How YNAB Helped Me Increase My Net Worth By 10,291% in 2020
No, you didn’t read the title of this article wrong. Thanks to the popular budgeting app YNAB (You Need A Budget), I was able to increase my net worth by over 10,000% in 2020. Yup, during a global pandemic, a budgeting app allowed me to pay off multiple credit cards, increase my savings, and lead a more confident life financially—even as the world as we know it was upended in countless ways.
While I’ve been using YNAB for years, 2020 was when I felt like I really hit my stride with the platform. Seeing the way the coronavirus was impacting our economy really made me buckle down and take a good look at my budget and spending habits.
Thankfully, I’ve still had a job during the pandemic; however, aside from getting even more serious about my budgeting in YNAB, I didn’t increase my net worth by getting lucky or doing anything out of the ordinary. Instead of inheriting money, living with my parents, or eating only rice and beans after cutting up my credit cards, I just got super conscious about my financial goals and used my budget as a map to achieve those goals.
During 2020, my YNAB wins included increasing my emergency fund, completely paying off three different lines of credit, and beginning to save for a downpayment on a condo. I also bought out my car lease with extra money down towards the auto loan and have been able to comfortably overpay on the loan each month without even breaking a sweat—plus, my interest rate is super low thanks to the boost my credit score got from paying down three different cards!
Read on to learn more about what YNAB is, how it works, and why it worked so well for me.
- What exactly is YNAB?
- The bottom line
What exactly is YNAB?
YNAB stands for “You Need A Budget,” and is just as much a budgeting philosophy as it is a standalone budgeting app. You can download and use YNAB on your smartphone; however, you’ll also want to be able to use it on a desktop or laptop computer in its browser-based iteration as well. Especially if you’re setting up your budget for the first time, I’ve found that using YNAB on a computer is ideal, since you’ll be setting up different spending categories within the budgeting software.
As a budgeting system, YNAB is very similar to a concept called “the envelope method,” configured for the digital world. Instead of looking at your monthly income and estimating what your monthly expenses will be, you set up budget categories and practice something known as zero-based budgeting. This means that you’re only ever budgeting money that you have between paychecks, which helps you avoid overspending and reign in your credit card usage.
For example, each month, I budget $100 towards cat food and litter in a budget category called “Cats.” As the month progresses, I use YNAB to categorize any transactions from Amazon or PetCo that fall under that category. Any money left over at the end of the month gets rolled into the next month. If I need to spend more than $100 for any reason, I need to find that money in another category and transfer it to cover the difference (YNAB calls this “rolling with the punches”—more on this below.)
In November of 2020, the cats still had plenty of dry food and litter from the previous months, so I only spent $58.48 on wet food for them. That meant that an additional $41.52 rolled over into December, which was perfect, since in December that gave me some extra money to spend on toys for the cats for Christmas and allowed me to more comfortably pay the cat sitter who came to watch them while my wife and I traveled for the holidays.
How does YNAB go above and beyond traditional budgeting tools?
Beyond just serving as a tool for categorizing your spending into different digital envelopes, YNAB, as a company, offers tons of resources and tools to help you budget smarter and find more success in the world of personal finance. Here’s a quick rundown of just a few of the things that helped me accomplish so much with YNAB.
YNAB’s 4 rules
YNAB isn’t just a piece of software; it’s also a philosophy for how to prioritize your financial goals and be more intentional with your money. YNAB accomplishes this with four simple rules which help frame a lot of your decision-making and the way you use the app.
Rule #1: Give every dollar a job
This first rule is all about being intentional with your money and putting it towards something. Each paycheck I got, I split up across multiple categories. Whether it was rent, groceries, food delivery, or Disney Plus, each dollar went to something. My budget is set up with my fixed costs and necessities first, so I always fund those first before heading on to more fun categories and other wants. This ensures that I always have money to pay my rent, credit card payment, student loans, and other monthly bills.
Rule #2: Embrace your true expenses
The next concept which was crucial to me getting ahead in 2020 is embracing your true expenses. True expenses are the sorts of costs that may only come once or twice a year but are still things that you can anticipate. By thinking of these expenses not as surprises that pop up, but as costs to plan for, you can break them down into manageable savings goals in YNAB as part of your monthly budget.
The perfect example of a true expense is my gifts category. Every Christmas, my wife and I have to buy gifts for relatives and friends, and we know that these costs are going to pop up from January 1st. Rather than waiting to fund a gifts category in November or December, we take our overall budget for the year, divide it by 12, and set a monthly goal.
Of course, we know that there will be times before December that we need to buy gifts for birthdays and other occasions, too. A great feature about YNAB is that when we spend money from our gift category, YNAB will automatically calculate how our savings goal needs to change moving forward to still hit our target instead of being derailed by last month’s expenses.
Weddings are a category we decided to embrace during 2020 as a true expense at the start of the year. We have a few friends who had planned weddings in 2020 and needed to start saving for gifts and travel. The pandemic put those plans on hold, but we’ve continued to save for weddings each month so that when they can be safely rescheduled we’re not scrambling to find money for a hotel or thoughtful present.
Rule #3: Roll with the punches
This rule gives some grace and is one of the key reasons that I think YNAB helps put you in the driver’s seat of your financial life. Rolling with the punches means recognizing that your circumstances and priorities can and will shift, so it’s important to stay flexible.
2020 necessitated a lot of rolling with the punches, but because of YNAB I was able to do so with confidence rather than leaving things up to chance. Obviously, transportation costs decreased significantly, but grocery expenses increased as I opted for grocery delivery services. My wife and I also began to save more aggressively for a downpayment on a condo, and decided to siphon some of the money that we would have spent on a vacation in 2020 to get that ball rolling faster.
In the past, I feel like I was susceptible to rolling with the punches to cover extra times we’d eat out with friends in Chicago. However, since the pandemic started and eating out has become more of a treat via delivery rather than a social event, we’ve gotten much more specific about lowering how much we eat out. In 2019 and the first few months of 2020, our eating out hovered around an average of $591.21 a month — despite our goal of only spending $200 a month.
The pandemic offered a valuable reset to really recommit to the situations when rolling with the punches was and wasn’t appropriate with our eating out category, ultimately lowering our average for the remainder of 2020 to just $195.71 this past month. Especially when you consider that delivery services, tips, and other miscellaneous fees (thanks, Chicago) add a significant amount to those expenditures, I’d say that’s a much better place to be at!
Rule #4: Age your money
Another aspect of YNAB’s methodology is focused on getting a month ahead and breaking the paycheck-to-paycheck cycle. By embracing your true expenses, you’re less likely to get set back by unforeseen expenses that are actually totally foreseeable. Plus, when you’re being intentional about how much you want to spend in specific categories of your life, you’re able to live within your means.
All of this contributes to something YNAB tracks called “Age of Money.” Your Age of Money is effectively a way of calculating how far in advance your money can pay for aspects of your budget. An Age of Money of 30 days means you’re officially living off of last month’s income. As you can see, my Age of Money doubled to 44 from around 21 at the start of 2020.
YNAB lets you get laser-focused on spending habits
Unlike other budgeting apps such as Mint, YNAB forces you to grapple with your spending habits. When I used Mint, I would think about my goals and then at the end of the month think to myself, “Darn, I ate out more than I thought I would. Better luck next month!”
With YNAB, since you’re forced to give every dollar a job you really have to consider the trade-offs. Sure, I may have wanted to order a milkshake from Cookie Spin after a stressful workday, but if my treats category was already depleted from last week’s peanut buttery pick-me-up, rolling with the punches would mean pilfering money from another fund I couldn’t afford to steal from. This helped me make the behavioral changes that are ultimately necessary to keep from overspending, allowing me to attack credit card debt and save for other financial goals with much more impact.
YNAB helps divorce your brain from your bank account
How many times have you looked at your bank account before making a purchase and thought to yourself, “I have plenty of money to afford this splurge!” — only to have that decision come back to bite you when your car payment or rent was due? Rather than looking at your account balance to determine whether or not you have the money to spend on any given purchase, looking at YNAB can be much more beneficial.
Thanks to the fact that YNAB can link with dozens of financial institutions, you can connect your checking account and savings account with the software for direct import of transactions. This means that rather than seeing a big pile of money when I opened up my Chase mobile banking app, I was looking at YNAB and recognizing that the reason my checking was growing so much was because of more aggressive contributions towards my emergency fund and down payment.
What were my YNAB wins in 2020?
So, what was the cumulative impact of using YNAB with greater intensity and intentionality in 2020? Thanks to YNAB, I was able to:
Pay off multiple credit cards
As mentioned earlier, YNAB let me pay off multiple credit cards in 2020! In total, between March and November, I paid off a total of $7,343.18 in credit card debt. I did this by creating a special Debt Snowball category in YNAB and getting it as high as possible each month to toss at my smallest debt after paying the minimum credit card payment, too.
Increase savings and net worth
By eliminating credit card debt, I was able to supercharge my savings, both for a bigger emergency fund as well as building up a downpayment for a condo. The graph below shows the huge difference that this made. The red bar represents credit card debt, while the blue bar represents my assets. In January of 2021 and February of 2021, the debt is just a few hundred dollars that will be paid off at the end of the billing cycle.
Note, too, that this is only including my checking and savings accounts and not including my retirement or any other investment accounts. Factoring those accounts into my net worth, the results are even more dramatic!
Have more financial confidence
It’s also worth noting that really recommitting to YNAB has given me a lot of financial confidence in an otherwise topsy-turvy year. While I’d certainly feel some stability just by continuing to have a job during the pandemic, to see so many people I know negatively impacted by the economic ramifications of COVID-19 has definitely driven home just how important an emergency fund is.
Being able to look at my budget and immediately identify the discretionary spending categories I would eliminate (how many streaming services are we up to now?!) offers me even greater financial confidence, especially in the face of a major expenditure like homeownership. With the road map YNAB provides, I feel like I’m on track to reach my goals without compromising that stability, which is worth its weight in gold!
The bottom line
Over the course of my first year with YNAB, I definitely became much more conscious about my spending and had a lot of historical data to look into when it came time to reconfigure my budget in 2020.
While it’s definitely a different way of thinking about money, YNAB offers tons of tutorials and resources to help address the slight learning curve involved with setting up your budget and reprogramming your brain to budget in a new way. Unlike other competitors like Personal Capital and Every Dollar, I’ve found that the support team and community surrounding YNAB (shout out to Reddit and the Debt Bootcamp Facebook groups!) have been an incredibly positive resource in addition to the app. From getting on top of credit card debt to making my wife and my dream of homeownership in the expensive market of Chicago a reality, YNAB has offered me and my family a lot.
While increasing my net worth by over 10,000% certainly feels a bit clickbait-y to type out, it’s 100% true in terms of my situation. All of this was possible thanks to steady progress in a budgeting app that has more than paid for itself and a commitment to reframe my relationship with money and get more serious about my personal finances.