Are you ready for the next step? Go back and read Building a Better Budget Part 1 if you missed it. You’re going to need to create a Budget Guide before continuing with Step 2.
Now that you’ve read our last financial post, you know that we use a program called You Need A Budget. That’s an affiliate link, by the way. If you click on it and sign up, we both a get a free month. If you love it as much as we do, you can continue for either $11.99 a month or $84 annually (pricing current as of 3/3/2020).
If you haven’t signed up for your free trial yet, click the link! Today, we’re customizing categories. Trying anything new can be intimidating so I’m going to break it down into simple steps with lots of pictures.
You might be wondering why this step is so important that it gets its own post. Good question. I think that personalizing your budget is does three things. It makes it come alive and work on a personal level in your life. It makes it super easy to assign jobs to your money, and if anything ever goes wrong in your financial game plan, it very quickly tells you what is important and what isn’t.
Welcome to your main budget screen! It should look something like this:
Ignore the To Be Budgeted Amount in Green. Also ignore the Credit Cards. You’ll add those next time. I added them first without thinking that your account balances are definitely going to change between now and when we talk about them whereas my imaginary balance isn’t going anywhere. Oops.
The blue lines are your Headings. The white lines are your Categories. YNAB is quite helpful in supplying several often used categories broken down into often used Headings. Go ahead an look over the suggestions. You might find something that you missed when you created your Budget Guide. If you’re happy with your Budget Guide and feeling overwhelmed by all the suggestions, take a deep breath. We’re about to delete most of them.
The one Heading they don’t let you mess around with is Credit Card Payments. You can move it up and down the list but you can’t rename it and you can’t rename any of the categories therein. They are directly imported from your account list and serve a very important purpose. As you spend money on your credit cards, YNAB automatically moves money from your specified categories straight to the credit card that you used. You still have to make the payment of course but YNAB builds your payment for you as you spend throughout the month.
If you don’t have your Budget Guide pulled up yet, now is the time. We’re going to use it to build our own Headings and Categories. I do want to note one thing. In our Budget Guides, we have our truck and camper loans listed as other debt and in YNAB they’re lumped in with credit cards. Don’t let this confuse you too much. I only listed them in the Budget Guide separately because in a worst case scenario situation I want to easily see that a truck payment absolutely must be payed whereas a credit card payment might be fudged.
Not on a regular basis…just a food vs payments situation. If you have no idea what that situation looks like…be grateful. It’s a horrible place to be. If you do know what that situation looks like…get ready. We’re going to build a budget to make sure you never get there again.
Okay, click on Immediate Obligations. We’re going to change the name to Bills – Monthly. Why? Because that’s the first heading in our Budget Guide under Credit Cards and Other Debt.
Next, click on each category under that heading and change the name to match whatever is listed on your Budget Guide. If there are any leftover categories, delete them. If you need more, hover your mouse next to the heading and an Add Category box will pop up.
Continue changing Headings and Categories until your main budget screen exactly matches your Budget Guide. When you get to Weekly Expenses…Stop. Grab a drink. Grab a snack. It’s about to get a little bit weird.
Weekly expenses are going to be a little different.
First, we’re going to lump together mandatory and optional expenses under the same header.
Then we’re going to make a header for each week 1-5 and list the same categories under each one. You can add a new heading by clicking Add A New Category Group at the top of the screen.
So now we match our Budget Guide, but we have expanded it to a weekly basis.
I promise this will make sense later.
Once you’re done with the Weekly Expenses, it’s time to move on to Living Expenses – Annual Goals. You guessed it. Start by adding or changing a heading. Then change the category names to match your Budget Guide.
Now there’s just one more category to add. I like to keep mine right under my Credit Card Payments. It’s called The Cost of Debt. This is where you are going to assign all of the interest you pay on cards and loans. You can call the category anything you want. I like to give it a very nasty sound so I stay motivated to pay it off.
Are you exhausted yet? Me too. Breaking down all those categories is enough to wear your fingers out. Don’t worry, not every budgeting day is going to be as intense as this. Go ahead and take a break.
In Building a Better Budget Part 3, we’re going to put in our accounts and actually start adding money to our budget!