As I prepare to track my spending in 2017, I have to decide which tool to use.
In the olden days, there weren’t many options. Lately, however, there’s been a boom in personal-finance tools. Rather than try every available app, I elected to take a look at four that seemed like good fits for me: Quicken, You Need a Budget, Personal Capital, and Mint.
Today I’m going to review my experience with You Need a Budget. I’ll cover the other three options later this week.
You Need a Budget
You Need a Budget (a.k.a. YNAB) started as a simple spreadsheet that Jesse Mecham built while he was still in college. He was about to be married but still had three years of school left. He was worried about making ends meet, so he decided to create a budget. But not just any budget!
“I was taking a spreadsheet course at the time,” he told me in a 2014 interview, “and I thought spreadsheets seemed like a great way to build a budget.” From those humble beginnings, YNAB grew into the robust software that exists today.
Note: I’m friends with Jesse. I’ve followed the growth of his business over the past decade, and have enjoyed spending time with him at various PF gatherings (including the first-ever chautauqua in Ecuador). I’ve tried not to let that cloud this review, but you should keep this in mind.
You Need a Budget isn’t just a piece of software. It’s a financial philosophy.
One of the things I admire about the YNAB method is that it truly pushes people to take control of their money. The other software I’m reviewing this week isn’t like that. The folks behind Quicken, Mint, and Personal Capital don’t care whether you get out of debt and build wealth. The folks at YNAB do care, and that informs how they’ve built their app.
Here are the four fundamental rules of the YNAB method:
- Give every dollar a job. “The secret is just to be intentional about what you want your money to do before you spend it,” says the YNAB website. In other words: Practice conscious spending. From experience, I know that many folks who struggle with money do so because they drain their checking accounts every month. If there’s money there, they’ll spend it. There’s no plan behind their actions. YNAB wants every dollar to be spent with purpose.
- Embrace your true expenses. In YNAB parlance, “true expenses” are large irregular expenses like home insurance, Christmas gifts, or annual vacations. These are easily overlooked by people when they first start to budget. YNAB brings these true expenses front and center, and asks users to set aside money for them every month.
- Roll with the punches. Be flexible and forgiving to yourself. Your budget isn’t meant to be a rigid diet. It’s meant to empower you, not to make you feel guilty. Some months you’ll spend more on dining out, say, than you had originally planned. That’s okay. Simply grab money from elsewhere in your budget to cover the overage.
- Age your money. “If you’re done budgeting for the month and you have extra funds, budget some to the next month,” Jesse writes. “The next time you sit down to budget, repeat the process. Send those dollars to the next month, whatever you can. In short order you’ll realize that you just funded all of February and it’s the middle of January.” YNAB tracks how many days you let your dollars sit before having them do the jobs they’re assigned. Clever!
Unlike the other tools we’ll look at later this week, YNAB isn’t free. It costs $50 per year. Fortunately, the company offers a 34-day completely free trial. (You don’t even have to enter a credit card to get set up!) And if you go beyond the trial period without paying you won’t lose your data; you just won’t be able to access it until you enter a payment method.
Is YNAB worth $50 per year when the competition is “free”? Let’s find out. [Read more…]