You Need a Budget (YNAB). No, You Really Do! | How to Track & Manage Your Spending


A common question that I receive during my
card consultations is “how do you track and manage your spending?” It’s a good question, and I’m sure everyone
has their own system and process. There are a ton of options out there, but
to be honest, I’ve really only used one system for the past nine years, and I still
think it’s one of the most valuable ways to maintain a budget and monitor your spending. How’s it going, everyone? It’s Ernest from Trip Astute. In this video, I want to review You Need a
Budget, or YNAB, and why I’ve used it for almost a decade to manage my budget and spending. On this channel, we talk a lot about traveling
for less money by using credit card rewards and points. Getting into rewards travel is really fun,
but it can also be a bit dangerous. I know I’ve talked about this in several
videos, but you need to have your financial house in order before you can get serious
about this hobby. That means that you’re paying your bills
on time and making sure that you’re not spending more than you can afford. If you’re paying interest or fees on your
cards, then you’re negating the value of any points that you’ve earned. That’s why I recommend monitoring your spending
and setting up an auto-pay for your statement balance on all your cards so you’re always
on track. As many of you know, once you start adding
more cards to your wallet, the task of tracking your spending becomes more complicated. So today, I want to review a tool that I use
to keep everything on track. It’s called You Need a Budget, or YNAB for
short. I’ve been using it since 2010, and I think
it’s great way to not only track your spending and budget, but also discover ways to save
money and work toward your financial goals — whether that’s more travel or even a
new car or house. Before we jump into YNAB, welcome to our channel. Trip Astute is a travel channel that is focused
on sharing ways to make travel easier, affordable, and more enjoyable. Traveling can be stressful and expensive,
so we’re looking for ways to help you maximize your experience through travel tips, points
and miles, and innovative gear. If that sounds interesting to you, please
consider subscribing. YNAB started in 2003 as a spreadsheet made
by an accountant Jesse Mecham. He and his wife Julie were looking for a better
way to maintain a budget. Fast forward to a few years, and they developed
an actual application and methodology. Then in 2016, they refined their application
and turned it into a web-based application. I’ll be honest, I had a hard time moving
over from their YNAB 4 software to their new cloud-based solution. A big part of it was that I didn’t want
to pay a subscription fee when I used to just paying a one-time fee for their software. Also, they made a few changes that made it
difficult for me to track reimbursements from work. I know why they did it, and I don’t disagree
with the changes since it keeps people from cheating their budgets. But for me, it was another reason to resist
the change. Ironically, my professional work experience
is in change management, so you think I would be less resistant to change. However, I just couldn’t do it until this
past new year, when I decided to give the new web-based system and features another
try. First off, let’s talk about how YNAB works
and some of the methodology. YNAB is like a digital version of the old
envelope system of budgeting. This is where you would create envelopes that
represented different budgets, like dining out, groceries, entertainment, then fill each
envelope with cash at the beginning of the month. You would then pull money from each envelope
until you reached the point that it’s empty. Then you would either have to wait on your
purchase or pull money from another envelope. Obviously, this meant that your spending was
in check. And if you happen to have something left over,
it would just carry over to the next month. This is pretty tedious, and when you add it
electronic payments, it complicates everything. But YNAB, in a nutshell, is that same system
but made for the digital generation. I basically create categories of spend then
allocate money to them at the beginning of the month, then as you go, you enter your
transactions which then subtracts from your budgeted amount. If you go over, you can use any unbudgeted
income to cover it, or even pull money from another account. Entering a transaction can be done over the
website, using their app (which tries to remember places that you frequent often), or even by
importing transactions through their bank connection service. While automatic import is the most convenient,
I still recommend inputting your spending as you go. It might seem like a lot of work since it’s
more active rather any automated, but it keeps you in check. In fact, I like to input the transaction so
I know where I stand on my budget, then use the import function to verify the charge amount
and show when it’s cleared on my account rather than just being a pending charge. The import function is also useful to capture
any fraudulent spending or authorized charges on your accounts. For example, if I were to record a $20 dining
out transaction, and the charge imports in as $22, I’ll know that there’s a discrepancy. This might seem silly, but I’ve had a two
instances in the past where an additional tip was added to my bill in a restaurant and
taxi, and I caught both since the amount did not match what I had recorded in YNAB. This type of system means that I don’t have
to think about how I am spending my money. For example, if I know I have $200 left for
dining out, it doesn’t matter whether which card I use or even if I spend cash. I just know that since I have budgeted the
money, it’s safe to spend to it, regardless of what method I use. Of course, for you points and mile nerd, I’m
going to use my Chase Sapphire Reserve or American Express Gold Card since those two
cards in my wallet offer the highest bonus for dining out spend. But then at the end of the month, I can be
confident that I have the money to cover the autopay that I’ve set-up to pay off the
statement balance. To me, that’s financial freedom. When I was in college and didn’t really
know how to budget, I was always worried about whether I would have enough in my bank account
to cover a my statement balance. It was stressful and I never know how much
money I had to spend. I hate to think about how much money I paid
in interest because I paid less than the statement balance since I was worried about whether
I would have enough money to pay the bill. This leads me to their methodology. Their first rule is Give Every Dollar a Job. This means that you are basically allocating
every cent in your accounts to a budget category. This allows you to have control over every
part of your budget. It allows means that you’ll catch discrepancies
due to fraud. The second rule is the Embrace Your True Expenses. This means that you should try to be as honest
as possible about your budget. It doesn’t make sense to create a budget
that isn’t sustainable or realistic. And if you have expenses that are infrequent,
then try to identify them in the process and start budgeting against them. For example, I pay about $1600 for car insurance
every six months for two drivers and two cars. That’s about $267 dollars every month that
I need to budget for car insurance. Though to make it even easier, I can have
YNAB monitor it and let me know if I’m on track to meet my savings for that budget category. Rule number three is to Roll With the Punches. Life is unpredictable, so it helps to have
a budget than can flex and adapt as needed. YNAB preaches that you should expect that
you’ll exceed certain budgets every month. And that’s ok! Like I mentioned earlier, you can pull money
from other budgets and adjust your budget for future months. It doesn’t mean that you’ve failed or
that your budget doesn’t work. It just means that you need to adapt and pivot
as your life changes. Lastly, rule number four is to Age Your Money. I alluded to this concept earlier. A big part of YNAB is that you want to get
in the habit of using your past or current money toward your future budget. Rather than using money that you think you
should be receiving to budget for the same month, you should use money that you’ve
already earned and received. This means that you not only have a buffer
in case things go astray. But in concept, you could get to the point
where you’re budgeting for the next month using money that you earned months back. YNAB says that the goal is to have an Age
of Money of at least 30 days. Though once you start using the program, you’ll
want to see that number grow. And in fact, it’s does motivate me to start
think about how I can save more money and budget more efficiently. In terms of the application itself, there
are a lot of things that I love about it. In fact, I think I might do another video
where I go through a more detailed deep dive on how I set-up my budget. However, if you do you use YNAB, here are
some tips for using the system: 1. Record transactions as you go: I talked about
this earlier. YNAB is much more of an involved and active
process. Other apps often allow you to see how you
performed against your budget every month, but YNAB relies on you actively entering your
transactions and tracking against your budget. This may be one of the reasons that a lot
of people get turned off by YNAB, but it’s one of the things I appreciate about it. I like to know where I stand in real-time. And knowing where I stand on each budget category
helps me to make better decisions on my daily spending. On that note, 2. Geotag locations: YNAB’s app is phenomenal. If you enter a transaction near a place of
business, it will use your device’s GPS to remember the location. When you try to enter another transaction
near that area, it will suggest locations based on your past spending and even the payment
method that you used. This makes it much easier and faster to enter
charges as you go and know how much is left in your budget. And if you don’t want it to remember a location,
you can hit the icon next to the Payee. This is helpful if you enter a transaction
later at a different location and don’t want the app to remember it. 3. Turn on bank and issuer notifications: One
thing that helps me to enter my transactions as I go is to turn on notifications from your
issuer on any spending. That way, I know to clear the notification
after I enter it into YNAB. Again, it’s a small thing, but it helps
amke the process easier. Of course, if I miss entering a transaction,
the auto-import feature will catch it a few days later. But again, my goal is to enter transactions
as soon as it occurs so I know how much I left in my budget. 4. Create an emergency savings category: I recommend
setting up an emergency savings category where you can set aside money for unexpected situations. I also try to build up categories like Car
Repair and Maintenance to help plan for large expenses, like new tires or major car services. This is a great way to 5. Split categories for expenses: One really
cool feature of YNAB that is very convenient and handy is the ability to split transactions
between different budget categories. For example, I recently went to Costco and
bought a ton of groceries. But mixed in were some shirts too, so I split
the charge between my groceries and clothing and laundry budget. You can split the charge with as many budget
categories as you want, so it’s very convenient. 6. Study the reports: YNAB provides basic reports
on your spending, net worth, and income vs expenses. This a great way to visually understand where
your money is going, and potentially shift behaviors to improve your finances. 7. Participate in their webinars: YNAB hosts
webinars regularly to help people getting started or working through a specific topic. They’ve been doing this for years, and I
even remember attending one years ago when I was trying to figure out some of the advanced
features. It’s a great way to learn more the system. So, what about things that I don’t like
about YNAB? Well, like with everything, there are things
that I wish were different. Here’s a rundown of what I think could be
improved. 1. Investment accounts: YNAB is strongly focused
on budgeting and spending, and to be honest, doesn’t have the ability to track your investments. They do have a section in the app for non-tracked
accounts. However, I found that the bank-connection
function doesn’t work well for these accounts. For example, I have a Roth IRA and Rollover
IRA account in my non-tracked account section with linked accounts. In theory, I just want the accounts to update
their balance regularly. However, YNAB doesn’t seem to understand
how to process the reinvested dividends. So, for now, I’ve unlinked the accounts
and am manually updating the balances every month. 2. Cost of service: This was one of the reasons
that I hesitated with moving to the new version of their application. I preferred the one-time-fee model. Though I understand why they’ve gone to
a subscription model. It obviously generates more revenue, but it
allows them to add more development. In fact, after testing out the new version
and features, I was sold on it. I know $7 per month might seem a bit steep
for a budgeting app, especially when options like Mint are completely free. However, I justify it since it helps to streamline
my budgeting and spend tracking process. And I would argue that it’s helped me to
save money in the process, so I don’t mind it as much. 3. Credit card payments: The credit card payment
section is new to YNAB, and it really confused me at first. However, I now get it. YNAB will move money from your budget and
toward paying your credit card account every month. Since I advocate paying your statement balance
every month, there shouldn’t be much concern with this section. However, it does help to have this when you’re
first starting out or transitioning from another budget. Since there may be transactions in the past
and money spent that you need to account for, this section can help allocate money toward
them. 4. Shared budgets: Right now, if you want to
share a budget with someone, you need to use a shared Google account. While this might not be a problem for some
people, I would much prefer to see YNAB allow you to create a budget that can be accessed
by two individual and separate users. Plus, having a completely shared budget doesn’t
work when you’re trying to plan something for your partner or even when buying a gift. This is one area where I think they could
improve the service. Bottom line is that you should use some kind
of system to budget, especially if you’re into points and miles. And honestly, for those of you not into credit
card rewards, it helps to still budget in order to save toward travel. While I am a big believer of the YNAB methodology
and system, there are a ton of tools out there, many of which are free. You just need to find the tool that works
best for you. I know it seems like a lot of work, but I
promise that if you stick with it, you’ll not only gain more awareness, but you’ll
make more informed decisions about your spending. And ultimately, you’ll save money and have
better peace of mind knowing that you have control of your finances. Do any of you use YNAB? What tools do you use to manage your budget
and finances? Let me know in the comment section below. I’ve included a referral link to YNAB in
the video description in case you’re interested in trying it out. They offer a 34 day free trial to test out
the service. I’m not sponsored by them in any way. I’m just a big fan of their service and
methodology, and since I’ve used them for almost a decade, I feel confident recommending
their system and process. Also, there’s an awesome YouTube tutorial
by Nick True – Mapped Out Money where he shows you how to set-up a budget. I definitely recommend checking it out if
you need a step-by-step tutorial on setting up your first budget. If you’re interested in applying for a credit
card, we would love it if you used our link in the video description or on our website. It’s an easy way to support our channel,
especially if you’ve found our content to be valuable and helpful. Also, if you need any help with picking the
right credit card or developing a card strategy, sign-up for our free card consultation service. You basically fill out a questionnaire and
schedule a 15-minute video or audio call with me to review your recommendation. Hope you enjoyed the video and found it useful. If so, please give us a thumbs up and consider
sharing the video with others. It really helps us with growing our channel
and community. Until next time, travel safe and travel smart.

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