It can feel overwhelming when you first sit down to budget. Keep these handy tips in mind to keep you from going too crazy.
Tip #1: Gather info before you start.
Once you start adding your bank accounts to YNAB and start personalizing your categories, you’re going to be prompted for information. You may find it helpful if you gather all that stuff first.
You will need:
- Checking and Credit Card Account Info. If you choose to connect your primary spending accounts (so YNAB can pull in your transactions and balances automatically) you’ll need your login credentials for those accounts. If you choose not to connect your accounts—totally fine—you can add them yourself. In that case, you’ll need the current balances for the accounts you plan to add.
You might want:
- A List of Your Monthly Expenses. What are all the things you need to pay for each month? This is a complete, uncensored list of all the things you need to pay for every month. If you don’t have exact figures, no big deal—but the closer the better! (Bonus points if you know the due dates of your individual bills!)
Tip #2: You should see your life in your categories.
We give you a default set of categories to get you out of the gate, but feel free to personalize. In fact, figuring out all the things you need to budget for is an important part of budgeting! Does your family have a snow mobiling hobby? Create a category for that. Do you always send the kids to a summer camp? Category!
When you’re done personalizing, it should look familiar and personal. It’s your budget after all!
Tip #3: Let categories earn their way in. Keep it simple.
It can be very tempting in the beginning to ADD ALL THE CATEGORIES!!!
Be careful – you may be creating work. Sure you can break out food, cleaning products, pet food, personal care supplies, but that means you’ll have to break out every receipt from the grocery store. And here’s the thing – it probably won’t change much.
So before adding a category, ask yourself: Will adding this category give me information that I can act on?
If I find out that toothpaste costs $3 a month for my family, there’s not a lot I can do about that. When I need toothpaste, I buy it. So I just include that in groceries.
Tip #4: Only budget what you’ve got.
You may start out with a small amount of money in your checking account and the urge to type in numbers all the way down the budget screen may be strong. Resist!
When you add dollars to your budget that haven’t arrived in your life yet, you are setting yourself up for trouble. Your budget won’t have accurate information and therefore, won’t be able to inform you properly.
Tip #5: Use goals to keep you on track.
Instead of adding money that hasn’t arrived, use goals! Let’s say you want to set $175 aside every month for gas. Add a monthly funding for $175 and your budget will look like this:
That orange alert is there to remind you that you want to budget $175. Perhaps you can only budget $100 initially.
You can see the progress indicator next to the orange number is closing in! You’re getting there. But you’ll still get that nice orange reminder until you budget the full $175, when it will turn green.
Goals give you reminders about your plan, but leave you free to only budget what you’ve really got.
(Psst! Since this blog post was originally published, we’ve introduced more options for setting up goals in your budget. You can find the details here!)
Tip #6: Use your budget to guide spending.
Here’s the real benefit of tips 4 and 5—now you have a budget you can trust. So lean on it! Make sure you check your budget before spending. Buying clothes for the kids? Check that clothing category! Going grocery shopping? Take a peek and see what’s set aside for groceries before you head into the store.
Your accounts keep track of where your money is, but they don’t have a clue as to what that money is for! That’s your budget’s job. And as long as you feed the budget honest accurate information, it will always guide you honestly.
Tip #7: Reconcile frequently.
Your budget depends on accounts for information, so make sure you reconcile frequently to make sure that information is up to date.
Reconciliation isn’t scary or difficult. It’s simply the process of making sure the info in YNAB is the same as the info at the bank. Think of it as financial laundry. The more frequently you do it, the less there is to do. We recommend reconciling at least once a week.
Tip #8: Be kind to yourself—roll with the punches.
In the early days of budgeting, you’ll probably find that some overspending will creep into your budget.
Folks, this is normal. Don’t sweat. Focus instead on two things:
- What you learn from it.
- What you do about it.
If you find you are consistently overspending on dining out, maybe the problem isn’t overspending, maybe it’s under budgeting. Maybe you just need to be honest and budget a little more in that category.
Regardless, the most important thing is that you adjust and fix it. The money has to come from somewhere eventually, and the nice thing about a budget is it helps you figure out where.
Tip #9: Leave room for fun.
You may think that budgeting is about restriction and deprivation. Actually, the opposite is true. We want you spending money on the things that are most important to you—including fun. So make sure you set some money aside for splurges.
Tip #10: Don’t be afraid to start over.
After you have your first month under your belt, it’s not uncommon to want to hit the reset button. That is totally fine! You’ve lived with your budget for a while, you’ll have a sense of what’s working, what’s not working, where to tweak, all that stuff. A fresh start is just a chance to take everything you’ve learned into a new budget. So don’t feel bad about that—feel smart!