Gather Little by Little

For the past 3-months or so I’ve been searching for the right software to use to manage our budget. I’ve looked at many different options and even tried using them with little success. As a result, I’ve struggled with maintaining our budget as well. I don’t need a budget, I need budget software! I’ve been using my own clunky spreadsheet. It works, but was tedious. I didn’t like the fact that it wasn’t easy to report on my various budget categories nor was I able to import bank transaction data easily.

I had read on some other blogs about You Need a Budget (YNAB) and decided I would like to try it out. I contacted Jesse Mecham, the owner and founder of YNAB for an evaluation copy to both check out it for myself and to write up a review on. Jesse quickly responded back and hooked me up with an evaluation copy of YNAB.

You Need a Budget (YNAB)

YNAB started out as a custom spreadsheet used by Jesse and his wife Julie for tracking and managing their expenses. They lived on a budget, lived on less than they earned and used the spreadsheet as a tool to manage their money and anticipate upcoming financial needs. They began to share their personal process with their friends and they all said they needed a budget too. The problem was the spreadsheet was very specific to Jesse and Julie’s needs. Seeing an opportunity, Jesse began to research available budget software. He found all where very static. His process wasn’t static, but a “living budget.” Jesse quickly realized his system was unique. He then developed the first spreadsheet version of YNAB that anyone could use.

YNAB came later and improved on an already great product. YNAB isn’t a spreadsheet, but a full custom desktop software product like other software products such as Quicken, MS Money, MS Office, etc.

This review only addresses YNAB. I didn’t want another spreadsheet, so I didn’t look at the regular version of YNAB.

The 4 Rules

Before I jump into the details of the software, we need to discuss the 4 rules. Both versions of the YNAB are based on 4 Rules:

• Rule #1 – Stop living paycheck to paycheck
• Rule #2 – Give every dollar a job
• Rule #3 – Prepare for Rain
• Rule #4 – Roll with the punches

I won’t go into the details on the rules, but you can read about them in detail over at the You Need a Budget website. I do want to discuss Rule #1 though. Rule #1 basically tells you to live on last month’s income. In order to do this, the rule recommends you have 1 month of income in savings. This is a point I really struggled with and still haven’t fully made a decision on yet. I think this is a great practice, if you aren’t in debt. If you’re in debt though (like me), I am an advocate of Dave Ramsey’s $1000.00 baby emergency fund.

You can still use YNAB without having the 1 month savings, but it makes it a bit awkward as income for the month has to be tracked differently. It certainly isn’t a big deal, but something you should be aware of.

Rules 2-4 are all very straight forward. Rule #2 places every incoming dollar to an expense category. This is commonly referred to as a zero based budget. Rule #3 helps you plan ahead for known upcoming expenses. YNAB actually helps you do this. Rule #4 helps you deal with overspending (which does happen).

Installation

YNAB was very easy to install. The installation process uses a standard windows installation wizard and with just a few clicks the software installs itself and ads a link to your start menu and optionally your desktop and quick launch bar. It literally took me less than a minute to install the software. This is just one example of the overall simplicity of this software.

Using YNAB

Clicking on the desktop icon launches the software and displays a very crisp and professional looking banner window which is displayed until the software fully loads, which unfortunately takes a long time. I am used to software loading rather quickly. YNAB literally takes about 15 seconds to load. The only other software package I use that takes this long to load is Photoshop CS3 which is far more complex. The banner window does indicate which modules are being loaded and provides you with visible feedback that things are loading up like they should be, but I just can’t understand why such a relatively simple program takes so long to load.

Once loaded, you are presented with the welcome wizard:

The welcome wizard allows you to start a new budget, import a budget from the basic version of YNAB, and to open an existing budget. I chose to start a new budget, and was presented with the register page:

The software is divided into 4 primary sections which you can see and select in the lower left: Register, Budget, Scheduler, and Reports.

The Register

The register is exactly like your checkbook register and is where you will record all of your expenses. The register is divided up by the various accounts you have. The different account registers can be accessed by clicking on the account tabs at the top. New accounts can be added by clicking on the large plus sign next to the account tabs.

Adding entries to the register is simple, you just click where it says “Click here to add a new transaction.” You can specify the date, the category for the expense, the payee, and then indicate if they entry is an inflow or outflow. Inflows are income, outflows are expenses. When specifying a category, you can select an existing category, add a new category, or split an expense across multiple categories. The ability to split categories is a must for me, as we often shop at Wal-mart and purchase items at the same time that cross over multiple categories. You can’t delete categories from this screen. You use the budget section to manage your categories, including deleting them.

One of the things missing that I’d like to see is the ability to download transactions seamlessly from you bank of choice. YNAB does allow you to import transactions from your financial institution which is wonderful, but it’s a cumbersome process. You must open up a browser, navigate to your bank’s site, login, find your account, download the transactions, then return back to YNAB and import them. Importing is done by selecting the Import Transactions option located on the File menu. The importing feature works very well, I just would like to see it more integrated like Quicken.

The Budget

The budget section is where you will go to both enter your budget and view how you’re doing. One of the really nice features of YNAB is the ability to group categories. For example, I have multiple types of savings and being able to have sub-categories under the Savings category is really nice.

The budget screen looks as follows (without any data entered):

The screen is very intuitive and displays the Budgeted, spent, and remaining balance for each category and sub-category. Budgeting is done monthly and multiple months are displayed giving you the ability to see your budget history.

The Scheduler

The scheduler allows you to enter recurring transactions so that you don’t have to enter them. This is easy to do and is useful for fixed amount items such as your cable bill, utility bills, etc. You basically just click on the grid and specify the category for the expense, the payee, the frequency, and the amount of the inflow or outflow. The frequency is a drop down selection that offers many different options from daily to every other year. A memo field is also provided.

Reports

One of the nicest features provided by YNAB is it’s reporting capabilities. Reports are provided in a graphical format and to be honest are really nice looking. Here is a sample of the “spending by category” pie chart:

Reports are available for categories, time frame, and for current category balances. The later will be the primary report I’ll be using for our our weekly budget meetings.

Miscellaneous Features

A few other miscellaneous feature worth mentioning include automatic backups, print capability with print preview features, a 48 page set-up guide in PDF format that takes you through not only using the software, but through the YNAB budgeting process.

If your wondering whether or not to spend the $39.95 for YNAB, Jesse provides a 60 day money back guarantee. From the website: “You have absolutely no risk when purchasing this product. If you give the program an honest effort and aren’t happy with it, you are entitled to a full refund..”

Freebies!

When you purchase YNAB you also get a few really cool freebies:

• Debt Snowball Worksheet – A really well done spreadsheet for managing and tracking your debt snowball.
• Tax Forecaster – Estimates your taxes, including capital gains.
• Retirement Planner – Allows you to do what-if scenarios for investing.
• Mortgage Analyzer – Will help you become completely debt free by showing different options for paying off your mortgage.
• Car Maintenance Schedule – This was my favorite. A very thorough spreadsheet for tracking all of the maintenance on your vehicles.
• YNAB Way – A 45 page eBook that walks you through the YNAB methodology and is full of information on the Whys and Hows of YNAB (an $11.95 value)

In Summary

Overall, YNAB is an excellent piece of software. The best thing about it is that it’s simple to use and just plain old gets the job done. I’ve been searching for the right solution for me for sometime now, and while YNAB isn’t exactly what I wanted, it is the closest of all the products I looked at.

Pros:

• Simple to install and use
• Excellent and thorough documentation
• Not only a software package, but a proven methodology as well
• Backed by a 60-day guarantee and Jesse’s excellent customer service

Cons:

• No automated integration with banks for downloading transactions
• Slow startup
• Budget is done monthly rather than bi-weekly which would work better for me
• Price – $39.95 is a bit steep for the feature set this application provides. This is offset some by the freebies that are included and by the fact that you’re purchasing more than just software, but a proven process as well.

I purchased YNAB over the weekend, and I’ll be posting updates as I continue to use and become more familiar with it. I’ll also try to capture any tips or tricks I learn along with writing about my experience with the forums and customer service.

What are your thoughts? Are you using YNAB? If so, what version? Has it worked well for you? Any concerns? Add a comment!