After about a month of using YNAB (You Need a Budget) personal money management software, I’ve learned more about the tool and some of the great budgeting features. My wife and I have both been using YNAB to manage our monthly budget as well as track our expenses. It’s user friendly and isn’t very complicated, so it makes it easy for my wife and I to have a conversation around our budget and expenses.
There are some budgeting basics YNAB handles extremely well. I thought I would highlight some of them for you in today’s post.
Active Budget Management
YNAB makes it easy to adjust your budget throughout the month. For example, we find we spend more in some categories than we have budgeted. I don’t think this necessarily occurs because we’ve done a bad job planning. Rather, it’s life occuring such as the need to spend more money on food one month, or gas prices changed, and we see the impacts on our spending.
If overspending occurs we’ll often move money from an underspent category to cover the overspending. This is basically the same as moving money from one spending envelope to another. We might have saved some money on our electric bill and decide to move that money to cover the overspending in the food category. You can do this in YNAB be negating some of the money budgeted for the electric bill and then adding it to the spending plan for food.
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Subtract from Next Month’s Buffer or Starting Category Balance
In YNAB you’re Available to Budget total minus Overspending total equals your starting balance for next month. So, if we don’t budget all our money YNAB will carry that money over to next month to be allocated. But in the case of the overspending example for food, YNAB will subtract overspent amount from the available to budget balance to get next month’s starting balance. By doing this simple calculation, YNAB forces you to fix your overspending. In other words, we are forced to fix the problem by reducing spending somewhere in our budget next month to fix the shortfall so that it doesn’t grow bigger.
The other option YNAB provides is to take the overspending directly from the category balance from which the overspending occurred. Rather than starting the month with less money overall, the category balance is reduced by the amount of overspending. We use this feature for a couple of different categories. For example, if my wife or I were to spend more money than planned in our blow money categories, each of us has to bite the bullet and spend less in our blow money category next month. Our overall starting balance doesn’t suffer in this case. Rather, we reduce our blow money starting balance so we each have to fix the problem ourselves and reduce the amount we’ll have in this category next month.
Available to Budget & Overspending Calculations
As I mentioned, YNAB provides a few calculations or indicators that are important to managing your budget throughout the month. I’m constantly paying attention to the Available to Budget and Overspending Calculations. If there is overspending, I know we have some managing to do to either balance the overspending by moving money around, reduce the category balance for the next month, or use any money in the Available to Budget total to cover the overspending.
YNAB makes it very easy to actively manage your budget and spending throughout the given month. The Overspending total is your indicator of how you’re doing overall with your budget and it’s important to pay attention to each day.
Are you a YNAB user? If so, share your favorite budgeting tips in the comments. Regardless, do you actively manage your budget each month as described in this post?