I'm often asked which personal finance software is the best. I strongly recommend YNAB 4, the system I personally use. It is by far the best budgeting system on the market. The software is fantastic and the methodology is extremely effective. Click here to Try YNAB 4 with a FREE 34-Day Trial!
YNAB 3 is the latest version of the very popular and extremely effective budgeting software known as You Need a Budget. YNAB has always been built around the very effective “envelope” budgeting methodology and even takes it a few steps further. The software is solid, the budgeting method is sound, and you’ll be hard pressed to find another budgeting program with a more loyal user base. Read on for all the nitty gritty details on YNAB 3. *Note: this review was last updated on version 3.6.4 of the software.
Getting Started with YNAB 3
After a very simple download from the YNAB website, you simply follow the steps to install the software on your computer. Both Windows and Mac users will find that the process is quite quick with a few clicks of the mouse.
Upon starting up the application, you are presented with this screen:
Being that I’ll be doing this walkthrough from a new user point of view, I chose the “Create a brand new budget file.” Those that have used YNAB previously (for example, on a different computer) can open their existing budget file to start right where they left off.
Next you’re introduced to the main YNAB screen and you’re given the option to go through a tutorial of the software:
If you’re new to YNAB and its methodology, I highly recommend going through the short tutorial as it will help quite a bit. I was actually fairly impressed with the clarity and helpfullness of the tutorial. It walks you through how to create an account, set budgets, etc.
If you’re hungry for more guidance, YNAB has plenty for you. At the end of the tutorial you’ll see links to the “Get Started Guide,” some free online classes, and video tutorials. And if that isn’t enough, you can always access the very in-depth help directory and see answers to commonly asked questions in the bottom left portion of the YNAB screen.
As a side note: this help directory isn’t like most other help files that are difficult to navigate and boring to read. These are actually extremely helpful and easy to understand. They even have illustrations throughout to help you learn quicker and easier.
Below are some screenshots of the items mentioned above the guide:
YNAB = Excellent Support and Help for Users
This reminds me of a point I’d like to briefly make. YNAB does an extremely good job of customer support through many different means. A quick trip to their support page and the training and education page and you’ll see that they offer a myriad of help options including:
- Live Online Classes (free) – Introduction to YNAB and classes on various other topics.
- Recorded Classes (free) – Covers the basics to get you on your feet in no time.
- YNAB Online Tutorials – A whole slew of video tutorials explaining how to do just about anything you want.
- Email Support - And they are actually quick at responding.
- YNAB Forums – A very active and very loyal community willing to help anyone who has a question.
- Much more…I think you get my drift. I’m impressed by the amount of help available to those starting out with the software.
My Experience with YNAB 3
YNAB has done an excellent job in their help and “getting started” documentation, so I’ll try to focus more on the features of the software rather than the detailed “how-to” so as to avoid duplicating efforts and information (while still giving you a good view of what YNAB 3 has to offer).
As you’ll see throughout this YNAB 3 review, YNAB has done a good job of walking you through the software. It has pop up boxes that ask you the right questions at the right time and that tell you important information to help you understand how the software and the (likely new to you) budgeting methodology works.
An Overview of the YNAB 3 Screen
Here’s a screenshot of the first screen you’re given in YNAB 3 — you are defaulted to one of your Accounts screens. (click to enlarge):
On the left is a Budget tab, tabs for all of your Accounts, and the Reports tab. We’ll go through each one in detail throughout this review, but here’s a brief summary:
Budget: The budget screen is where you allocate your funds to your categories, monitor your spending/savings, and more. This is the real heart of the YNAB system.
Accounts: This is where your “physical” bank accounts reside. While one of your accounts is selected you can see, edit, add, import, schedule, and search your transactions. You can also now see your working balance on this screen.
Reports: The Reports tab provides a number of a great little reports including: spending trends, spending totals, and net income/net worth.
As mentioned earlier, you’ll also notice that in the bottom-left corner of YNAB 3 you’ll see a Help tab. This has resources for the most commonly asked questions as well as access to the full Help directory. A side note: to save space, the Help tab is also collapsible. Another space saver you’ll find is that you can collapse a portion of the left sidebar by clicking on arrows shown in the third screenshot below:
YNAB 3’s Budget Tab
We’ll start with the real bread and butter of YNAB: The Budget. Here’s YNAB 3’s Budget screen (click to enlarge):
At the left of the main budget window are all of your budget categories. You can think of these as your spending “envelopes.” Like any quality personal finance software should allow, these categories and sub-categories are completely customizable. You can add to or delete them to you hearts content. You can even drag and drop to change their order or choose to hide the ones you don’t want to see.
The main portion of the budget window is taken up by 3 columns: each month’s set budget amounts (Budgeted), actual spending (Outflows), and what’s left over for each category (Category Balance):
At the top of each month is a tab showing how much you have available to budget for that month. At the bottom is shown how much is rolling over to the next month to be budgeted. You can choose to collapse or expand this tab to show how these figures are calculated.
Budgeting in YNAB 3
I’ll spare you the details on how exactly to do everything in the Budget, but suffice it to say that YNAB 3 does an excellent job of making it extremely easy to set your monthly budget, know exactly how well you’re doing throughout the month, and see how your spending and saving will effect your finances in the future.
Setting Your Budget
The leftmost (Budgeted) column is where you can quickly allocate your funds for each of your spending categories. According to Rule #1, you’ll allocate all of your “Available to Budget” funds until it reaches zero (giving every dollar a job).
If you’d like, you can also use YNAB 3’s Quick Budget feature which automatically fills your budget cells for you. You can tell it to use last month’s budget numbers, last month’s spending, the average spending that you’ve had in the past, or total scheduled outflows this months. If you want to get your budget done quickly or just want a starting point to work from, this is a quick and easy way to do it. I, however, recommend giving each category at least some thought each month so you can find areas where you can spend less and save more.
See What You’ve Spent
As you enter your transactions throughout the month, YNAB 3 automatically incorporates that spending data into your budget screen so you can see exactly what you’ve spent in each category and where you’ve spent it.
The middle column (Outflows) shows you what you’ve spent from each category. And for those times when the words “Did I really spend that much on XYZ already?!” slip out of your mouth each week, you can see a breakdown of your spending by simply clicking on the spent amount:
And by the way, if you click on a transaction, you’re taken right to that transaction in the Accounts tab to view it in more detail or edit it. A nice touch.
Working With Balances
The Category balances column shows you the balance that you have for each of your categories. If you’ve not yet spent the amount that you budgeted, you have a positive figure. If you’ve spent too much, you have a red, negative figure. Essentially, this is the column that tells you if you can buy that sweet new shirt or not.
Also, if at the end of the month, you have a positive balance in a category, that amount rolls over to the next month, building up your balance. This is how you can save money for irregular expenses. This may be the coolest part of envelope budgeting.
YNAB 3’s Accounts Tab
As previously mentioned, the Account tabs are home to the information for all of your bank transactions. Under the Budget tab, you will find a smaller tabs for each of the bank accounts that you’ve added. You can display or hide any account that you wish. (Click below image to enlarge.)
The main window to the right of the account tabs is the Transaction Window, containing all the information for each of your bank transactions. By default the transactions window shows the date, payee, category, memo, outflow (debit), inflow (credit), and a running balance. It also allows you to mark the transaction as cleared or give it a colored flag of your choice.
A great feature of YNAB 3 is that you can customize which columns appear in the this transaction window. If you don’t want a Memo column, you don’t have to have it. Want a Check Number column? You got it.
Adding Transactions in YNAB 3
Adding transactions in YNAB 3 is extremely simple. You have two options to add your transactions, you can either 1. add your transactions manually or 2. import them from your bank.
Add Transactions Manually
This is one area that I tend to be a little picky in. Being that my wife and I usually add our transactions manually (it helps me to feel the influence/pain of my spending more), the ease and speed of data entry is pretty important to me. I’ve found with many software applications that it takes too many clicks of the mouse, that I’m unable to use only the keyboard, or that it’s just plain tedious. Fortunately, this is also one area where YNAB 3 does especially well.
Every piece of data in your transaction can be entered without every having to leave your keyboard to touch your mouse. Also, the fields begin to auto fill as you start to type your data. This all may seem like small things, but trust me, it’s little details like this that cut your budgeting time WAY down and that a good piece of software certainly won’t overlook. Thank you YNAB for paying such attention to detail.
For those who would rather skip the data entry, YNAB 3 makes it extremely easy to get all of your bank transactions into YNAB in a flash. YNAB supports the most commonly used file formats from your bank: OFX, QFX, and QIF. Simply download your transactions from your bank, click the Import button at the top, and follow the instructions.
Once your transaction data has been imported into YNAB 3, the software reminds you that you need to review each transaction (indicated by a faint warning triangle). This is your opportunity to rename the payees if you want and to add a budget category to each one.
Scheduling Recurring Transactions
At the bottom of the screen, you’ll find the Scheduled Transaction area. YNAB 3 also offers the ability to schedule recurring transactions so you don’t have to remember them each time they come around. This is just as simple as adding a regular transaction. You can schedule it monthly, weekly, every 3 months, or just about any other time period you can think of.
No Direct Connection With My Bank?
Some people want their budgeting software to connect directly to their bank and download the transaction for them. While this can be quite handy, YNAB hasn’t developed this functionality because they say it promotes a “set it and forget it” mentality that is actually counter-productive to your budgeting. And you know what? I completely agree! It only takes my wife and I a few minutes each week during our weekly budgeting session to input transactions. And the act of doing so truly helps you to “feel” the act of spending more (which is hard in today’s world where we just swipe a debit card for all purchases).
Search in YNAB 3
One of the great features of YNAB 3 is the ability to perform very intelligent searches within your transactions. By clicking in the search box at the top right of the application, the screen turns from green to blue, indicating that you’re in search mode (again, a simple but brilliant design).
YNAB 3’s search is quite robust. As you begin to type, it starts offering options for you to search by. For example, when you start typing in “gr” it shows you payee’s that have “gr in the name, categories with “gr”, a ‘gr’een flag, and on and on.
You can also include multiple parameters in your search. For example, in the screen shots below, I searched in the Groceries category, with the Payee name “Costco” and after the date of 12/13/09. It gave me the one transaction that matched all of those requirements. This can be extremely powerful and helpful if you’re looking for specific transactions.
This is one of the many details that is setting YNAB 3 apart from it’s competitors. Very intuitive and very powerful. I can’t tell you how many times I’ve had to look for a transaction or been trying to figure out why my balances were off and this feature helps me find what I’m looking for in seconds.
Other Nifty Tools and Tricks
There are a few other well thought out details that I thought I’d briefly highlight here as well.
Splitting Transactions: An absolute essential item for any good budgeting software is the ability to split your bank transaction into multiple budget categories. I may, for example, buy food (Groceries) and an oil filter (Auto Repair) at Walmart in the same transaction. YNAB 3 allows you to quickly and easily split those transactions with a few clicks (it even calculates the remaining amount for you as you add categories).
Transfer Transaction Jump: On a transaction that is a simple transfer of money between two accounts, you’ll find an icon with blue and green arrows next to the “payee.” Clicking this icon will take you to the other side of that transfer (to your other account). As small, but often helpful detail.
Payee Settings and Rename Like Payees: By right clicking on a transaction you can choose to enter the Payee Settings screen where you can customize how you want the data for your future imports to perform. You can also rename like payees very easily for past transactions. Some nice touches.
YNAB 3’s Reports Tab
For those that are looking for some nice reporting functionality, YNAB 3 does a pretty good job. There are other programs that may provide more in-dept reporting, but YNAB does a great job of organizing your data in some pretty helpful graphs:
One thing that I really like about YNAB’s reports (that differs from many other software applications), is that you are not only shown a visual graph of your data, but you can simultaneously see the data in a table as well.
That table serves two purposes: 1. to give you easy access to the data and 2. to serve as a selection tool and key to your graph. Each item in your graph shows the corresponding item highlighted in the same color in the table. You can also click any item in the table to “draw” or un-draw that item in your graph. See the screenshots below for a clearer picture:
As you would expect, you can change the date range of your reports by dragging the date slider (or its ends) below the graph to cover the dates you want. Also, the size of the table and graph can be easily changed with a simple drag of the mouse.
I’ll briefly go over each report that YNAB offers:
The Spending Trends report is a very useful graph and table that shows you how your spending has changed over time for each category that you choose. Here’s a screenshot:
You can select (in the table) any master or sub-category that you want to be drawn on the graph. This can be helpful if you have an outlier that is skewing your graph (as shown in the screen shots below). Simply deselect that category to take it off the graph.
YNAB 3 also offers 3 “Quick Graph” options where you can choose to graph the top 5 master categories, the top 5 sub categories, or all master categories.
One last note: I also like that they’ve included the percentage numbers next to the items in the table. It’s light enough that it’s not distracting, but there in case you’d like to know.
The Spending Totals report gives you that often seen pie graph showing your distribution of total spending for your different categories:
You can now drill down into each master category by clicking on it’s piece of the pie. You can then see the sub category spending for that particular master category. A nice touch.
Net Income/Net Worth
The Net Income/Net Worth report is a handy one indeed. It helps you to see a quick view of your cash flow and wealth accumulation over time. Here’s a screenshot:
By default, your Income, Expenses and Net Worth are drawn on the graph. You can quickly see how money has flowed into your life, how it’s flowed out, and how that’s effected your overall net worth. For example, in the screenshot above, you can see that we sold a car in July and bought a (less expensive) car in August.
You can also choose to include Net Income, Total Assets, and Total Liabilities in the graph as well.
Also, all of the above reports can be exported in a .csv format so you can play with the data in Excel as much as you’d like. You can also print the report as well.
The Book: “You Need a Budget”
If you’d like a very thorough, entertaining, and encouraging explanation of the budgeting methodology behind YNAB, you can purchase a hard copy of the book called “You Need a Budget” for $10. If you don’t mind reading it on a computer, the whole book can be downloaded from here absolutely free.
It’s a quick read (only 50 pages) that teaches you the why behind the methodology so you’ll understand the why behind how the software works. They’ve made the book convincing, outlining in great detail the benefits of this Four Rule methodology.
YNAB 3’s Price and Free Trial
YNAB 3’s retail price is $60, a reasonable price to pay for such high quality software. And with the average YNAB user saving around $300 in the first month, it’s well worth the purchase price.
For those wanting to test drive the software before purchase, YNAB offers a 34-day full feature trial to let you see if YNAB is right for you.
YNAB 3’s Money Back Guarantee
If, for whatever reason, you’re not completely satisfied with YNAB 3, they offer a no-questions-asked 30-day money back guarantee.
30 days is plenty of time for you to fall in or out of love with YNAB, so there’s no risk in buying. This kind of money back guarantee is quite refreshing.
The YNAB 3 software is extremely effective and easy to use. It’s simple, and that’s what makes it so powerful. The software itself is very well designed – it’s apparent that a good deal of thought went into even the smallest of details to make the system quick and intuitive.
The level of support that you receive with YNAB is superb. There is a myriad of resources available to you (online guides, video tutorials, live coaching, amazing community forums, direct contact with the founder, etc.) to ensure your budgeting success. This is in stark contrast to most software companies out there.
While the software itself is fantastic, the real power of YNAB comes from the budgeting system that lies behind the software. YNAB’s “4 rules of cash flow” make up what is one of the most effective ways to manage your money that I’ve found. I love the YNAB budgeting methodology because it focuses you on the tasks that actually make a difference in the way you spend and save money.
YNAB states that it is: “Budgeting Twice as Effective, in Half the Time.” And after using YNAB in my family for over 3 years now, I must say that I completely agree. It’s simple, fast, and effective. And it’s sure to save you loads of money.