You Need a Budget

I’m no stranger to personal finance software. Hell — I’ve written about most of my experiences with them here on this blog. Moneydance, Mvelopes, Wesabe, and most recently, Mint, all helped keep track of my family’s finances for varying lengths of time and differing degrees of success.

Mint turned out to be an interesting case. Its homepage promises that “Mint does all the work of organizing and categorizing your spending for you.” Which is true, really. Log in, and it automatically fetches the latest transactions to give you up-to-date balances for all of your accounts.

So for over five years, I dutifully logged in every day, checked my balances, and split and corrected any transactions that required it. But the question it took me too long to ask myself was: Does using Mint change the way Casey and I spend our money?

As it turns out, the answer is no. Mint did so much of the work it meant I didn’t have to pay much attention to our numbers. It gave the feeling I was managing our money when that wasn’t necessarily the case1. The biggest thing though, is that Mint feels far too reactive with our money when what I want to be is proactive. This article in the New York Times nails the issue:

By automating the tracking process, I miss the opportunity for reflection and awareness. If someone (or something) else enters all my expenses, I miss the chance to put those purchases in context and assess if my budget is realistic or if I need to make some adjustments. Plus, I’m missing the chance to question my decision to spend the money in the first place.

Pulling in all our purchases automatically sounds an awful lot like typing notes verbatim. The result is a technically correct reflection of how our spending compares with our budget, but we miss the chance to process what the numbers mean. The act of looking at each receipt and adding those numbers ourselves mimics the act of hearing something and then putting it in our own words. We know where the money went, and, hopefully, we know why.

Baby steps toward a real budget

A couple of years ago, after a month of an unusually large number of periodic expenses, I created a new Google spreadsheet. I wanted to get a better handle on our irregular expenses, so I listed all of the things we pay for that weren’t on a monthly schedule, added them up, and divided by 12 to get the amount we should be saving each month2. Then I started depositing that money into a savings account, transferring it back to checking when needed3. Accounting for these periodic expenses went a long way toward evening out our monthly outflows.

Not long after, I created another spreadsheet I called “Safe to spend”. Here I kept a current balance of what was available to spend from our checking account minus all expected expenses for the rest of the month. This, too, helped me keep a realistic view of our day-to-day finances.

You Need a Budget (YNAB)

Fast forward to a couple of weeks ago, when I came across You Need a Budget while reading a bootstrapping start-up blog. I visited their website, read about their method, and realized I was already doing a lot of it with my own system. The big difference, though, is that YNAB is a true zero-based budget. Every dollar gets a job.

Screenshot of the You Need a Budget software

So why bother switching to YNAB? The software is amazing, and it handles all of the situations I had encountered, plus many more. At its core it uses the same envelope system of money management as Mvelopes, but its execution is much better. YNAB emphasizes flexibility in your budget, making it easy to reassign money to a category you’ve overspent in.

Add its companion iPhone app to enter transactions away from the computer and the fact it’s a one time purchase instead of a monthly expense, and I quickly upgraded my trial to the paid version.

If you already have a good way of managing your personal finances — awesome. But if you’re still looking for a good solution that works for you, it’s worth taking a look at You Need a Budget. There’s a ton of free educational resources on the site, and you can get a free 34-day trial of the software. That’s plenty of time to see if it’s a good fit for you. And if/when you decide to buy, you can get $6 off YNAB by purchasing through that link.

  1. Possibly related, Mint’s budgeting tool feel like an afterthought to me — like they knew they needed to check off the “budgeting” checkbox and created the bare minimum to satisfy that requirement. 

  2. Of course, me being me, it was never this simple. The spreadsheet quickly evolved into a complex system with sub accounts for each category, ledger entries, and more. I’m quite proud of it. 

  3. I had already been doing this for gifts, but hadn’t thought of extending it to other expenses until several years later. 

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