How I set up a Personal Budget using YNAB Pro

I know many of you have been requesting that I write a post on my experience with the personal budget software, YNAB. I have mentioned it in several posts but have yet to give my review. Spoiler alert – I love it!

I have always been one of those guys that knew that I needed a budget. I would buy things on a whim and would often have to use my credit cards towards the end of the month to cover my ass. Each month I was digging a deeper and deeper hole for myself. I knew I needed a to set up a personal budget so I tried programs such as Quicken and Money. I think both of them were very impressive programs. I used Quicken for a while and liked being able to download all my transactions and see the beautiful graphs of where my money was going. The problem was as I looked at the graphs, my money continued to go out at an even quicker pace. I played with the budgeting portion of the software but was unable to set it up to my liking. I continued to use the program to keep track of my transactions, but used the budgeting portion less and less as time went on. Getting my personal finances under control was the reason I bought the program and if I wasn’t using the personal budgeting than this defeated the point. I eventually stopped using the Quicken software and went back to just checking my online statements every so often.

As I began to see my credit card balance steadily increase each month, I knew I had to make a change and make it quick. I researched budgeting on the internet and by chance came across YNAB PRO, which stands for YOU NEED A BUDGET. The YNAB budgeting software is offered in two versions. One is in a personal budget spreadsheet form and the other is actual personal budget software you install on your computer. I chose to go with YNAB Pro, which is the software version.

I took some time to read the manual after purchasing the software. There are some basic strategies to personal budgets and the YNAB Pro method on setting up a personal budget. First off every dollar has a job. Whether you have 100 dollars or 5000 dollars ready to be budgeted each month, all of it will be split up among several categories. Some may go to groceries, some to clothes, a lot to bills and hopefully some money to savings.

Each time you receive a paycheck that money is categorized as primary income. Here comes the twist. The money you are budgeting is last months money. It may not make sense at first, but hear me out. The plan is if you make $2,000 in August that money will be budgeted in September. What this does, is eliminate the need to live paycheck to paycheck. Since you are budgeting a months worth of money you already have, this eliminates a lot of the stress that goes into other personal budgeting techniques. If you do not have a months worth of pay saved up, have no fear. The manual shows you how to create a buffer category that will help you gradually build up to that one months worth of padding. Until then you will just budget with your current months income.

Let’s get into some of the details of the actual program usage. First off there are tabs along the top, which identify your different accounts. You may have your ING savings, credit cards or any other accounts you want to keep track of. Once you click on one of these tabs you will see a register for that account. You can either manually enter transactions as they occur, or download the money or quicken files from your banks website and import them into YNAB Pro. I like to visit my ING account every few days and import the latest quicken file. YNAB is smart enough to match duplicate transactions and input them only once. Now that you have some income and expenses in your register, you go ahead and categorize them. The categories you use are up to you and are very simple to add or remove.

The next section of YNAB Pro you will need to use is the Budget section. Here is where you get down to the nitty gritty. Once you click on budget you will see a page with the current month and next month along the top. Right under each month will be the total available income for that month that can be budgeted. Remember this figure comes from the income generated in the previous month. We are trying to get out of the habit of living paycheck to paycheck. Along the left side you will see the categories you set up previously. There are three columns next to each category for each month. The first one is labeled “budgeted”. Here is where you will type in how much you want to budget this month for this category. Once you type in an amount it will be deducted from the available figure at the top of the column. Go ahead and assign a budget amount to each category until the available figure has reached zero. That’s it, you have budgeted for the month. As you enter transactions into your register, and then assign a category that will be automatically entered into the budget page. The figures will show up in the second column labeled “spent”. The third column, labeled “balance”, is the difference between your budgeted amount and your spent amount. You do not want this to be a negative number. Of course as you get used to budgeting it may go into the negative here and there. Don’t stress over it! If you can, move some money around or just improve next month. It takes some getting used to, but I am doing much better today than I was 3 months ago when I started YNAB PRO.

I know this may be a little hard to picture so I have attached some screenshots to give you a better understanding (close each image at the bottom right). As you can see there are also some nice graphical representation of your budget and spending patterns. If you have any questions for me that I may not have covered, please leave a comment or shoot me an email. I will be happy to try and help clear up anything you may be confused about in YNAB Pro.

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