In this article learn how to create a semi automated budget that will give you an awesome understanding of your budget and complete control.
Do you feel like your money is out of control? You have no idea where all your money went?
I've been there. When I was younger I was fighting bank overdraft fees. I had no money saved for vacation. I had no money saved for emergencies.
One of my first attempts at getting it all under control was a spreadsheet. I even tried software like Quicken.
Are you using spreadsheets? Ughh...
Are you using antiquated software like Quicken? Ughh again...
That stuff is either too time consuming, costly, or OLD!
Things have changed so much in the app and software world. There are much better ways to handle your money now.
If you want a truly automated budget check out my previous post on "How to Create an Automated Budget." That works perfect for most people, but some people are a little more interested in controlling the details and that's where this (semi) automated budget comes in.
If you are one of those people (like me), read on and I'll tell you how to create an awesome semi automated budget!
THE SEMI AUTOMATED BUDGET SYSTEM
HOW IT WORKS
You may have heard of the envelope system before. Basically, you take all your incoming cash and divide it into envelopes. One for electricity, one for dining out, one for rent, etc.
When you need to pay for dining out it comes out of the dining out envelope. If you don't have enough in that envelope you have to take it out of another envelope.
It forces you to prioritize your money and live within your means.
This system work the some way but with a modern and digital take on it.
Are you ready to build an awesome budget? Let's roll.
YOU NEED A BUDGET
I love to use Level Money to automate my budget and it works awesome. Sometimes though I like to have more control and vision into my money and that is when I use You Need A Budget or YNAB for short. You can get by just fine with Level Money, but if you want more control and the ability to do some advanced budgeting, YNAB provides just that!
It also has desktop, app, watch versions as well so you can use it anywhere.
To follow along you'll have to sign up for the YNAB 34 day trial at their website. It won't cost you anything and if you end up liking it you can subscribe.
You can get YNAB at www.youneedabudget.com.
CONNECT YOUR ACCOUNT
Once your signed up and ready to go the first thing you'll need to do is connect your bank account. This will allow YNAB to connect to your bank and download all your transactions (income and expenses).
(Don't worry, it's read only access, so they can't modify or make any changes to your account. They can only download a copy of your transactions for their software.)
Click on "Add Account" in the left navigation bar to add your bank. You can add multiple if you have more than one account.
Give your account a name and tell it what kind of account it is. YNAB has a lot of different account types you can add but for this guide, I'm just focusing on checking accounts.
Once your account is connected it will show up in the left hand navigation bar allowing you see all of your transactions from all of your checking accounts!
SYNC YOUR ACCOUNT
Now that your account is added, it is going to download all of your transactions every time you import. You'll be able to import all of your transactions just by clicking on your bank account in the navigation bar on the left. Then click on Import in the top bar.
All of your transactions are imported! It's that easy!
SETUP YOUR ENVELOPES (CATEGORIES)
Now this is the part where you really have to think about how you spend your money and how you want to spend it going forward.
Remember the envelope system I mentioned earlier? This is where that comes into play.
Imagine all the money you earn comes in as cash and you have to divide it among envelopes for every thing you spend money on.
Now you'll need to create those envelopes. However, YNAB calls these "envelopes," "categories." So from now on we'll call them "categories."
To help you get started here are the categories I use in YNAB:
- Home Insurance
- Home Maintenance
- Real Estate Taxes
- Car Insurance
- Car Maintenance
- Home Design
- Cool Stuff
- Dining Out
Pretty much everything I ever spend money on falls into one of the categories above.
So now you need to create categories that fit your lifestyle. YNAB starts with some default categories that you can use if you'd like. Otherwise hit the the little + sign in YNAB an get started creating your categories!
ASSIGN YOUR MONEY A JOB
OK, now you've got you bank account(s) synced up. You have all of your transactions coming in going forward. You have all your spending categories.
Now it's time to give every dollar you have in your bank account a job!
The first time you start, all the money you currently have in your checking account will be available to be budgeted and it will only add transactions going forward. It will start today and ignore past transactions.
Click on Budget in the left Navigation bar.
You'll see a green box in the top navigation area. It will have the total amount of cash you have now, listed as "To be Budgeted."
You have to give those dollars a job!
Go through your list of categories and in the "Budgeted" column assign each of them some of that money.
Give each of the categories money until you have no more cash to be budgeted.
Once your done you'll see exactly how much you have to spend in each category in the "Available" column.
That's it! Next we'll look at what you need to do when you get new income and spend that cash.
From now on every time you sync your account all new transactions will be imported for you.
The first time you get a transaction YNAB may not know which category you want to place your money in. You'll have to tell it, but what's cool is that once you do YNAB will remember it and you won't even have to tell it which category to put it in the next time a similar transaction comes in.
From the navigation bar on the left click on your checking account.
Click on Import.
If you have a new income transaction, click on the CATEGORY field for that transaction and select, "To be budgeted."
Click on Approve.
Boom! Now you can go back to the Budget tab and assign those dollars to categories!
Expenses work pretty much the same way. So, after you do an import of your transactions you'll see a list of all the transactions you paid for with information like the payee, memo, outflow amount.
All you have to do is click on the transaction and approve it.
The most important part is to tell it which category to assign the transaction to. When you tell it which category it will deduct that amount from that category.
So if you go back to your budget screen, you'll see that category has now been reduced by that amount.
If you had more than enough cash in there, it will still be green and good for more transactions.
If it is getting low it will warn you by turning yellow.
If you go negative it turn red. That's OK. You just need to move cash from another category by reducing the amount budgeted to the category you have plenty of cash in and increase the budget for the category that needs more cash.
That's it! So how does this work on a day to day basis?
MY DAILY STEPS
Every day I review import my transactions, review them, and review my budget to make sure everything is on track. It all takes about 5 minutes and is mostly automated!
Here is what I do daily and what you can too:
- Login to YNAB
- Import any new transactions
- If they don't already have a category, assign them the right category and Approve the transaction
- Review the budget to verify everything is on track
That's all I do and I can easily see where all my money is going and know exactly what I need to fix if anything is going wrong!
It's a detailed budget but it's so easy!
Like I said earlier if you like the completely automated method using Level Money go ahead and stick with that. It works great.
If you wan't a comprehensive view of your money and where everything is going YNAB is a great way to do just that.
How is your budget working for you? Let me know! Shoot me an email or reply below.
David Shepherd is the founder of Let's Automate Your Life, lifestyle automation for personal finance, productivity, business, and much more.