Life @ NCP

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Why not YNAB it

YNAB (read: why-naaaab) is the saviour of my financial life. After raving about it to quite a number of people, I’ve decided that the best thing I can do is to blog about it so that more people will be using it.

One of YNAB’s pretty loading screen


I first came across YNAB a while ago when it was made as an excel spreadsheet. Jesse Mecham, started the work early in 2003, out of necessity when he had to get more income for the newborn baby in his family. The rules he came up with were practical and flexible enough for his family to ensure that they had some financial security despite a single low student income in the household, and several children to look after.

At the time, lured by shinier other options, I chose other alternatives like Quickbook, Microsoft Money, Buxfer, Billmonk, Mint, Xpenser, Toshl, Xero, etc (yes, my obsession to get my financial life in order had been running for years). I even started a project with pyko, chii and minch to create one ourselves, called omex (incOMe EXpense, heheh). But with 99.9% projects that I had started, we didn’t end up finishing it.

I did my usual review of software alternatives last June because I was not happy with Xero’s primitive budgeting ability, and there I found it. YNAB 3.0, in its true great shiny form, far from the messy excel spreadsheet I saw previously.

Another gorgeous loading screen for the Reports section


I have never looked back since, and can’t stop recommending it to enough people.


Why? What’s so special?

YNAB has four solid ground rules that are easy to follow:

  • Rule One: Give Every Dollar a Job. When you earn money, you plan how you’ll use it, then you follow your plan.
  • Rule Two: Save for a Rainy Day. Take those large, less-frequent expenses that usually send you into a financial tailspin, and break them into monthly chunks. Result? Financial peace.
  • Rule Three: Roll With the Punches. In budgeting, be flexible and address overspending before moving on to the next month. This helps you stay in the fight.
  • Rule Four: Live on Last Month’s Income. We want you to spend this month expenses on what you earned last month.

Rule One definitely puts some breaks on my shopping spree. Rule Two makes saving to pay for my mortgage a much more concious thought, Rule Three makes me feel committed because I can’t just erase last month’s budget overspending by creating a new budget this month. YNAB makes it obvious that I have a lot less money to budget for this month if I have overspent last month. I don’t have any problem in relation to abiding by Rule Four, but nonetheless, I get quite happy when my income increases slightly for some one-off reasons.

Budget loading screen is cute


Budgeting without Lies

YNAB provides super flexible budgeting tool which allows you to apply these four rules into everyday life. It works by creating a separate budgeting layer, isolated from your daily transactions. To illustrate this point, let me give you an example. I have always had huge expenses around November every year, because of my car. My car is 12 years old, so it needs pink slip every time I renew the registration. I usually get it serviced at the same time since I’m already at the mechanic. Given the age of the car, there’s bound to be quite a lot of cost involved – the last time I had to change the brakes and the door locks, hmmm expensive. Registration costs came up to about $300 and the servicing another $500-ish. This means every November, I usually get stressed. I try not to shop much, and every time I do, I regret it.

However, the stress may not actually be necessary if I’ve already saved enough buffer in prior months to pay for the car. But how do I know that I’m not just making those excuses so that I can shop more? This is how I do it in YNAB. Every month, I can budget for those big expenses I dread.

Any expenses, no matter how big they are, as long as it’s budgeted for, I’m not worried.


YNAB will tell me to assign every dollar for the previous month’s income into a budget category at the beginning of the current month (remember Rule Four). As transactions get recorded (I can upload transaction files generated by my banks), it will accumulate the expense amount under the “Outflows” column and match them with the categories I have set. Where I see the “Balance” column is red, it means that those are the expenses that I was not expecting. I can also drill down further to an individual transaction quite easily (as shown in the picture above).

This feature on itself has allowed me to see my monthly expenses with context i.e. in relation to the previous month’s expenses, and what I have budgeted for at the beginning of the current month. As long as I’ve budgeted for the expense, I don’t need to be worried. Quarterly bills such as council fees or water bills can also be budgeted this way. Let’s say your water bill is payable in March for $150, then every month, you can put $50 into the category and YNAB will keep a rolling balance. By March, you would have $150 under the “Balance” column, so when you see an Outflow of $150 for water bill, the balance will not be red.

Expenses that are out of budget just because of “Dumb Mistakes” like overweight airport baggage fees still happen (urgh), and I still get stressed about it, as I should be. That’s the only way for me to change my spending behaviour, but nothing else. If I have a spending splurge in November, I will see it in YNAB despite the car expenses I have to incur. In the past, I can mask the splurges as any overspending in that month is expected.


Awesome Spending Trend Report

YNAB allows wonderfully flexible categorisation. I split mine into Everyday Expenses, Monthly Bills, Quarterly Bills, Annual Bills, and several Saving Goals. When I see my Spending Trend report, I can see whether the total expenditure is huge because of the electricity bill or because of some parking fines I got (those dumb mistakes!).

As of 2013, YNAB has this awesome Spending Trend report!


The report above is showing good signs as February has the lowest expenditure so far, despite the fact that it has a lot of “Quarterly Bills” due (highlighted in green in the chart). That means double achievements for me yay 🙂

Like the budgeting tool, you can easily drill down to the subcategory and the actual transaction. When I drill down to my Quarterly Bills category (as shown below), I can see that most of them are electricity bill and strata fees, and I can see that along with my November car expenses, these two bills were also due last November. No wonder the total expense for November was so huge!

November huge expense was not just because of the car, but also the electricity bills and strata fees..


The program comes with numerous reports such as Spending by Category and Net Worth, as well as loads of features. You can link all of your computer and mobile devices through dropbox cloud-sync, so that you can also account for some of those snarky cash transactions that add up. The mobile app is neat and easy to use.

Behind all of that, YNAB has managed to build a community behind them, whose members strive to lead less stressful financial lives. Heck you even get a crash course when you first join. If you often read personal financial blogs like The Simple Dollar or Get Rich Slowly, there is no reason why you can’t incorporate some of the lessons and goals to YNAB as well.


Do You Lie?

I have found it is very easy for me to lie to myself on how much I am earning, and how little I am spending, or making excuses as to why I don’t have much money in my wallet even though I did a big cash withdrawal just yesterday. Once or twice is okay, but minch and I found that every month, we have a “special” expense that always happens.

Does that happen to you? Did you remember when you last told those lies? Was it end of last month? Or was it as recent as yesterday? If you can’t say how much exactly you’ve spent, then you wouldn’t know how much you’ve actually saved. Without savings, the differentiating factor between you and the poor hobo on the street, is a job. What happens when you can’t rely on your job unexpectedly?

YNAB is not free, but you’re worth it (less stress, less wrinkles).


PS. I get discount as YNAB customer if I refer a friend. Let me know if you are thinking of getting the program after the one month trial, I can get you $6 discount as well.

Thanks to minch for proofreading this post.