Why YNAB is the BEST Budget Tool for Business Owners
Disclaimer: This blog post contains referral links to the budgeting app YNAB (You Need a Budget). If you choose to subscribe to YNAB after using my link to create an account, I will be compensated at no additional cost to you. However, my recommendation of this product is based on my honest opinion. I have used and loved YNAB personally and for business for years!
YNAB stands for You Need a Budget and is, quite simply, a budgeting app. However, despite how many budgeting programs there are on the market, it’s the ONLY budgeting app that I recommend for business owners for so many reasons! (And honestly, it’s the only budgeting app I recommend to anyone, entrepreneur or not.)
In this post, I’m going to break down exactly what it is that makes YNAB so special and why it’s worth a look. And while this is a personal finance app first, I want to show you why I believe this is such an incredible tool for business finances, too!
Before I continue, I do want to be transparent that this is a paid app. As of this writing, their monthly plan is $14.99 USD per month and the annual plan is $98.99 USD per year. They also have a 34-day free trial, no credit card required.
That said, YNAB reports that on average, new budgeters save $600 in their first two months and more than $6,000 their first year using the app!
As a long-time user of this app, I can honestly say that not only do I believe the statistic above, but I know that I’ve lived it. Without YNAB, I truly don’t believe I would have nearly as much control or peace-of-mind over my own finances.
Benefit #1: Unlimited Budgets
One of the simplest and yet most significant features YNAB offers to business owners is the ability to have as many budgets within one account as you want. This may seem like a given, but MOST other popular budgeting programs out there (and I’ve tried a lot of them) do not offer this! If you want to use the same tool to manage both sides of your finances, personal and business, you have to pay for a second subscription.
But not with YNAB! Not only do I have a personal budget and a business budget, but I also have a dozen various “teaching budgets” that I’ve used for past clients, students, and presentations. I don’t even know if there is a limit to how many budgets you can have, but if there is one, I haven’t reached it yet.
Why this matters: You may only be here for business finances. But what many entrepreneurs don’t realize is that there is a strong correlation between your personal and business financial wellness. While it can help to focus on just one at a time if you’re just trying to learn and develop systems for the first time, your ultimate goal should be to create a seamless system for your ENTIRE financial story!
Benefit #2: A Proven Cash-Based Method
How does YNAB boast “real results” greater than that of other budgeting tools? It’s because their system is built on what I call a cash-based methodology.
When most of us learned how to budget the “traditional” way, we learned to sit down on the first of the month, estimate our income and expenses, and then spend the next few weeks hoping we earned what we said we were going to earn and we spent what we said we were going to spend. More often than not, you make it to the end of the month realizing that nothing went to plan and there was no point to the budget in the first place.
The #1 secret to powerful, successful budgeting is to stop guessing and simply make a plan with what you have.
When I budget, I’m not saying “I think I’ll earn $4,000 this month and if I do, this is how I’ll try to spend it.” Instead, I’m going to sit down and say “Right now, I have $2,600 in the bank. Let me decide what I’m going to do with each of those dollars.”
With YNAB, my bank balance or newest deposits are listed at the top as “Ready to Assign”. Then I go down the list of my budget categories and “assign” those dollars to their jobs. This way, I’m spending on paper before I actually spend the money!
This tiny, tiny shift in perspective on creating a plan for your money will absolutely change your life. The level of proactivity and intentionality that this introduces can’t be beat. And while YNAB has their own terminology they use to describe the same concept, that’s exactly the principle the entire tool is built on.
Benefit #3: It Works Seamlessly With Profit First
Because YNAB is a cash-based system, it works seamlessly with the Profit First method for business money management!
If you’re not familiar, this is a system created by author and business expert Mike Michalowicz that encourages entrepreneurs to set aside their business profits BEFORE they spend them. This counters the typical practice of waiting to see what happens to be left over after your business expenses to see how you profited and how much you’ll be able to pay yourself.
Instead, Mike teaches you to set aside a percentage of all earned revenue right away into four main categories: Profit (your cash reserves), Taxes, Owner’s Pay (your salary), and then Expenses.
But the reason why people are hesitant to try Profit First is that the original system has you setting up FIVE separate bank accounts to manage these funds. One for all of your business income to be paid into, and then you transfer that money out into the other four accounts so that those funds go directly to their intended purpose. (And if you’ve read the book, you know it’s actually technically seven. 😬)
Now, I’m not saying there’s anything wrong with this approach. In fact, I did it myself at one point and really loved it! And thousands of other business owners out there follow that approach and love it, too.
But if that sounds too tedious to you, then YNAB is a great alternative that allows you to still keep track of your accumulated Profit First fund balances while keeping it all inside your one business bank account. The reason is that, again, it’s based on a system where you’re putting your money, no matter how much is sitting in one account, into “digital buckets” so that you’re never just making decisions on your total bank balance. Instead, you’re seeing how that money is subdivided up for different purposes, which is exactly what Profit First is all about.
While I have $2,600 in the bank in this example, YNAB shows me that $130 is my cash reserves for profit, $1,300 is designated for my next pay check, $260 is saved for taxes next year, and $910 is left over for my business expenses.
Benefit #4: A Ton of Really Valuable Budget Features
Here’s the catch-all benefit. YNAB, quite simply, has some really amazing and convenient features that make budgeting a breeze:
Goal Tracking
When you create your budget categories, you’re essentially designating a bunch of “buckets” or “envelopes” or “subfolders” for your bank balance. I may have $1,000 in the bank, but I’d rather see it as $100 for Bill A, $300 for Bill B, and $600 for Bill C. That way I know exactly what my plan is for that money (and that the only way I can currently afford that $50 purchase I want is if I pull money away from one of these three bills).
But with YNAB, I can take this even further! Not only do I create the categories, but I can also “templatize” my budget by setting goals for each line item. That way I always know how much money needs to be budgeted into each category (I don’t have to run the numbers in my head every time I go to do my budget).
Here are just a few examples of the uses of goals:
Every month, I have a $15 subscription come out on the 5th. I can set a goal to fund $15 before the 5th day of the month.
In 3 months, I want to have $600 saved up for a new desk. I can set a savings goal for three months from now and YNAB will tell me that I need to save $200 each month to reach that goal on time.
Every month, I want to put $75 into a cash reserve fund for potential Refund requests I might get from clients/customers so I always have the cash available. I can set a monthly savings goal of $75 and YNAB will remind me to save that amount until I decide I’m happy with how much is saved.
Financial Reports
YNAB is not an accounting tool, and in general it shouldn’t be used as a replacement for your bookkeeping system. That said, their financial reporting tool is still extremely valuable!
Additionally, if your finances are simple enough (which may be true for most freelancers), you may actually be able to get away with using their Income v Expense report (basically, a Profit & Loss Statement) for your accounting record.
Always consult with your tax preparer first to be sure that the right level of data is being tracked for your personal needs.
Mobile App + Widgets
Yes, YNAB has a mobile app! My husband actually prefers using the mobile app vs. the web version, whereas I’m the opposite. It’s all up to preference!
But having YNAB available on your phone makes it much easier to stay up to date and keep an eye on your available funds even on-the-go.
They also have widgets features you can play around with too! When we were saving aggressively for a downpayment on our home, I used the widget feature on my Android phone to always have that category’s balance visible on my home screen.
Time? Check. Weather? Check. House Fund Balance? Check.
Note: This phone graphic is staged so it’s not my real YNAB category…but that is my real weather. 😂
Automatic Bank Imports
This one’s huge if you’re able or willing to use it! If you bank in the United States, Canada, United Kingdom, or select EU countries, YNAB may be able to connect to your bank feed and automatically import your transactions. Then, all you do is categorize them (and yes, YNAB does try to memorize how you categorize transactions from the same vendor to save you time later) and approve to apply it to your budget! Tracking your transactions within YNAB is what allows you to keep tabs on your exact available funds.
For example say you have $1,000 in the bank and $100 is budgeted for office supplies. You went to the store and spent $40 on office supplies. You need to update that in YNAB to show that you now only have $960 in the bank and $60 remaining for office supplies.
Without bank feeds, it is still extremely simple to manually enter these transactions daily (recommended) or do a file import for larger batches of transactions (if you do weekly updates - which should be your MINIMUM). I bank with a smaller local credit union that hates bank feeds, so I update my own account manually!
That said, I won’t lie: The automatic import is pretty nice. And they’re working to constantly expand their coverage to more and more countries!
Side note: If you’re in Australia, I’ve also heard good things about these 3rd party tools as a workaround: Bank Sync for YNAB or BudgetFeeder.com. Please note that I have not been able to test them myself.
Amazing Support Team
The last honorable mention that I want to make is for the YNAB team. YNAB’s customer support, and honestly their ENTIRE team over at that company, is absolutely amazing. You may not expect it for a company centered around budgeting, but they’re some of the kindest, coolest, and most fun-loving people! If you have a question or issue with your account, don’t hesitate to reach out to their team. They’ll truly go above and beyond to help you out.
Next Steps: Where to Start With YNAB
YNAB’s “Make a Fresh Start” feature is great for starting over without erasing the budget categories you’ve already set up.
YNAB is a tool that you can try right away. They have a great 34-Day Free Trial (no credit card required) and the way the tool is designed allows you to start exactly where your finances are in this moment. There is no backlog cleanup or catching up to do!
If you already have a YNAB account from a past attempt to use it, I highly recommend either creating a brand new budget or utilizing their “Make a Fresh Start” feature. This feature allows you to keep all of your budget categories, but it’ll clear out all of your bank transactions so you can start fresh with today’s starting balance.
Also, whether you’re trying YNAB for the very first time or looking to give it another shot, I highly recommend their Youtube channel. They have a “Start Here” playlist that is full of great budgeting gems and technical tips for making this incredible app work for you.
Are you ready to take your financial journey to the next level? Then you may be ready to check out the More With Money Academy!
This ever-growing collection of online courses and trainings are specially designed to support entrepreneurs like you on your path to financial wellness. The Academy contains carefully designed courses that are easy to understand and implement so that you can be empowered with the practical concepts, streamlined systems, and powerful mindset to transform your business and personal finances.
Click here to explore what the More With Money Academy has to offer!
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I'd love to continue the conversation in the comments! Feel free to share your thoughts.
Until next time!
