Good question(s). When you sign-up for YNAB and set up your account, you are asked if you want to connect any bank accounts or credit cards, and you have to decide whether you want it to be a Budget Account or a Tracking Account.
Sometimes we get people saying things like, “Wait, what? I thought YNAB stood for You Need A Budget? I’m trying to set up a budget. So, tracking, what?” (I’m not actually sure if they say this, but it is how I imagine it in my head, and why I wanted to address Tracking Accounts today.)
What Is A Tracking Account?
In YNAB, a Tracking Account simply means an account that does not affect your budget. You might set up a Tracking Account to track your overall balance, debts, or assets. The activity of your Tracking Accounts in YNAB will only appear in the Net Worth report. Typically, Tracking Accounts include:
- Investment accounts
- Loan accounts (auto loans, student loans, etc.)
- Other asset accounts, like real estate, that may not directly fund your budget.
From time to time, we hear about people using YNAB to track their food consumption or their time and productivity, but, I think it’s safe to categorize those as “extreme use cases.”
Tracking Accounts—What Are They Good For?
If you are looking for some additional insight, Tracking Accounts may be able to help. For instance, if it motivates you to see your car loan balance decrease over time, you could set up your car loan as a Tracking Account. This will give you more of a full picture of your net worth and your progress over time.
When you are in your budget—prioritizing and making decisions—seeing that car loan and how it affects your net worth overall, might really annoy you. And that might help you pay it down faster. Heck, you could even put your mortgage and house value in there and go to town on it! Monitoring your Tracking Accounts alongside your Budget can help give you a little more insight into the big picture.
Are Tracking Accounts For Me?
Ask yourself the following questions:
1) Will additional insight lead to meaningful action?
2) Are you making behavioral changes that are positive?
If the answer is a double yes, then it might be a good way to go.
If not, don’t bother with it or consider doing it the way I do it. I just dump everything into a spreadsheet and then update the values every six months, sometimes, every quarter. That’s it.
I’ve found if there is too much going on in your YNAB account, it ends up creating overhead—visual overhead, mental overhead. It makes your budget feel more tedious, more like a chore, because you have to update the fact that your loan balance went down by $118.
That might be super helpful and motivating to you—to have it all there—and if so, great! Pro Tracking Accounts! But if there is any chance, the overhead of tracking all these additional accounts that don’t impact your budget will prevent you from budgeting as much, or as well—it’s not worth it.
Nothing will impact your net worth in the long-term more than consistent, effective budgeting. Nothing. Like I always say, “If you take care of your budget, the balances, debts, assets—all of it—will take care of themselves!” (The embarrassing thing is I actually have said this.)
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