anything and when i buy i have this great sense if achievement. I managed to buy all my furniture cash this way so im quite happy. Plus my salary is not variable

  2. Jameson King

    What is your recommended way to track things like Betterment through YNAB? Do you just add the return (interest) into the account? Same thing with loans. Do you continually make interest adjustments? Seems a bit tedious, although I’d love to have those items tracked in YNAB.

    • mark

      Hi Jameson –

      My Betterment account is off-budget. Every once in a while (every few weeks or monthly), I log into Betterment, grab the current balance, and update the only transaction I have in that account – “starting balance.” In other words, I don’t track returns or deposits on the Betterment side. I budget for the Betterment deposit and record it as an expense.

      • Jameson King

        So you don’t “transfer” the Betterment deposit from your checking to the off-budget account?

      • mark

        Nope – I don’t. Although I suppose I could. I’m just not very concerned about perfect balances in savings or debt accounts. That’s just me, though.

      • ace3

        I handle our investment accounts in a similar way, except I enter new transactions as a “Balance Adjustment.” I like to track our net worth, and this helps me to see how it is growing over time.

      • Absotively

        If you used “adjust balance” rather than changing the starting balance, then you could see the changes over time, and it doesn’t seem like it would be much more work.

  3. jm

    I have one checking account and two savings accounts, plus my credit cards that I’m trying to pay off. The two savings accounts hold my emergency fund and sinking funds, respectively.It’s better for me to keep them separate and out of my checking account. I would be too tempted to spend it if I logged in and saw a significant amount of money sitting in my checking account.

    • mark

      Yep – you have to do what works for you. Keep it up!

  4. Dez

    I don’t agree with this part: “For YNAB’s purposes, Rainy Day funds refer to any expense that gets paid less frequently than every month.”
    Example: I pay around 700€/year for my car insurance. But i don’t use a “rainy day” category for that..instead i make 700/12months = ~60€/month budgeted in a “car insurance” category.
    I’ll change your sentence like “For YNAB’s purposes, Rainy Day funds refer to any expense that gets paid less frequently than every month AND YOU DON’T KNOW ITS AMOUNT”

    Sorry if I misunderstood you, english is not my language :)

    • Hung

      I am on the same side. I don’t know why you put student loan to off-budget account? Let’s say I plan to pay $12000 student loan in one year. I cannot have $12000 immediately, so I have to split it to 12 months, $1000 each. So, create Student loan in Rainy Day funds, and budget $1000 every month.

      Is there something wrong here?

      • Rick Peyton (@rickpeyton)

        Hung, I keep my student loans as off-budget accounts because I personally do not find it beneficial to have to adjust for interest and reconcile my student loans as if they were a checking account or a credit card.

        I think the missing link here is that an Account and a Category are not the same thing. I also have a Rainy Day Category called Student Loans and I too put aside money into that Category to make lump sum payments on my student loans.

        But the thing to notice is that it is completely unnecessary to have an Account for your Student Loans at all. The only purpose it serves is to help you evaluate your net worth. But for the purposes of budgeting, only the Category is necessary.

      • Anita

        I kinda do the reverse for my superannuation account – I never record the income because it’s transferred direct from my employer, so I don’t need a category for it.

        I do have an off budget account for it, and every now and then I log into the provider, get the balance, and do a balance adjustment for my off budget superannuation account. That way my net worth stays sensible, and I don’t faff about recording “income” for money that never touches any of my on budget accounts.

    • Rick Peyton (@rickpeyton)

      My interpretation is this: My Monthly Bills category is for expenses that balance to $0 each month. If I paid my car insurance monthly then I would put that in Monthly Bills and it would be zero at the end of each month.

      Rainy Day Funds is for irregular expenses, not necessarily unknown expenses (though it could be), just irregular. These funds are expected to carry a balance from month to month until they are needed. Then you start over again. Since I pay my car insurance every 6 months, I carry a balance for 5 months and empty the account for the Rainy Day that comes every 6th month.

    • Anita

      Me too :)

      Things like my rates are just evenly spread through the year, and I am confident that when the direct debit goes out the money will be there – I never even notice it until I balance my transactions against my account.

      Perhaps it’s called a rainy day expense because if we didn’t spread it evenly the way YNAB encourages us to it would feel like a big unpleasant surprise :)

  5. J.D.

    I have a rental property that I put in a separate budget. It’s a really simple budget with only a handful of categories, but I have a separate checking account set up so it’s all completely separate from the rest of my personal accounts.

    I’m curious as to how others handle this too, because I really don’t do much with my rental budget, as most transactions are fixed, one month transactions. I don’t even go into it except to update everything once every few months.

    I wonder if it would be better to combine it all into one budget and one checking account, since everything would be separate in the budget, but for some reason it makes me nervous. Anybody handle their rental properties that way?

    • Christian

      I too have rental properties. My dad (an accountant) taught me that business and personal should be kept separate, so I have a separate checking account for the rentals and thus a separate YNAB budget for it. Once in a while I need to transfer funds from personal to rentals but any profits from the rentals stays in the rental account.

      I prefer to use this method because it becomes obvious if the rentals are doing good or bad (ie. the need to add capital). Like you, it’s also a “set it and forget” since there aren’t many monthly transactions.

      The only downfall is that YNAB does not make it convenient to handle multiple budgets (and this isn’t the place to complain about it).

    • Jen

      We have a rental property, too. It’s a separate checking account from our personal, so I also set it up as a separate YNAB budget.

      It’s a super simple budget, and I only go in there once a month to make sure everyone deposited their rent.

  6. Colleen Hyman

    I started using YNAB while my daughter was in the Cardiac ICU at Boston Children’s Hospital. I wasn’t able to connect to the internet in my daughter’s hospital room so I didn’t have access to any of the YNAB courses the first month I used the program. I set things up to meet my personal needs without really understanding how the program worked. Users may not utilize YNAB exactly as it was attended, but they can still make it work for them until they have an opportunity to learn more about the program.

  7. Kevin

    4. Is it okay to budget a month in advance?

    I agree with how you addressed this, which is how I was using YNAB when I had a job. As a student, I am living off loans and I decided to budget out several months ahead to make sure that I have enough to last me until I get my next loan check. After spending in a particular month, I can scroll forward and see how much money I will have left over at the beginning of the next semester (when I get the next loan check). If you have any better ways to deal with this, let me know!

  8. Chad Ryan

    After reading this I moved several of my accounts off budget. I think I had too many on-budget accounts. It definitely seems simpler now.

  9. Anita

    I budget ahead when I either know a precise number (e.g. next month’s power bill) or I know I need to change the allocations next month from how they were this month for a particular reason (so it acts as a reminder to me when I do the allocations at the start of the month).

    I also budget for many months in advance for anything I’m evenly spreading (e.g. my rates payments).

    Now I’m worried I’m being bad ;-)

  10. Marissa

    Instead of using next month as a placeholder for my typical category allocations, I put that amount in the notes for each sub-category within next month. That way I always see that beautiful green $0.00 in available to budget. I edit the notes for monthly variables such as gas, electric, & water once I get the bills. Then once we get our paycheck and I put the full amount needed into each sub-category, I move the notes over to the next month. Does that make sense?

  11. Rolo

    Speaking as a former Quicken user, “The more moving parts, the more that can go wrong.” definitely applies to software (buggy, server errors, poor feature-set) and to managing your cash flow (too many accounts, accounting for too much).

    Switching to YNAB cut my financial management hassle by 90% and brought my wife into participating fully in it.

    I only have accounts that I absolutely need in YNAB: cash, checking, savings, brokerage, one credit card. That is all as those pertain directly to budgeting _and_ cash flow _and_ require reconciliation; loans do not as they already have a category for budgeting/cash-flow and do not require reconciliation. I only need to check loan accounts when preparing our income tax return and they are all on the web; entering them into YNAB would be a completely redundant time-waster.

    Rather than, “Rainy Day” category, we have “Monthly Bills”, “Recurring Expenses” (known non-monthly bills), and “Savings Goals” category contains “Buffer/Emergency”, “Repair/Replacement”, “Farm”, and “Vacation” sub-categories.

    If it doesn’t _directly_ pertain to your cash-flow decision-making on a _continual_ basis, you don’t need it in your financial management software/method.

      • Rolo

        hehe…It’s better than the alternative method…
        …(“He ‘bought the farm'”)

  12. Ben

    I switched from Mint.com to YNAB, but I still find Mint helpful for a full net worth picture, with all my loans and savings accounts automatically updated. In YNAB, for the day-to-day, we got rid of all credit cards, and only have a single account. I ended up adding a cash account, only because I tend to pay cash for gas and want to track that, but really would like and recommend the simplicity of a single account, because that account will exactly match your budget.

  13. Aaron Sapp

    What is the best way to handle student loans? I have them as a fixed payment, but don’t keep the accounts within YNAB, mainly because I don’t want to deal with adjusting when interst hits the account, but I see you have included them in your off budget accounts. Any advice on how you handle them?

  14. John

    4. Is it okay to budget a month in advance?

    “The True YNABer keeps “Available to Budget” at a radiantly green $0.”

    While I agree with this, this seems to disagree with the Rule Four video posted that I have seen (link below). In the video, unassigned dollars are rolled into the next month’s ‘Available to Budget’ balance to help grow one’s buffer. Which is the correct way to go? Should we only budget to zero after we are living on last month’s income?

    https://www.youtube.com/watch?v=Sqgb8eR3nWM (posted by YouNeedABudget)



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