YNAB 101: How to Get Started

So you’ve decided to try out YNAB.

Maybe you’re doing it because your brother-in-law keeps pestering you about it; you saw it on Reddit, or maybe you found my blog post drooling about how much I love it.

If you want to know how to get started using YNAB, you’re in the right place! I’ve been using YNAB for over a decade and teaching other people how to use it for several years. YNAB is my jam. I love walking people through it, step by step, so that they not only learn how and why to use this magical, life changing money management tool, but also how to make it fit their actual life.

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While I can’t go into a ton of detail here (for space reasons, not for lack of desire on my part, this post is already hella long), I thought it would be fun to go into the very basic parts of the things I teach people when we very first get started working together.

I’ll show you the 5 steps that I cover with newbie YNABers, with step by step instructions:

  1. Sign up

  2. Add your accounts

  3. Customize your categories

  4. Budget to zero (and then stop)

  5. Keep it going

Before we dive in, though, it’s really, really important that you understand that YNAB is different. It’s all about telling your money where to go (rather than hearing secondhand where it went last week). YNAB is intended to make you aware of financial scarcity so that you stop spending money you don’t have and ultimately, to align your values with your spending.

It’s going to make you uncomfortable at times, and that’s a feature, not a bug.

OK, let’s get in there! Step One!

Step One: Sign Up

The very first thing you should do is to sign up for YNAB’s free trial. (Note: You can try it through the Apple Store, too, but for a variety of reasons too boring to go into, I’d recommend going through YNAB directly).

You can get apps for your iPhone, Android phone, iPad, or even the Apple Watch or Alexa as well. Make sure you get the app without the “Classic” banner across it, if you’re in an app store directly.

The authoritative version of YNAB is always the web app, though, and there are some features that aren’t available on mobile (though they’ve been working really hard on their mobile apps, and there’s a lot you can do on them!). At a minimum, you’ll need to sign up on the web.

Step one complete! You're on your way!

Step Two: Add Your Accounts

Next, you’ll add your bank accounts.

Which ones should you add? For now, add the bank accounts that you regularly use. Think: checking accounts, credit cards (both those you use for new spending, and those you’re working on paying off), and savings accounts if they’re ones you regularly spend money out of (i.e. if you use a savings account more like a backup checking account). I’d stay away from adding other types of accounts (like a 401K, or PayPal) for now, because you want to keep things simple. Simple systems get used.

To Use Direct Import or Not To Use Direct Import?

YNAB offers users in the US & Canada the ability to connect directly to their bank accounts to import transactions as they come in from their banks.

Pros:

  • Less work for you!

Cons:

  • There’s a delay between when the transaction happens to when it shows up in YNAB. Usually no more than 12 hours, but depending on your bank, might be up to a day or two. If you rely solely on Direct Import, your budget will be out of date during that time.

  • It’s a bit twitchy. Technology being what it is, and given the sheer number of banks in the US & Canada, there are sometimes issues with it. Mostly it works great, and YNAB is fantastic at troubleshooting it when there are issues.

  • Some people aren’t comfortable with giving a third party access to their financial institution, no matter the security protocols that YNAB uses.  

Only you can decide whether it makes sense for you, but I use it, have for years, and I find it to be a very worthwhile time saver.

That said, I also manually enter transactions as they happen (either on the web app, or on my mobile app) and use Direct Import as a way to make sure nothing fell through the cracks. I also keep myself familiar with File Based Importing (short version: download an OFX/QFX file from your bank, drag & drop it into YNAB) in case I need to go that route, or if my little hometown credit union is dragging its feet sending the data out.

Step Three: Customize the Categories

Which categories you need in your budget depends on you, and your life - but your past spending history is a good place to start.

What goes in a budget, anyway?

Download the FREE guide to what should go in your budget. I'm pretty sure you're forgetting something. That's where I come in!

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My rule of thumb for whether you should add a category or be a little less granular is that if more information will help you make better decisions, add a category. For instance, you can see why I might decide to split Fun Money by different members of the household, but I wouldn’t split medical expenses in the same way.

To edit or add categories

  • Add category groups (like “Annual Expenses”) by clicking on the + Category Group button just under the month name on the budget.

  • Add individual categories under a category grouping by hovering over the name of the group and clicking the + sign that appears.

  • Hide, delete, or edit the name of any category by double-clicking on it.

  • Rearrange categories or category groups just by dragging it to its new place.

Step Four: Budget to Zero (and then stop!)

This is where things get spicy. We’re officially budgeting now, babe!

When you set up your accounts, your starting balances automatically were categorized by YNAB as Inflow: To Be Budgeted. That’s YNAB-speak for “these dollars need jobs, stat!” and guess what? It’s up to you to give them some.

If you go to your budget, you’ll see your categories all laid out, with 3 columns next to each one. They are, in simplified terms:

  • Budgeted (the plan)

  • Activity (the reality)

  • Available (what’s left over when the plan + reality meet)

At the very top of the screen, you’ll see a large number in green. That’s your total available money. It’s the total of your cash accounts that you added.

ALERT! Try not to get too excited here, looking at all money. It’s likely that you’ve already budgeted a lot of that money...in your head. It’s time to get it all out of your head and into the budget.

IMPORTANT NOTE: If you’ve got a credit card that you pay in full, begin by budgeting for the full starting balance on the card. The way credit cards work in YNAB is a little bigger than we can get into in this post, but since this is often a huge chunk of your available funds, we need to start there. I don’t want you budgeting that money for something else that you really want or need, and then paying your credit card off, having it throw off your budget, and then cursing yourself, YNAB, and me for not mentioning this earlier.

To budget money, select the category you want to allocate money to and type a number in the “budgeted” column. You’ll see the same number pop up as a green bubble in the “available” column.

If you’re not sure how much to budget for something, make an educated guess, and adjust as you learn more. Seriously, you’re going to get loads of beautiful data about your spending soon enough. For today, just begin.

If there isn’t enough money in your “Available” at the top of the screen to cover your whole month’s bills, don’t panic! That’s definitely the norm. Make sure that you don’t budget money you don’t have. When your To Be Budgeted number at the top of the screen gets to 0.00, stop.

YNAB is, at it’s heart, a digital envelope budgeting system. If you budget money that you don’t (yet) have, you’re only fooling yourself. What happens if you try to pay your mortgage and realize that your envelope is a little light, when you thought it was full? Yeah...don’t do that. When you get paid again, budget more money to that category.

TIP: If you want to make sure you know how much

you need to budget for the whole month, try using goals!

To prioritize your money, start with the keep-the-lights-on expenses. YNAB automatically creates a category group called “Immediate Obligations” that’s a great place to start. Roof over your head, heat and lights on, food in the fridge, gas in the car.

After that, budget for automatic expenses that are monthly, or happening that month, including debt payments. Then, move on to putting some money aside for things like your semi-annual car insurance premiums, out of pocket medical expenses, home and auto repairs, or the holidays (sneaky holidays, always coming at the same time of year every year but seeming surprising nonetheless).

Step Five: Keep it Going

The four previous steps went over how to get started using YNAB. If you’ve done all that, give yourself a big pat on the back! You’ve begun!

So...what now? Here’s what you’ll do on a regular basis:

Daily (or just about daily):

  • Update your transactions

  • Check your “available” amount before spending

  • Adjust your budget to cover unavoidable overspending (use the handy dandy move money feature). Better yet, adjust the budget before you spend!

When you get paid

  • Enter your new inflow when it hits your bank

  • Budget your shiny new money to whatever needs it first! Ask yourself, “what do I need and want this money to do before I get paid again?”

At the start of a new month

  • Review upcoming expenses, add them to your budget

  • Note: YNAB wipes out your “budgeted” and “activity” columns on the first of every month. Any positive amounts still left in your budget from the previous month are exactly where you left them.

That’s about all I can fit into this post without putting absolutely everyone to sleep. Obviously, YNAB is a complex tool that I have absolutely not covered in full here. If you want to learn more about how to use it, YNAB has great free live workshops and a bunch of other ways to learn.

If, however, you’re finding that this all feels like too much to learn (this is my favorite program, but it’s got a steep learning curve, and a lot of bells and whistles) and you just want someone to walk through it with you, one-on-one, let’s chat!

 

P.S. Are you interested in learning if YNAB is right for your business? I've got a post for you! 

P.P.S. Looking for a YNAB coach, consultant, or 1:1 help to make sure you do it just right, the first time? That's me!