Do You Need A Budget? A YNAB Review

Women Who Money is all about helping readers of all levels understand and manage their personal finances. Key to this concept is understanding how and where you spend, in order to track, monitor, manage, and improve your finances.

Research shows that nearly half of Americans say their expenses are equal to or greater than their income.

Of those who say that they have too much debt, 96% are stressed about it. Forty percent of all people who spend as much or more than their income per month have irregular income.

Statistics like these are shocking and saddening. And they demonstrate a clear need to get a better handle on the in-and-out flow of our money.

“If you can’t measure it, you can’t manage it” – Peter Drucker

In order to get control of your money, and make sure your expenses stay below your income, you need to have a clear picture of what is coming in, and what is going out. This is where a budget system comes in.

You Need a Budget!

My all-time favorite tool for budgeting is You Need a Budget (YNAB).

This budgeting software offers a lot of amazing features – it safely syncs to all of your bank accounts, updates in real-time so you can track and manage on the go (even from a cell phone), includes debt paydown and goal tracking tools, and offers some great reports and analytics on income and expenses.

YNAB follows 4 simple rules:

1. Give every dollar a job (create a budget and stick to it.)
2. Embrace your true expenses (break down larger, less frequent expenses into monthly “bills”.)
3. Roll with the punches (shift money from one category to another when “life happens”.)
4. Age your money (as you become more purposeful with your money, and spend less than you earn, your income from one month will “age”/last long enough to cover your expenses from upcoming months.)

In addition to the awesome features of the budgeting tool itself, YNAB offers loads of resources and support.

They have classes on how to use most of the budget features, in addition to some other really important financial topics, like mastering credit cards and creating a debt paydown plan.

You'll also find a blog with good information on important financial topics like emergency funds, credit card management, and investing. While you don’t need to buy YNAB in order to access the blog or classes, they definitely go together well.

Their support staff is also top-notch; I’ve reached out to them several times with questions, and they are always responsive and helpful.

Budgeting has several side benefits:

1. Align spending with priorities: In addition to showing where all of your money goes, it can help you align your spending with your priorities. Are you spending hundreds of dollars on clothes each month, when your real life’s goal is to travel the world? If so, your spending is not aligned with your goals. It can be eye-opening to see how your budget does, or does not, fit with your long-term goals. Recognizing this lets you shift spending from one category (ex. clothes) to another (ex. saving for a vacation to Europe).
2. Optimize spending: One of the biggest benefits of budgeting, in addition to seeing where all your money goes, is the ability to identify all of your line-item expenses, and optimize your spending in each one. I started doing this in a series called Optimize Everything. I pick one budget item at a time and look for opportunities to improve it. Some were easy (car insurance) while others are still a work in progress (grocery shopping!)
3. Give yourself a cushion: One huge benefit to using YNAB is the “age your money” concept. That is, once you get your budget under control and spend less than you make, you begin to have a little left over each month. Eventually, you’ll “age your money” so that you have at least a month’s worth of expenses covered in advance. This cushion can be a huge stress-reliever and allow you to roll with the punches when life happens.

I don’t know what I ever did before using YNAB, but this tool is amazing. It lets me track each of our monthly expenses so that I understand exactly where all of our money is going.

It’s eye-opening to see exactly how much we spend on groceries, for example. When we first started budgeting, I really thought we only spent a few hundred per month on groceries! Turns out, it’s closer to $1000 (we are working on this!)

When you first start using YNAB (or any other budgeting tool), you’ll need to be a little bit forgiving with yourself. Plugin the numbers as best you can. Estimate from old bills, bank statements, or your best recollection of how much you spend per month on each area.

Chances are, for the first several months you will need to make a lot of adjustments to cover the gap between what you think you spend and what you actually spend.

Final Thoughts on You Need a Budget YNAB

Be patient with yourself; it’s a process. The end result, however, is well worth it.

You’ll be more confident in your financial life, have a better handle on your cash flow. And begin to create a margin between income and expenses allowing you to get ahead and save, invest, and spend on the things you really value!

If you’d like to give YNAB a try, you can get a free month using this referral link and I’ll get a free month too!

Article written by:

Kate, the writer behind the blog On Our Way World! Kate’s family of 4 is seeking freedom – financial freedom, location freedom, and freedom from the status quo. On the site, she talks about the things they’re passionate about – optimizing finances, traveling, homeschooling, and digital nomadism!