I discovered You Need A Budget last year and it completely changed the way I look at my spending, my debt, and, well, all of my money, really. When I wrote about it last April, I said it could change your life. While that may sound like cultish adoration, this little glorified spreadsheet really did change my life for the better in a way that Mint, Level, Simple Bank, and other services failed to do.
A huge part of it is that unlike Mint and other budgeting apps, YNAB ("why-nab"), as it’s usually referred to, is activist software. It doesn’t just want you to budget, it wants you to budget their way. Why is this important? Because for a lot of people, budgeting doesn’t come easily, and without a commitment to strict rules, nothing ever changes for them financially. YNAB isn’t the only player out there with a set of rules, but their set of rules worked for me.
In the latest version of YNAB, called simply "the new YNAB" (familiar naming strategy), the company has tweaked their rules and their software to make the implementation of their method even easier. On top of that, the new version is entirely web-based, which is a radical change from previous iterations. All of these new features make YNAB easier to recommend than ever before.
First, let's talk about the web
When I wrote about YNAB 4 last April, my biggest complaint was that you needed to buy the desktop app in order to use the iOS or Android companion apps:
It also seems weird to me that you can’t buy a license just for the mobile apps. It’s nice to get the mobile apps for free when you buy the desktop version, but why isn’t there any option for people who just own a smartphone or a tablet? If the YNAB team truly wants to bring its budgeting solution to everyone, they’ll have to find a way to make their mobile apps full-featured pieces of software and figure out a new monetization strategy.
Apparently, the YNAB team thought the same thing, because the new YNAB is now completely web-based. There is no more desktop app; instead, you fire up a browser to start budgeting. That means the mobile apps no longer rely on the often-faulty Dropbox syncing solution – just sign in to the mobile apps with your YNAB account info and you’re good to go.
There’s a new monetization strategy: instead of a flat fee of $60 for this version of the software, YNAB is now subscription based. You can get it at $5 per month or $50 per year. While this makes the new YNAB more expensive than any other version that came before it (if you bought YNAB 4 when it first came out in 2012, you’d have effectively paid $20 per year of use), users are getting more bang for their buck. Now the YNAB team can continue to push out new features very quickly, instead of bundling up a bunch of features into a big release every few years. If the YNAB development cycle is anything like Adobe’s Creative Cloud, which is similarly subscription based, we’ll see a lot of great changes more frequently. Of course, this is all theoretical, and requires a bit of faith in the company (which personally, I have).
Unfortunately, I’m still disappointed in the mobile apps. While you can now edit your budget on the iPhone version of the app – something you couldn’t do previously – the mobile versions don’t feature any of the exciting new features of the web app. For example, you can’t import bank transactions from the mobile app, and the new Goals feature is also missing.
I’m hoping that these apps will be updated soon – they literally did just launch two weeks ago, after all. I don’t want the mobile apps to be just a companion experience to the web version; instead, I want to be able to use just the phone or tablet app for all of my budgeting with no missing features.
However, at the end of the day, this new web-based version is a fantastic base for the future of YNAB. You can now access on it on any machine with a web-browser – a Chromebook, Linux machine, a Windows tablet, and maybe even a refrigerator someday. In a world where fewer and fewer traditional PCs are being purchased every year, relying on a desktop app is antiquated and bad business.
Direct import – now with awareness
A major part of YNAB’s method is forcing its users to enter every single transaction in manually. Unlike apps like Mint and Level, which passively look at your bank accounts and feed that information to you, YNAB has always wanted you to be hands-on with your budget in a way that promotes awareness.
That’s why when the YNAB team announced that the new YNAB would have a direct import feature, many in the community pointed to it as a sign that YNAB had lost its way. How could you have awareness of your budget if you didn’t manually enter every transaction?
Turns out, YNAB’s direct import feature is designed in the spirit of awareness (surprise, surprise). You can’t just hook up your bank accounts and expect your budget to magically start organizing itself, like it might at Mint. Instead, you still have to approve every new transaction that shows up on your accounts.
Direct import in the new YNAB isn’t reducing awareness – instead, it’s about making reconciling easier. Everyone who uses YNAB has missed a transaction at some point, or entered thirty-two cents instead of forty-two. Direct import makes it easier to catch mistakes without having to pour over your bank statements.
Sorry to harp on the mobile apps, but to me, this really is the killer feature missing from the YNAB mobile experience. Bank and credit card apps are consistently pretty bad, so being able to import transactions and reconcile on your phone without having to deal with a second app would be a game-changer.
A big change to credit cards and debt
I use my Visa credit card for pretty much every purchase I make. Like a lot of people, I love cash back rewards, and as long as you use a credit card responsibly by paying it off every month, there’s no reason not to use a credit card for everything you possibly can.
In the old YNAB, I found myself using a complicated series of colored flags and notes in order to keep track of exactly how much I owed my credit card every month. It was a by-product of previous debt – I couldn’t just pay the complete balance every month because I hadn’t budgeted for it. Other people using YNAB were also having problems with credit cards. It was too easy to create credit card float – the act of paying for last month’s expenses with this month’s income.
The solution? Make the rules even more strict.
Let’s say you use your credit card to buy a cup of coffee. When you enter the transaction into YNAB, you assign it to the "Coffee" category, reducing the amount available in that category. In the old YNAB, that was where it ended. You were expected to pay off newly created debt before the end of the month, but there was nothing built into the software to encourage that.
The new YNAB changes that by creating a Credit Card Payments category. Now when you enter that coffee transaction, the money is both taken out of your coffee category and put into the credit card payments category.
You can see that in this example from my budget. I used my Visa to buy $24.40 worth of stuff, so $24.40 was moved into that category to cover my payment. I also budgeted $192.76 into the category to cover previous debt, creating a total payment of $217.16.
The new YNAB also takes away the ability to keep a category in the red for more than one month. Let me give you an example. Let’s say you buy a $7 coffee because you’re a snob, but you only budgeted $2 into your coffee category because you’d like to believe you can enjoy cheap coffee. As of this point, you’ve officially overspent this category by $5.
In the both the old and the new YNAB, the category’s "available" balance would turn red. If you don’t find a way to cover that overspending (usually by taking money away from another category), the money is automatically deducted from next month’s income.
However, in the old YNAB, you could also choose to keep that negative balance contained to the category. That means you’d go into next month with a category balance of negative $5, instead of a flat zero. In this case, you could just budget $5 into the category and be done with it. But what if you just don’t? What if that $5 charge stays on your credit card for months, even years? Or what if you budget $5 to cover the negative, but then spend another $7 you don’t have on coffee?
Extrapolate this out into even more (and larger) purchases, and now you understand why the old YNAB wasn’t exactly great at destroying credit card float. Luckily, the new YNAB completely gets rid of this feature. Either you cover the overspending or it’s subtracted from next month’s income. That’s it.
(To help you cover overspending, a pop-up appears when you click the red negative balance bubble that allows you to move the exact amount of money you need from one of your other categories. No more math!)
Officially supported savings goals
YNAB always wanted you to save money, but it didn’t have a great way to show you that. Take a simple "Vacation" category, for example. You know you want $1500 in cash in six months so you can visit your cousin in Washington, D.C. for a week. Basic math tells you that you need to save $250 every month. You know that. But YNAB doesn’t.
In the new YNAB, however, you can set a funding goal of $1500 for six months in the future. YNAB does that math for you and shows how much you need to fund every month in order to reach that goal.
If your goal isn’t funded enough for the month, it shows the available balance in orange instead of red or green. You’re not necessarily doing everything wrong (you are still saving, after all!), but you’re not exactly doing everything right, either.
You don’t have to set time-based funding goals. You can set up a recurring monthly funding goal instead. For example, your Netflix category. Every month you need $9.99 to pay for Netflix. Set that as your funding goal for that category and you’ll never forget.
You can also use YNAB’s Quick Budget actions to quickly fund a category to the goal target. With one press of a button, you can fund your entire "Monthly Subscriptions" category group with the exact amount of money needed to keep your TV addiction strong.
Should you use the new YNAB?
You Need A Budget is easier to recommend than ever before. It now runs on basically every machine, without having to install any software (to those of you who love desktop apps, the YNAB team does say they’re currently working on one). In my opinion, the new features make this the best version of YNAB yet, and with the aggressive update schedule, it’s only going to continue getting better.
Users of YNAB 4 may be turned off by some of the changes and some of the missing features (including Reports, a feature that allowed you to look at your historical data in chart form, which they are planning to reintroduce). But for me, the new YNAB takes everything that was great about YNAB 4 and makes it better, while patching up some the loopholes that could destroy your budget.
Plus, YNAB still offers a generous 34 day free trial, and if you’re not completely convinced by the end of the free trial, you can pay month-by-month with no commitment. And YNAB 4 will continue to receive bug updates until the end of 2016, with users supported indefinitely, so you can always go back if you miss column view that much.
Image: You Need A Budget