There is a lot of budgeting software on the market. They all boast how their software will help you get back from living paycheck to paycheck. Many have a lot of bells and whistles which look impressive but really don’t do much for the average person just looking to budget the income to pay the outgo.
YNAB is budgeting software that does just one thing; budgeting – and does it well. It has a lot of features to help you stay on your budget and new features are being added all the time. The main difference between YNAB and other software packages is its methodology. The creators of YNAB produced a product that actually helps people stop over-spending, start saving, and build up excess income that eventually provides a buffer system of one month’s income in advance. That is software with a purpose!
The methodology of YNAB resembles the old envelope budgeting system. Instead of setting aside money into actual envelops, you use virtual “categories” that you assign your income dollars. Of course, there is more to it than that. The crux behind YNAB methodology is based on four rules.
- Rule 1: Give Every Dollar a Job – 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. By using categories, your hard-earned dollars are divided up into the amounts needs to pay in-coming bills. Extra funds are distributed into extra categories like entertainment or mad money.
- Rule 2: Save For a Rainy Day – By using rule 2, you to look at the larger, less-frequent expenses (car insurance, life insurance, Christmas) and break them down into monthly, manageable amounts. Then you budget for them over time with no worries. This gives peace of mind.
- Rule 3: Roll With the Punches – Be flexible and address over-spending before moving on to the next month. Rule 3 helps you do this. If you overspend in a category, look through your budget and move some money around. However, remember that the goal is to stay on budget. If you get off budget, reality sets in.
- Rule 4: Live on Last Month’s Income – To be perfectly frank, YNAB wants you spending this month bills with 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 will eventually get there.
YNAB’s methodology is the key that makes this software ahead of the others. Check it out and see for yourself.