Because the principles behind YNAB are different than traditional budgeting, it can be a little tricky to get started. However, once you take the first steps to figure it all out, it’s a game changer for your money. Here’s exactly what you need to do to get set up and start using YNAB.
It’s been a while since I put up a YNAB tutorial, especially a video one (too long I think!). I’ve been getting some requests from people that need help setting up their budget, but I’m busier than a CPA in tax season (oh, wait, that’s exactly what’s going on here…).
So, I thought it would be helpful to do a quick tutorial to show exactly how I:
- Set up YNAB budget accounts (such as checking, savings, and credit cards)
- Set up YNAB categories (and which ones I use!)
- Create your initial budget
- Budget for your first paycheck
You can watch the video tutorial, or if you prefer a written version, I’ve got a short written summary below.
Set up Your Budget Accounts
The first thing you need to do is let YNAB know about your cash, bank account, and credit card balances. Remember, budgeting with YNAB isn’t the typical budgeting exercise of adding all your income and subtracting all your expenses. It’s about assigning a job to each and every dollar that you have.
The basic accounts to set up include:
- Online Savings
- Credit Cards
Once you’ve set up all your accounts, you may wish to directly link them to the banks so that you can import transactions. I highly recommend this, but realize that some people may be nervous about this. At a minimum, I would suggest linking credit card accounts, especially if you’re like me and most of your day-to-day spending is done with credit cards.
Set up Your Categories
Next, you’ll need to set up your categories, or money buckets as I like to think of them. It’s important to make your categories as useful as possible for you. If you’re having trouble with overspending in a certain area (such as food), it may be helpful to break that category out in a detailed manner (i.e. groceries, lunches out, dinners out, coffee, etc.).
If you’d like to download a printable of the exact categories I use in YNAB, you can sign up here.
If you can’t stand the thought of managing so many different categories, it’s totally okay to generalize the categories much more than are shown here. The key to budgeting is to set it up in a way that is actually useful and sustainable for you. One reason I like to keep a detailed budget is that it helps me break out taxable items and deductions, so keep that in mind.
Create Your Initial Budget
Now you’re ready to rock and roll. To begin, you’ll want to look through your account balances and determine a “job” for each dollar in your bank.
Start with credit cards if you pay off your balances each month. YNAB won’t automatically assign amounts to your credit cards, so you’ll need to do that first. Then, determine amounts you’ve set aside for your emergency fund, vacation, home down payment, etc.
After those are budgeted, you’ll want to make a list of all your monthly bills and the due dates. For any bills that are due before your next paycheck, budget the full amount of the bill. For those monthly bills that aren’t due until your next paycheck, budget half of the bill now (the other half will be allocated after your next paycheck).
Then, go through your other day-to-day expenses such as groceries, gas, clothing, and others and determine how much you will need to spend until your next paycheck.
There will be some trial and error while you figure out the best way to allocate things. If you’re overbudgeted, you may have to temporarily pull out amounts budgeted for saving line items, such as your emergency or vacation fund. If you have money left to budget, that should be easy to allocate (hint: the correct answer is to allocate it savings…)
Budget for Your First Paycheck
Each time you receive a paycheck, you’ll need to go back to your budget and allocate the funds to the various categories. It’s a little bit more simple than the initial budget you set up.
I budget my actual paycheck using gross pay, then subtracting out payroll deductions, so watch the video if you want to see how I set that up.
However, it’s important to check the “available” column each time you budget to see where you are overspending or could allocate funds a little bit differently to improve your money situation.
These are just the basics, but if you’re interested in more in-depth tutorials on YNAB, you can find them here.