Not using YNAB because you don't like that it doesn't accomodate budgeting/forecasting income? YNAB is the greatest budgeting software out there-use this income hack!

How I Hack YNAB to Budget My Income

Not using YNAB because you don't like that it doesn't accomodate budgeting/forecasting income? YNAB is the greatest budgeting software out there-use this income hack!

When I returned from our 4-year long business assignment in Asia, I was ready to finally utilize a budgeting software that would help simplify the budgeting process and minimize the time I was spending tracking our expenses. I am a HUGE believer in tracking expenses and had been using the same spreadsheet that I’ve provided to you in the class about tracking expenses here since I had a mix of foreign and U.S. transactions.

Living in a foreign country, but still having many expenses here in the U.S. meant that I had to convert all of my day-to-day expenses back to U.S. dollars to really be able to track my cash flow in a meaningful way. While it worked, it was a time-consuming process that didn’t add a lot of value to me.

So, I Tried All the Budgeting Software

I was sure that I would love Quicken so I purchased the software first. After all, my background is in accounting and I’m a debt-credit type of girl.  I absolutely did not (the bad reviews on the new Quicken are true, darn it!). So then I also tried Mint, Mvelopes, YNAB, Personal Capital, EveryDollar and LearnVest.  I put my information in each one of these budgeting programs and tried it out for at least a week. Each had their features and flaws. I didn’t feel like any of them were perfect for me.

However, of all the budgeting software programs I tried, I loved the format of YNAB the most. If you’re not familiar with this budgeting software, it stands for You Need a Budget. YNAB uses zero-based budgeting and is in a simple spreadsheet-type format. After trying many additional budgeting programs after YNAB, I found myself wishing that they had the same features as YNAB.

Related Post: Which Personal Finance Software Should You Use?

However, a main premise of YNAB is that you only budget for income that you’ve already received. This lack of being able to forecast my income against future expenses was a deal breaker for me. I continued to look for a better zero-based budgeting software that incorporated some of the same features but also had the ability to budget income.  I can tell you that it doesn’t exist.

At this point I had a simple realization: could budget my income in YNAB. Income is simply a negative expense.

Do You Want to Be a Fellow YNAB Rule Breaker?

YNAB has 4 rules that encompass the company’s philosophy behind budgeting:

  1. Give Every Dollar a Job – All money coming in is assigned to a task, either a spending or saving line item.
  2. Embrace Your True Expenses – Set aside money in advance for irregular bills such as insurance premiums, repairs and holidays.
  3. Roll with the Punches – Be flexible with your budget and since it’s a zero-based budget, you can move money around from one category to another when you overspend.
  4. Age Your Money – Break the paycheck-to-paycheck cycle and use last month’s income to cover this month’s expenses.

By hacking YNAB to include your income, you are partially breaking Rule #4 by including this month’s income against this month’s expenses. In order to successfully budget your income in YNAB, you should consider the following:

  • You should have enough funds that the timing of income and expenses during the month won’t matter (i.e. not be living paycheck-to-paycheck) but be living on last month’s income already like they suggest.
  • You should also have enough in an emergency fund or in the “true expense” buckets from Rule 2 that you won’t be negative in your cash flow if a few unexpected things come up.
  • You shouldn’t have an excessive amount of debt that you’re trying to pay off (in this case you should wait to budget your income until you receive it so you can allocate your extra to debt payments).

We don’t live paycheck-to-paycheck and actually have at least 6 months expenses saved in an emergency fund, plus no debt except our mortgage.  So, this method works great for us and we would just adjust our budget if we were to have a decrease in income. It’s always possible to go back to budgeting for income the YNAB way if we ever needed!

Setting Up Your YNAB Budget for Income

First, let’s take a look at how the budgeting categories look when you first set up a new budget with YNAB.  The main default categories are Immediate Obligations, True Expenses, Debt Payments, Quality of Life Goals and Just for Fun. For simplicity purposes, I’m assuming there are essentially no other funds (this is a paycheck-to-paycheck situation).

After your first paycheck, you can start budgeting for your next expenses, including rent/mortgage, auto loan, and half of the month’s other expenses such as groceries and clothing.  However, you aren’t able to budget for the entire month’s expenses or you will be in the red for the budget. Note here that there is an extra $250 in a savings account that was added in.

After the second paycheck, you are able to budget for the remaining expenses for the month. These expenses in this example include a student loan payment, and more day-to-day expenses like groceries, transportation, and giving. In addition, by creating a budget instead of spending everything that was earned, there’s a hundred dollars that they can save toward their vacation and other savings categories.

If instead, you budget your income for the entire month, you can set something up similar to this example below.  Note that I personally set up my payroll income to be broken out between gross pay and deductions. I talked about this in the budgeting class here.

After the income and expenses for the entire month, the budget will look like this:

Other Suggestions for Budgeting Income in YNAB

If you have several pay sources, such as multiple paychecks if both you and your spouse work, you can add another master category to reflect the additional income source.

You can also add and adjust income categories to reflect any other income sources that you have such as selling items on craigslist, business consulting, or rental properties.

Just make sure that you aren’t relying on future income in your budget that is uncertain or overestimating your possible income, as this may cause you to overspend and go into debt.

Final Thoughts

The key to successful budgeting is to use a method that works for you. If the perfect budgeting method isn’t out there for you, make some adjustments to make it work for you!

If you’re interested in more YNAB tutorials and/or exactly how I set up my categories and accounts in YNAB, go to my YNAB tutorial list here.


25 Responses

  1. YNAB is such great software and it’s definitely a program that I encourage people to use at the Dave Ramsey class that I help facilitate. It makes a huge difference especially for those that have never budgeted before.

  2. Super huge YNAB user here! Love love love this. Haha, I hadn’t ever thought of hacking my income with this software. Way to think outside the box.
    Thanks for sharing.

    1. Thanks Nick! The accountant in me wants to line up those income and expenses :). I absolutely LOVE YNAB as well. I’m hoping to have some more tips and tricks about how I set up YNAB, so stop by again!

      1. Thank you, thank you, thank you! I have been so frustrated with the inability to forecast using YNAB. I do love the format and how well it tracks expenses…but I HATE the fact that I can’t plan the next 12 months and understand my cash flow (husband is self-employed and I just retired, so I need to understand how we have to adjust our spending). This is perfect!!!

        1. I’m glad it helped! The first time I tried out YNAB, I decided not to use it because of this very reason. After trying a bunch of other apps, I still loved the format and other features of YNAB so I realized that I could make it work this way. I’m definitely careful to make sure that the cashflows still work even though I’m technically budgeting money I haven’t received (by being at least a month ahead in expenses), but I’ve been budgeting income in YNAB for a couple years now and it’s working great for me!

        2. Hallo from Italy,
          I tried this way to forecast our income. But I can do it only for the current month, right? Unfortunately the minus amount is not present in the month after, so it is not possible to forecast for several months. Or perhaps I didn’t use it correctly?

          1. Hi Manuela! I actually do budget months in advance with this method. The following months will show in the top right-hand corner that the previous month was overspent, but I just pay attention to line below that refers to whether the current month balances. Let me know if that doesn’t make sense and I’ll try to explain it more.

          2. Hi Kathryn, thank you so much for your reply.
            I’m sorrt but I can’t understand. In the new Ynab (online version) , the negative amount is not present in the next month, it returns to zero.
            All the other categories, with positive amounts, add the amount to the next month. Perhaps I make some mistake.

          3. I’m referring only to the very top of the budget screen for the month where it says something like “Overspent in Oct”. This carries forward from the past month if you spent too much, but you’re correct about the individual categories. Maybe I should add this explanation to my YouTube videos? It would probably be a lot easier to show than to explain.

          4. Dear Kathryn, yes that’s right, the month after I see the income amount in Overspent on the top. But not two month after, then the amount returns to zero. So it is not possible to calculate any cash flow for example in January or later. Right?

  3. I am in my second month if using YNAB and am also using this process of creating a Next Month’s Budget category, assigning all income to that category and then do a negative spend from that category for the next months budget. Only issue I have is that it makes all of the side reports i.e Total Activity, Total Available and Total inflows meaningless unless I am missing something. Small price to pay I guess to be able to continue budgeting to live off last month’s income.

    1. In YNAB, you can actually just start budgeting for the next month and it’ll pull in that income that was received this current month without creating a separate category. It’s a built-in feature. I want to see each month completely separately, including all cash received and spent during the month together, so that’s why I hack it this way.

  4. I hate YNAB. There, I said it! I just can’t wrap my mind around how this software is structured (and I have a finance degree with a minor in accounting!).

    My frustration:
    I have about $30k in my checking account that is to be used to pay future education expenses (over the next two and a half years). When I set up this Checking Account, YNAB shows that I have $30k to budget, but I will only use about $10k over the next 12 year. How do I set up short-term and long-term categories?

    Any help will greatly reduce the clumps of hair I have been pulling from my head! Thank you!

    1. I think your accounting/finance degrees are causing you to make it more complicated than it is. Remember, this software is for the average person that doesn’t think in terms of debits or credits and classifying their assets and liabilities.
      That being said, the best thing to do is scrap all of their terrible categories and set up your own just the way you want them. You can create a long-term savings category and a subcategory for the education expenses. Then put the full $30,000 in there or create separate subcategories for the short and long-term portion if you want. If you want to see how I set up my YNAB categories, I have a printable you can find at (or just click the subscribe button at the top of the blog).

  5. This was the answer to my problems with the new YNAB version! Saved me from going back to the classic YNAB4 version. I can’t imagine not planning out my income and expenses months in advance. Brilliant hack!

    1. I’m glad to hear Steve! I love YNAB, but the accountant in me has to budget more than just to the next paycheck, just like you’re saying 🙂

  6. How or could this method be used for inconsistent pay checks, like for realtors? Some months=more closings than others? Varying commission amounts? What if I’m trying to pay down debt? Thanks!

    1. This probably isn’t the best way to do it if you have variable income. Living on last month’s income will probably provide a lot more peace of mind in that case. YNAB has some great resources that talk about variable income.

  7. Hi Kathryn,

    Thanks for everything you’ve done here. I love knowing all the valuable info is coming from a Christian!

    Any chance you are able to help me with my YNAB acct… I just can’t seem to adjust, undo, or fix the way it’s set up now. I’ve complicated it and don’t understand what to do next.

    Any help would be appreciated.



    1. Thanks for the kind words Jeff! Honestly, the best thing sometimes is to just do a “Fresh Start” and begin again (especially since it’s close to the end of the year anyway). If you’re not sure whether you have set it up correctly, you can try this video (I’ll admit, it’s a little boring, ha!):
      If you have specific questions, you can email me and I’ll be happy to try to answer them!

  8. Hi Kathryn.

    Buxfer is a zero-based budgeting software that has the same YNAB features but also has the ability to budget income.



I’m Kathryn Hanna-wife, mother of 3 and a Certified Public Accountant. I love to budget (really, I do!) , build spreadsheets and spend money on travel, sewing supplies and good chocolate.


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