YNAB

For those of you that are feeling overwhelmed.

jesse — Mon, 21 May 2012 19:59:37 +0000

If I’m 30 pounds overweight, would it be better for me to look back and analyze all I’ve eaten that caused the 30 pounds of weight gain? Or would I be better off planning what to eat going forward?

When it comes to managing money, getting out of debt, “finally doing things right”…people are so overwhelmed at the thought of getting started.

If you’re just hearing about YNAB, or just now thinking that maybe we’re right, and maybe you do need a budget, you’re probably incorrectlythinking that the whole task of starting requires something like:

an analysis of your spending during the past n months.
importing mountains of historical data and laboriously categorizing it to a level of granularity that would make even the snootiest of accountants raise their eyebrows your direction.
a knowledge of exactly what you’re going to spend, so you can budget accordingly. (Um, if you knew what you were going to spend…why are you budgeting? :))

It’s no wonder you think this process is going to take hours. I propose starting by doing the following:

Look at your bank balance online. Add your account to YNAB and make that balance your starting balance.
Click over to the Budget and adjust the default categories to your liking. You have six minutes to make your adjustments. Any more than that and you’re thinking too hard about it. Plus, you can always change everything later.
Budget what you have Available. Your starting bank balance is what you’ll have available. Just ask yourself one question, “What does this money need to do before I’m paid again?”

That will take you 20 minutes. And you’ll feel like a million bucks.

Jesse, I have way more than just a single checking account.

Okay. Repeat steps #1 and #3 from above. (You don’t need to do step #2 each time obviously.) Or, if you really are feeling pretty overwhelmed, just use your “main” or “most popular” account.

Jesse, I have 10 years of Quicken data, and three children. The children are optional, but I’d really like to keep my Quicken data.

Okay. Just don’t import it into YNAB. Just know that you have that Quicken data if you ever need it. (You won’t need it.)

Jesse, we stopped using YNAB for three months, but want to start again. Should we “catch up” then move forward?

Will catching up take more than 30 minutes? If yes, then just do the old and reliable File -> Fresh Start option. It’ll keep your categories around. The adjust your balances to be current as of today, and move forward.

Jesse, my spouse doesn’t want to budget.

They’re probably feeling overwhelmed, and they may not get as excited about 10 years of Quicken data as you do. Maybe consider starting by just using YNAB for one account, then slowly add things as they get used to the idea (and realize that, “Hey, this isn’t nearly as bad as I thought!”).

Jesse, you talk about living on last month’s income, but we will NEVER get there.

On average, it takes YNABers four months to live on last month’s income. Our lead teacher needed a year to get there. Everyone’s different, but it is possible. Tens of thousands of people have proved that. And they were in worse shape than you :)

We Didn’t Budget in April

jesse — Mon, 07 May 2012 16:51:11 +0000

We had the best of intentions, honestly.

Our day of budgeting is usually the evening of the first Sunday of every month. If it falls on the 5th or 6th or whatever, I don’t sweat it. We’ll get it done.

Except Sunday, April 1st, where we didn’t.

I’m not sure what happened. It just slipped through the cracks of what was probably an abnormally-busy Sunday. The next Sunday was busier than normal because we had family come in to town for a few days. Then the kids’ spring break happened and we took off for the week. And then the county convention happened that Saturday (I’m a delegate)…and Sunday felt like we were just playing catchup. No time to budget then. The next week I was out of town, which meant Sunday was—again—fairly busy.

And honestly, at that point I’m kind of thinking, “Well heck, we’re halfway through…”

So, one thing led to another, I was out of town again over a weekend and April escaped without having any dollars assigned their jobs (Rule One, folks).

We did out May budget last night. I feel a LOT better.

I think this is the second time in over nine years where a month has escaped our budgeting wrath.

Some lessons learned:

It wasn’t the end of the world. The most important part about missing April? Making sure we got May. We’re 109 out of 111 months. That’s not too shabby. Especially if this were baseball instead of budgeting.
Your spending can slide in an instant. Some stuff’s predictable. For instance, our food budget, even though we fed family that came into town, was actually six percent less than the prior month. That’s a normal variation for us, and not something I worry about. But our slushy, put-random-stuff-here category? That was up 108% from the prior month, and up 75% from the 2012 average.

Lesson #3 is important. We have the slushy “miscellaneous” category for things that 1) we didn’t anticipate or 2) don’t care to track too closely. Think about that for a second. As soon as we don’t have a budget to work from, spending increases in the area where we haven’t cared to “track too closely.” Out of habit we stuck to the norms in most of our categories, and out of habit we didn’t really care what was in the miscellaneous category, so it naturally grew.

If we let our budget be shelved for a few months, the following would have happened:

More and more categories would have been sucked into that black hole of thinking where we don’t care to track it.
The category (misc. in our case) where we already stuck stuff we “didn’t care about” would have metastasized.
The categories from #1 would have slowly begun to increase in spending, just as the miscellaneous category did.

If you want to make sure your spending is aligned with your values, plan it, and track it. If you want your spending to take on a life independent of your values, don’t.

If you missed a month, start again. We did!

April Podcast Roundup

jesse — Fri, 04 May 2012 21:52:14 +0000

A quick roundup of podcasts from April!

The Disaster Effect – when it rains it pours…is that your own doing?
Success Story: Bible Study Group – This church out of Idaho has been using YNAB as part of their bible study groups—for SIX YEARS.
Backpacking & Rationing – How do you handle a paycheck? And what do you do if your income is wildly variable?
What Does the Ideal Budget Look Like? – The trick is to simplify without sacrificing benefit.
Are you a Budget Failure? – What does it mean to fail at budgeting?

If you want to subscribe to the podcast, you can do so over at iTunes, or through this RSS link.

What Does the Ideal Budget Look Like?

jesse — Mon, 23 Apr 2012 23:31:40 +0000

TL;DR > The ideal budget is simple, maximizing the result while minimizing the required effort. The first place to look is the number of accounts. Second, is the number of categories. Third, is consolidating as many outflows as possible into a single cash withdrawal.

I’m not talking about the percentage of your take-home that should be spent on groceries.

Your setup will dictate your workflow, so I want to talk today about the setup. Setup consists primarily of accounts, categories (and a bonus: cash).

And ideal budget setup, is a lean budget, but only to the extent that the budget is still delivering value. When I budget, I’m:

Aware, which means my money is aligned with my values. That brings me a lot of peace and contentment.
Looking forward, so I’m ready for the “unexpected”
Flexible, understanding that life is anything but “expected” ;)
Liberated, because I’m not living right on the edge financially, from paycheck to paycheck.

Those are the values I get from budgeting. The focus of an ideal budget is to maintain those values, while cutting anything possible. Maximum value for minimum effort. To that end, I present the lean budget, and my ramblings as I work through it with my own personal budget.

Accounts

My accounts look pretty good. What we’re going for here is fewer. Less is more my friends! At the moment I have:

Checking
Credit Card
Savings

The savings account will be closed yesterday. I forgot it was there. The bank required me to set it up when they upgraded my checking account. That leaves me with:

Checking
Credit Card

I like it. All last year I operated with:

Checking

I didn’t like that. All of our funds were in the Checking account (the car fund, where we’ve been saving for about five years, the Christmas fund, the property tax fund…). Our checking balance is abnormally high (compared to most) because we keep all of our savings there.

Fraud Protection

I became worried that our debit card would be swiped (the bad kind of swiped) and we’d be drained of everything, having to sort through a mountain of administrative work to get our money back.

Just yesterday a friend told me he’s fairly certain his debit card number was taken. He’s noticed some charges that shouldn’t be there…it’s going to be a nightmare for them.

Do any of you have direct experience in dealing with fraudulent transactions on a stolen debit card vs. a stolen credit card?

Hence our use of the credit card.

One way to still have “access to money” if your checking account is ever drained is to use a credit card in the crunch, have the funds restored, and pay off the card. I just don’t like the idea of using a credit card without having the funds on hand to pay it off at that very moment.

Reward Points

We can’t be bothered. They’re there, but that has absolutely no bearing on our decision to use a credit card. I can’t remember the last time I cashed in our cashback. One of these days, I’ll by a yacht with it.

Less is More

What’s the big deal with having two or three checking accounts, or two or three credit cards? It’s all in the administrative overhead. That’s one more account you have to import transactions from, reconcile, search for discrepancies… when you’re entering a transaction on your phone, that’s one more decision you have to make: “Which card did I just use?” Or when you’re at the store purchasing: “Which card should I use?”

I’d rather just not have to ask myself those questions, and do those administrative tasks.

Bear in mind, those administrative tasks add no direct value to budgeting. They’re necessary evils so you can make sure you’re aware, and that your records are complete (so you can budget accurately). Knowing your account balance is accurate to the penny is only useful to the extent that you also budget to the penny.

We try and make the software smart, and remember what account you used if you’re say, standing in Joe’s Grocery Store with your phone, but wouldn’t it be nice if things were simpler because they were…actually simpler?

I’m a big proponent of fewer accounts. The budget is the answer to the I-have-ten-different-savings-accounts-because-I-have-ten-different-savings-goals dilemma. You’ll love it once you begin to trust your budget.

Bonus: Use Cash to Simplify

One sure-fire way to setup your budget so it’s simple, is to use cash. NOT a cash account. Cash accounts are quite the opposite. They’re tedious and error-prone.

As I scan my budget categories, certain ones jump out at me as certainly cash-able:

Groceries
Restaurants
Gifts (unless purchased online, so let’s strike this one)
Clothing & Toiletries
Miscellaneous (probably)
Babysitting (I added that one to Personal, but didn’t write about it)
Dates & Family
Repairs & Tires

The question then becomes, are there any of those categories that you’d be comfortable consolidating into one, big pile of outflow? Because that’s what we’re going to do :)

Let’s say I still want to track Babysitting and Repairs & Tires separately, I could consolidate the other five categories into a new cash category. At the beginning of the month (or whenever), I’d budgeted the cash needed (let’s say, $1,500), then go to the bank and withdraw the money. I’d then have a single outflow in my checking account for what was probably 15 outflows before. We consolidated accounts, categories, and now a lot of outflows.

I’d also never overspend if I only used what I had on hand.

I would not set up cash envelopes, because I tried that years ago and it was a cumbersome hassle. That would defeat our maximum result for minimum effort mantra.

If I noticed the budget sliding…I’d start breaking things back out of that slushy cash category.

I’m pretty intrigued by the cash idea. If I take the plunge, I’ll write up a post-mortem.

Conclusion

This was long. As I wrote this, I actually manipulated my budget, thought through the simplification process, and dumped it here into this post. Hopefully you grabbed something insightful from it!

Do you see any ways you can simplify your budget setup? Share in the comments below!

Your Largest Expense, Over Which You Have the Least Control

jesse — Fri, 06 Apr 2012 22:07:42 +0000

Taxes are due very soon, if you weren’t aware. Of course, they’ve been on my mind. They’re my single largest expense (and yours as well, over your lifetime).

I caught an article in the Washington Post called “Taxmageddon” (style points: +5), and had a bit of a realization. Not only are taxes our single largest expense, but they’re also an expense over which we have very little control. A double-whammy.

You Budgeters know as well as I do, that we like to maximize our dollars, give them jobs, and put them to good use. We like to be in control, and with taxes, we’re not (well, more on that in a second).

I want to give you examples to illustrate a point, not to talk specifically about the examples. Based on the information given in the Taxmageddon article, on Dec 31, 2012 (if we make it past the 21st…), some tax laws are set to expire, and others to get a slightly larger net:

You know those three kids you have? Your tax will increase $1,500. Just. like that. If you have five kids (like us), it goes up $2,500.
If you’re in the lowest tax bracket, your tax will increase 50% (this is simplified, but if you earn $8,700 in wages, instead of paying $870 in taxes, you’ll be paying $1,305).
The Social Security payroll tax is set to jump back up to 6.2%. If you earn $100,000 a year (easy math), you’ll be paying $2,000 more per year (again). If you have dividend income, that’ll get a huge hike. (Your employer will pay the other $2,000 for the hike.)
The Alternative Minimum tax (without congressional intervention) will add thousands of dollars in annual taxes to an additional 30 million households.

So, will these tax laws expire? Man, who the heck knows. The second half of the article it all political blahbitty-blah and I barely could keep down my protein shake.

And I guess that’s my point. Your single largest expense is, in large part, controlled by a bunch of other people.

So what does an enlightened, budgeting, dollar-maximizing person do? Educate yourself on the code and minimize the heck out of what’s known. You can’t deal with the unknowns, but you can deal quite adeptly with the knowns! After switching tax advisors saved me $20,000 one year (I rounded that number, but not up), I became a believer in knowing what the heck is going on with my taxes, and doing my best to minimize them.

You can do the same. Casey Murdock, my tax advsior, has his book Tax Insight still available through YNAB. It’ll save you a bundle. I encourage everyone who hasn’t yet purchased it, to check it out. (It’s updated for the 2011 tax year, so you could still apply some of the strategies if you’re a procrastinator.)

March Podcast Roundup

jesse — Mon, 02 Apr 2012 14:55:02 +0000

The first quarter of your 2012 is in the books! How’d it go? Here’s a roundup of March’s YNAB Podcasts:

Success Story – Musicians Rock with YNAB – I talk with Mason (who created the podcast bump music) about how his finances are now rockin’ with YNAB.
Your Budget Boiling Point – Your budget as sa boiling point. Dial it back a few notches so you can stick to your budget for the long haul.
YNAB for your Business? – Can YNAB serve your business just as well? Well, YNAB’s serving YNAB well. (Inspired when I moved YNAB to YNAB.)
Reality and Unleashing Your Will – If you’re not operating in reality, you don’t know what you want. If you don’t know what you want, you won’t get it.

You can always subscribe to the podcast via iTunes, or with your favorite RSS reader.

If you’d like me to discuss a specific topic in a future podcast, leave a comment below!

YNAB’s Roadmap

jesse — Mon, 26 Mar 2012 16:35:28 +0000

I hesitate to write this, because roadmaps change. There have been more and more questions over at the forums surrounding where we’re headed, what’s coming, why it’s quiet, etc…so I wanted to write up a bit of a roadmap. Inspired by a forum post I wrote last week.

Yes. I inspired myself. ;)

Where is YNAB Headed for the Next Five Years?

We’re headed to a place where the device you’re using doesn’t really matter, but the budget does. We’re headed to a place where you can check your budget, record your transactions, and make adjustments in any number of ways. Some of those ways haven’t yet been imagined by the team.

What’s Coming?

At this point it’s probably fairly obvious that we have been working on Cloud Sync for about 20 years. It has required a gutting of our data model. It’s something we’re extremely proud of, and we are way more anxious to get it out the door than you are to get it. Trust us.

Some of you may have deduced that we’re also working hard on the Android platform, having just hired a full-time developer (say hi to Dorian, if you get a chance).

Why is it so Quiet?

Because we’re devoting everything we can to this next release. We don’t want to release something half-baked or premature. It’s not quiet because we’re not developing. It’s quiet because we are developing. A lot.

Faster Faster Faster!

I’ll admit that I’m not the swashbuckling entrepreneur some might like me to be. I’m methodical and s-l-o-w. Hiring (fast) scares the heck out of me. I was at the park Saturday and ran into a guy that’s working for a startup here in the valley (not the Silicon kind, the Utah kind). He’s been with the company two months and they’ve gone from 30 to 50 employees. Wha?!

That type of growth would give me a panic attack. And here I thought we were growing fast.

There are three reasons hiring fast scares me:

The person hired is now relying on YNAB for their livelihood. Yes, I know that’s capitalism and everyone can find other jobs…but it doesn’t make it any less scary for me.
It could radically change our culture. This actually scares me more than the first.
It usually requires funding. Funding scares me for a whole other slew of reasons. It’s a non-starter for me.

I’m getting better at going faster, so be patient in that regard :) Setting up YNAB in YNAB has actually helped me hire faster. As a result of doing that exercise, we hired two new full-time developers and we have plans for several more in the next few months. I talked about that in last week’s podcast quite a bit).

Wrap-Up

I do feel that we’re on the edge of something. I feel like there’s a lot of pent-up excitement that’s bottlenecked with our development. I’m hopeful you’ll like it.

You want us to do WHAT?

malisa — Mon, 05 Mar 2012 17:53:21 +0000

Oh…THAT. We already do THAT.

Jesse put out a survey near the beginning of 2012 that included the question “What should we START doing?” This details SOME of the things that people asked us to start doing that we already do. While these aren’t the items with the most requests, they are the easiest to answer. We realize that if even a few people asked us to do these things, there are many more people who are also unaware that we already do these things. There may be later installments for the things that take more detailed explanations. We’ll call these some quick wins out of the gate. I’m going to make it a nice even 10 (except I’m going to cheat a little).

You should start a blog.
Here’s the link to the blog. You might be reading this there right now. There were a few people who lost bookmarks to stuff when the YNAB website was re-vamped back in December. Some things did move, but it’s available at the top of most pages of the site.
You should start a podcast.
Jesse started a podcast towards the end of last year. You can find it here. Or you can search iTunes or your favorite podcast app.
You should make an iPhone app. You should make an Android app.
We’ve got BOTH iPhone and Android apps! Information about them can be found here.Some people knew about the apps but had certain items that they wanted to request. I’ll mention one here:Split transactions are not yet available on the Android app, but they ARE available on the iPhone app. I must admit that I need to think about it when it comes time to do one. I tend to start my iPhone entries by choosing the Budget button, and you can’t get to a split from there (because by nature of choosing a category, you’ve bypassed that option). However, if you choose Add a Transaction or the Accounts button, when you tap the Category field there will be the split icon at the top of the screen.
You should include a calculator in YNAB.
While some people specifically asked for a free-floating full calculator that they could call up at anytime in YNAB, it was evident on at least a few of the requests that people weren’t aware that YNAB already has a calculatorbuilt into any cell you can type money into.In the Budget, in the Budgeted cell, there’s a handle that shows up when you click in the cell and one of the options on that handle is a calculator. In an Account Register, when you click in an outflow or inflow cell, a calculator shows to the left or right. You can also just start typing operations + – * or / will call it up in any of those cells.As far as a calculator that’s not tied to a cell, I was going to give instructions about how to get the calculator into your dock on a Mac and find out how to do it in Windows. But when I was asking Windows advice I got even better advice for a general calculator: type what you want into Google. It works! And it’s always good to know OS neutral ways to go. (Thanks Ian.)
You should give us a place to type notes in the budget.
There are several places you can type notes in the budget: on each Master Category, each Sub Category, and within each month on each Sub Category. There is a tutorial video that explains notes.Don’t forget that you can also put little things into the category titles like due dates, the amount you want to budget each month, the total your saving for, or a minimum payment amount. I know people who put a combination of a few of these things into category titles. Check out the various tutorials on category organization and manipulation about half way down the page here.
You should give us a way to change how many months show on the Budget screen.
The number of months that are displayed on the Budget screen is determined by the size of your window and therefore to some degree by the size of your monitor. Drag to make the window bigger or smaller, as is possible by your monitor size.
You should make a printed manual.
There is a full manual online. If you’d like to print it, it’s there for the taking.If it was not the software that you wanted the book for, but rather the method, we’ve got another bookyou’re welcome to as well.On a somewhat related note, for those who said we should ship disks in case your computer crashes, you can easily re-download the software at any time from our website.
You should give us a…
…way to have YNAB tell us when we’ve not put a category where we need one.
(Error Checking)…way to tell whether we want YNAB to open downloads or if we want some other software to do so. (Download Preferences)…way to easily reorder items in the account register and the scheduler.
(Sorting Transactions)
Note: In the scheduler, you have to click on the column headings to sort.…column for check numbers or to indicate Direct Debit, ATM and so on. (Choose Columns)
You should give us a way to have YNAB with us on the go.
There are a few things wrapped in there that different people may or may not have meant. It’s not an exhaustive list, but let me give you a few options:A great way to have your categories with you on the go is with the iPhone or Android app. We’ve got those.In the absence of one of those two smartphones, there are other ways to keep your category balances with you on the go so that you can use those to inform your spending decisions. The low tech way is to use the Print To PDF feature under the File menu. You can then print your budget and take it with you. If you don’t want your whole budget, because generally there are only a few categories you need to worry about on the go, you can do a screen print of that part of the budget and just print what you need. Of course lower-tech still would be to write them on a card and keep it in your wallet, and sometimes the simplest solutions are the best.A medium tech solution, if you have access to email but can’t get one of our mobile apps, would be to email the pdf or screen shots mentioned above. I used to email my husband a screen shot from my iphone app of the favorites since those were all the categories he’d need to worry about on the go. Now I’ve finally got the app on his phone so it’s unnecessary, but it worked well for a long time. He could just text or email me upon spending. Usually. (Okay, sometimes).
You should give us a way to use YNAB on different computers. You should give us a way to share YNAB file among family members.
There is a help article that can help you with all aspects of this.

February Podcast Roundup

jesse — Fri, 02 Mar 2012 16:26:48 +0000

January saw some great podcasts (with a few technical difficulties that hopefully won’t rear their ugly head again):

The Double-Edged Sword of Automation – Used wisely it will revolutionize your finances. Used poorly it will do nothing for you (and may even hurt you, financially speaking).
The Debt Snowflake – It sounds nice and easy, but it’s intense, and it works.
Too Poor to Budget – Are you too poor to budget? Absolutely not!
Halftime Adjustments – The goal isn’t to become really good at predicting what you spend, the goal is to become really good at adapting when things don’t go according to plan. In other words, Rule Three.