It Worked! You Need A Budget (YNAB) personal home budget software has REALLY worked

YNABWe transferred from one huge energy provider to the smaller, highly customer service driven Good Energy to supply both electricity and gas soon after we moved to this house in the summer months.

We had had so many good experiences with Good Energy in the previous three houses and their ethics are spot on (‘Help us build a green energy future’) that switching to them is always one of the first things I do on moving house.

The change over takes a bit of time but apart from sending off a couple of meter readings on a particular date the switch over has been invisible to us as the original supplier continues to provide the service until the transfer is complete and then a bill is sent out.

Yesterday I received the bill from the energy providers we left behind and for a unusually I opened it immediately.

It is a HUGE bill which covers both gas and electricity used in this house since September and although I anticipated it being large I still did not relish receiving it HOWEVER for the first time ever I had already allocated the right amount of money for this bill and will be able to pay it without worry that we might go overdrawn or having to dip into our savings which we are trying to build up since the big spend of a house purchase six months ago.

How did I do such a clever and grown up thing? I cannot take much credit at all as it is all down to the usage of a very nifty piece of household budgeting software called You Need A Budget

A massive shift in household budgeting practices has happened in this household since the beginning of November when I searched on Mumsnet for recommended home financial management packages.

So many people waxed lyrical about You Need A Budget (or ‘Y-NAB’ as it affectionately called) and how it had revolutionized not only their money management but also their relationships with their partners and their health (!) that I looked it up straight away, started a trial and immediately knew it was exactly the thing that would help us sort out our spending.

The You Need A Budget (YNAB) software works on four very simple principles:

1. ‘Give Each Dollar A Job’
Your money shouldn’t tell you what to do. You’re the boss. The drill
sergeant. The maestro. When you earn money, you plan how
you’ll use it, then you follow your plan.

2. ‘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. Climb
out of that Financial Crisis Roller Coaster. It’s smooth sailing ahead.

3. ‘Roll With The Punches’ 
In boxing, a fighter moves his body in the same direction as his opponent’s punch, so as to lessen the blow. In budgeting, you do the same. Be flexible and address overspending before moving on to the next month. This helps you stay in the fight.

4. ‘Live On Last Month’s Income’
To be perfectly frank, we want you spending this month, what you earned last month.
This Rule is something to strive for, and likely isn’t something you can implement
right away. However, with the help of the other three rules, you’ll get there.

With Rule #1 ‘Give Each Dollar A Job‘ the YNAB team  explain that ‘Instead of deciding to buy something based on the big (or small) pile of money in your checking account balance, you’ll decide based on a category balance’.

Our gas and electricity usage was set up as one of the many ‘budgets categories’ that we spend our income on.

The clever thing that YNAB does is that is encourages you to allocate ‘spending’ to each of the categories you have each month EVEN IF IT IS NOT ACTUALLY SPENT FROM THE BANK ACCOUNT THAT MONTH. Genius.

So by using YNAB I had simply allocated an imaginary monthly spend in both the Electricity and Gas budget categories of £75 when I set up the software in late October so by the time yesterday’s whopping big bill arrived I had October’s £75 for Electricity plus October’s £75 for gas as well as November’s£75 for Electricity plus November’s £75 for gas, December’s £150 for both and January’s £150 for both. I not only had enough money allocated to pay the nasty energy bill I had more than enough as had purposefully over-estimated the amount we would use each month and the bill was far less than £600. The monies allocated hadn’t been moved anywhere but they had been spoken for and were ready to be spent from our current account.

Today I delighted in logging into our bank immediately and settling the account instead of putting it off, losing the bill, receiving a red bill and eventually paying it but worrying if the money was depleting our savings or meant we wouldn’t have enough for food by the end of the month.

We have set up budget categories for all the usual regular spending categories – food, insurance, council tax etc but also all the unusual and less regular spending categories such as ‘Car Repairs’, ‘Piano Tuning’, ‘Christmas Party Drinks and Food’, ‘Trips to Cinema and Swimming’ we also have categories for saving areas such as ‘Solar Panels, Wood Stove, Holiday, and building up our Emergency Fund.

With a bit of luck using YNAB will mean that each month a few pounds will be put aside or allocated into each budget category regardless of  whether any actual spending for that category takes place so all those allegedly unforeseen areas of spending or forgotten about spending (parking fees, window cleaner, teacher’s gifts at the end of year, school trips) are magically saved for with very little effort.

The other marvelous thing about YNAB for us as a couple is that it has finally resolved the related mysteries of what happens to cash taken out of the cash machine – what does it get spent on? and also how much does my lovely husband spend on beer each month (according to our bank statements it was annual spend of £14 – hmmmmmm I don’t think so!). This is partly because it is just one licence for multiple computer installations, partly because it so easy to use and partly because it has a handy phone app so you can easily log transactions on the go.

I love YNAB it is the piece of software I have been wishing for for decades. I especially love it’s well put together video tutorials and support forum too.


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4 comments to It Worked! You Need A Budget (YNAB) personal home budget software has REALLY worked

  • I currently use gnucash to manage our cash but it does leave lots of questions such as cash withdrawals where the money just disappears to a “cash” category. So I’m going to give the free trial a go! Not sure how useful if we don’t have iphone but will report back!

  • Ackers

    I’ll be very interested to hear how you get on with it. It has seriously revolutionised the way we think about our income and our spending and our life goals and FINALLY we know what the unknowns are and also how very quickly the little bits and bobs that surely don’t matter add up to matter quite a lot really quickly.

    The iPhone app isn’t necessary at all

  • Hi again,

    Yes I’ve installed it and set myself a budget so will see how it goes. Only issue is our income tends to be irregular (some months more than others) so will be interesting to see how it works in YNAB.

    I’m already a bit obsessive about keeping a track of things, I use the open source GNUCash financial package and I used Microsoft money before that, but I think YNAB is a lot better and drilling down each month and seeing what you spent in each category. I’m going to run the two programs together to see how they complement each other!

  • Kat

    The $60 price tag is quite a lot for me at the moment – do you think it’s really worth it? I currently budget using a spreadsheet but I do get into a bit of a mess with it at times.

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