Saturday, January 16, 2010

You Need A Minty-fresh Budget

So, this article is one of the first articles I wanted to do when I started up my blog, but it seemed like a waste when no one was reading it. Now, with a double-digit number of readers, I think it's finally time to do a legit, useful advice column! Also, as a preface, none of the links given in here are referral links and I make nothing off of people signing up - this is purely a personal, honest recommendation from a user of this software.

About a year ago, I realized that I had no idea what my money was doing. I maintained a positive balance in my bank and paid my bills, so things were doing fine, but I had no idea why they were fine. I couldn't tell you how much I was spending on food or what I had set aside to buy video games with. It was entirely fly-by-your-seat-and-hope-for-the-best money management. Frankly, this was fine in college. By the time I got a wife and a house though, it became apparent that we could be on the brink of bankruptcy and I'd have no idea.

I set out on a quest to figure out how to deal with my money. In this process, I went through a lot of financial software, both free and paid, and read a lot of reviews, attempting to figure out the best way that I could manage my personal money (I would not recommend this to businesses). In the end, I discovered a two-pronged approach that is absolutely perfect for me.

The first tine of my fork of budget-management (not really sure where I was going with that metaphor...) is, an entirely free online financial aggregator. If you only have one bank account and no other assets or debts, and never use a credit card, then isn't really needed. However, I had a number of bank accounts (joined with my wife's personal ones) as well as a mortgage, a Paypal account, and a credit card. very slickly combines all of this financial data into a single webpage.

It's quite brilliant, really. You just give login credentials to their (secure) server, it checks for recent activity automatically, and always keeps all of your accounts up to date. It has excellent charts and graphs and combines your spending trends across all accounts, making it much easier to see where your money has gone. In case you're worried about security, this is a venture-backed, industry-reviewed, recently-acquired-by-Intuit company. If nothing else, if things go wrong there are big companies with lots of money that you can sue. :) One quick word of warning - some banks apparently charge a fee for "electronic access" to account info. I mentioned this in a previous blog post, but Wachovia charges me $6 a month for to check the data. Suntrust on the other hand doesn't charge a dime. Just make sure you keep an eye on it.

However, as great as is as collecting all of my data (and insisting that I'm worth less than nothing since it deducts my mortgage from my net worth...sigh...), it doesn't help me much with budgeting. Basically, it's great at looking backward, but very weak at looking forward. (I'm sure users/employees will point out that there is a budgeting widget in, but I'll respond that it is woefully inadequate, especially compared to what I'm about to discuss).

So, you need a budget. No, seriously, You Need A Budget, also known as YNAB for short. In my search for a budget, I kept coming across YNAB being mentioned here and there, with really good reviews. I checked out their website and, honestly, it looked like a cheap scam. So I ignored it for a while. But it kept coming up, including an incredible, glowing consensus review on (please note, I give that link only to show the reviews - that is the old version and no longer sold). I bit the bullet and downloaded the demo. Turns out it wasn't a cheap scam, just a victim of bad website design (an ailment that has been recently fixed, or at least improved). I was immediately hooked.

First off, this is not free software. The new version, YNAB 3, retails for $59.95, and is currently in beta. I've already purchased my copy and am in the beta stage with it, and it's a fantastic piece of software. Secondly, if you're a spreadsheet wizard, you can do most of what is offered here (in fact, the original version was sold as an Excel Spreadsheet file). Not all of it, but by and large most. That said, this is a very slick piece of software that pushes you into good spending/saving habits and makes you adjust yourself when you miss your targets. It is simple, easy to use, and very effective. There's also a large and helpful forum of users that the YNAB creator is surprisingly active in.

The basic idea, like most budget software, is to use a modified "envelope system", where all of your money each month is put into a labeled envelope for a particular purpose. Thanks to this setup, I can now tell you exactly how much I budget for eating out, groceries, fun money, clothing, vacations, internet, water, etc. every month. I know where my money is going, and that is incredibly liberating. It lets me spend my "fun money" without feeling guilty or worried that it might cause me to not be able to eat one day, because the money is already allocated for that purpose.

The new version of YNAB is quite cool, with a few significant improvements over the previous edition. The biggest for me is the move to Adobe Air, which means it is OSX-compatible now (no more booting into Parallels to do my budget - whoo!). Beyond that, it has a nicer interface and much better reporting tools. There are a few other improvements too, including some nice tools for splitting transactions and dealing with reimbursements, but either way it looks solid (with a few minor bugs here and there, but heck, it's still in beta).

The one downside to YNAB 3 is that it isn't It doesn't automatically grab all of your financial transactions and enter them into the register. It can import summary files from your financial institutions if you wish, but I actually prefer entering them by hand anyway - it's my version of balancing my checkbook and making sure there aren't any surprising charges. This is where my title comes from - and YNAB play along very well. I pull up, go through the transactions, and enter them into YNAB. It's a therapeutic experience for me - I spend a few hours a month, go through all the numbers, balance everything out, and see how we did. I'll admit, it wouldn't be as much fun if you were having financial difficulty, but it'd be all the more important.

Using these two tools, for a grand total of a one-time $60 fee, I'm able to know exactly where my money is, what I have saved up, and what I can spend on everything. I have much greater control over my finances and would heartily recommend this solution to anyone. Please leave comments if you have any questions - I'd be happy to help!


  1. Nice post. I've been using for about 18 months now, and find it very helpful in seeing where my money is going. From a budgeting standpoint, I think their updates are a lot better.....In all honesty, I've never tried YNAB (read quite a few articles where it's recommended, but I haven't seen any demos or anything.

    Prior to using, I would use desktop versions of the software, and altough I miss some of the advanced features....(like entering expected payments so I could get a forward looking cash flow statement), those items really just made the software harder to use.

    If you'd like to get started with, and would like a getting started guide, i offer one on my website:

  2. Corey - Thanks for the comment and the link! Actually, recently did a significant overhaul of their budget system. They now have the ability to enter regular expenses to help budget and plan for infrequent things like car insurance payments, and even have the ability to rollover amounts from the previous months now.

    That said, it's still a simplified and clunky version of a budget compared to YNAB. As far as I can tell, rolling over doesn't have the dual-option of per-category vs. whole budget. I'm not aware of ways to make sub-categories (I have probably 50 categories in my current budget which would be a pain in, and I'm not sure that you can split transactions. Plus, the web interface to me is just less efficient than the spreadsheet register that YNAB uses when it comes to making changes and writing comments for transactions.

    So, if you really can't afford YNAB, you can use to help you budget and save up until you can buy YNAB. :) But seriously, it's a fine tool, but I really think YNAB brings a lot more to the table in terms of tools, functionality, efficiency (though it chugs a little sometimes with the new Air interface - hopefully they'll fix that up), and pressing you into good habits.