Our Journey to Budgeting with YNAB

Many years ago (more than I think I want to count at this point), my wife and I started using a bank called Simple. It was online-only, with no physical branches, but it had a wonderful budgeting system at its core. You could create Expenses and Goals, each with different funding methods and schedules. You’d also tell it when and how much you expected to receive from each paycheck, and it would go about divvying up your income to cover everything. Any money left over was marked “Safe-To-Spend” and could be used for whatever else we wanted (anything from food to fun).

Essentially, it was an automated envelope budgeting system. It was our first real attempt at budgeting as a couple, and it got us to a place where we could pay off some debt and buy our first house.

A few years later, but in fairly quick succession, Simple’s parent bank BBVA was acquired by PNC, the Simple service was shut down, and—poof—there went our budget. This happened right around the time we sold our first home and moved into another. We came out of that move cash-positive and assumed we had our shit together and didn’t need a budget anymore. (Foreshadowing…)

We went about two years without any real budgeting and made a number of big financial decisions: buying a new house, turning the shed into a studio, purchasing a travel trailer and a tow vehicle, and shifting to a one-income household while Steph started teaching part-time and building her side hustle.

By the end of that two years, our lives—and our finances—looked very different. We had worked ourselves back into some uncomfortable debt. We needed a budget. (Duh.)

So, I jumped into You Need A Budget (YNAB) and set one up. I had looked at YNAB before but wasn’t in the right mindset at the time. I was trying to make it work like Simple—just show me my Safe-To-Spend—but YNAB starts from a different place: Rule 1, Give every dollar a job. We’ve now been using it for well over a year, and in that time, thanks to some windfalls (tax returns, work bonuses), we’ve paid off all our unsecured debt, without resorting to Top Ramen for breakfast, lunch, and dinner. Even better: we’re now fully buffered. That means every single dollar we spend this month was earned last month. Our required spending (like the mortgage) and our fun spending (like date nights) are both funded one full month in advance.

So here’s a look at what that budgeting system looks like for us now.

The YNAB Method: The Four Rules

Before diving into how we use YNAB, let’s take a step back. To understand our process, you need to understand the core principles behind YNAB’s method. YNAB is based on four simple rules that can radically change your relationship with money. But instead of me trying to explain them here, I recommend checking out the wonderfully put-together videos the YNAB crew has made. They do a much better job explaining it than I ever could.

Visit YNAB’s Four Rules for Less Stress and watch the videos. Once you’ve done that, come back here to see how I apply those rules to our life.

My YNAB Categories

Now that we’ve covered the fundamentals of YNAB’s four rules, let’s dive into how I structure my budget. My categories are organized in a way that reflects both the fixed and flexible aspects of our spending, with an eye toward long-term savings and keeping our finances in check. Here’s how I’ve broken it all down:

💳 Credit Card Payments

This built-in category group is something I barely glance at anymore. We use credit cards for nearly all of our discretionary spending—everything except recurring auto-drafts from our checking account. The beauty of YNAB’s handling of credit cards is how seamless it is. When I budget money for things like groceries, dining out, or any other discretionary expenses, YNAB automatically moves that money into the credit card payment category.

I’ve set up our credit cards to auto-pay the full balance each month. The money for those payments is already in the budget, so I don’t stress about it. The confidence that comes with this setup is huge. If you’re working on paying off credit card debt, however, you’ll want to approach things differently by developing a strategy that handles paying down debt while covering new spending.

📅 Bills

This group is for our must-pay expenses—things like the mortgage, utilities, car payments, insurance, etc. It also includes things that happen on an annual basis, like car registration fees or credit card annual fees. These are non-negotiable expenses, and I treat them as such by giving them a special place in our budget.

I never touch this group when we’re in a tight spot, as this money is necessary to keep the lights on (literally). This is a foundational group for any budget, providing the security of knowing the essentials are covered.

🔄 Subscriptions

I separate subscriptions from bills because, while they recur, they’re still optional if things ever get tight. This group contains things like Amazon Prime, streaming services, gym memberships, and software subscriptions.

I could easily lump all subscriptions into one category, but I prefer to see what we’re signed up for at a glance. It makes it easier to spot services we may no longer be using, and ultimately decide if we need to cut back. While I do prioritize funding the things in here, this group is definitely one I’d consider trimming back from if I needed to make quick adjustments.

🧾 True Expenses

This is where YNAB’s Rule 2—“Embrace Your True Expenses”—really comes into play. These are the sneaky, non-monthly expenses that can really throw off your finances. Think things like car maintenance, medical costs, and groceries—expenses that don’t occur every month, but still need to be budgeted for.

We take this group seriously. Some categories, like car maintenance, get a set monthly contribution (e.g., $100/month), while others, like groceries, get a weekly budget. Here are some of the subcategories I use:

Groceries: Budgeted weekly, smoothing out those 4-week vs. 5-week months.
Consumables: Items like trash bags, paper towels, and dish soap.
Durables: Bigger purchases like rugs, shelves, or electronics that last a while.
Sundries: Miscellaneous one-off items, like passport renewals or birthday cards.

⠀These categories help us anticipate those “hidden” costs and smooth out our cash flow.

🌈 Flexible Spending

This is essentially part of our “True Expenses” but deserves its own group because of its flexible nature. These are the wants, not needs: clothing, family outings, vacations, and gifts. These are fun, but they can be flexible when life throws curveballs.

When we overspend somewhere, this is the first place I look to make adjustments. While it’s important to budget for these things, I know I can pull from here when needed, so there’s less stress when things don’t go as planned.

🎯 Goals

This is the category group for all our longer-term saving goals—things we want to do, but that aren’t urgent. For example, the “Next Vehicle” category has been sitting empty for quite some time (whoops 😅), but it’s still a placeholder for something we plan on saving for.

We also use this group for larger goals like vacations, tech upgrades, or home improvement projects. These aren’t immediate expenses, but they’re important and are part of our longer-term financial picture. This group is flexible, and I can reassign dollars here if we need to cover other categories.

🐾 Other Groups (Dog, Christmas, Side Business)

We have a few special-use category groups that are unique to our family. For instance, we have one for our dog, one for Christmas, and one for our side business. While these could technically fall under other broader categories, separating them out makes managing our budget easier. Keeping them distinct helps maintain clarity and makes it easier to track how much we’re putting aside for these specific areas.

👨‍👩‍👧 Family Member Categories

This has been one of the best things we’ve done for our budget: giving each family member a personal “allowance” category. My wife and I fund these monthly, and then we can spend that money however we want—completely guilt-free. Starbucks runs, games, hobbies—basically, any fun or impulse purchases are covered by these categories.

We also have categories for the kids, though these aren’t true allowances for them. Rather, they cover discretionary spending on things like toys, outings, and art supplies. If we say “yes” to something, the money comes from here.

By organizing these categories, we’re able to track everything from essential bills to long-term goals to our personal fun funds. The key is to keep everything well-defined and reflective of what matters to our family, and YNAB’s flexible system makes that so much easier to manage. Now, let’s look at how all of this comes together in our budgeting workflow.

My Workflow: When We Had Debt

When we were still carrying unsecured debt (mostly credit cards), I had a pretty strict workflow for how I handled new income. Any time a paycheck came in—or really any deposit that wasn’t a refund—I’d immediately assign it to the “Next Month” category. If we weren’t yet a full month ahead, then I’d cover any remaining expenses for the current month first, and then put anything extra toward next month. Over time, this habit helped us finally get ahead of our expenses, one paycheck at a time.

I also created a specific category called “Debt Plan.” This wasn’t a minimum payment tracker—this was where I funneled extra money toward debt payoff. Each month, I tried to put as much into this category as I could comfortably afford (for us, that was usually around $500). I treated it like a bill. It was not to be touched except in absolute emergencies. And if we got a windfall? Tax refund, gift, 3-paycheck month—straight to Debt Plan.

At the end of the month, I’d usually make two credit card payments:

One payment from the credit card payment category — this covered the current month’s card spending, and YNAB handled moving money into this category automatically.
One payment from the “Debt Plan” category — this was the actual principal reduction payment, applied to the highest-interest card first.

We still made sure to meet minimum payments, of course. But by keeping new charges off the cards (at least while we were paying them off) and focusing our energy on one card at a time, we saw visible progress every month. It made all the difference in staying motivated.

My Workflow: Now That We’re Debt-Free

We don’t have any unsecured debt anymore—but the “Debt Plan” category is still around. Once we paid off our credit cards, I kept budgeting that same chunk of money into the Debt Plan category. But now, instead of going to credit cards, it became extra payments on our car loans.

At the end of each month, I’d make two car payments:

One payment from the car loan budget category* — this is just the normal scheduled payment.
One payment from the “Debt Plan” category — again, actual pricinpal reduction payment, although in this case I applied it to the loan with the lowest remaining balance.

⠀Eventually, we paid off our first car loan. When that happened, I did two things:

I closed the car loan category under Bills.
I increased our monthly contribution to Debt Plan by the amount of that car payment.

Boom. Snowball.

This meant our monthly cash flow stayed exactly the same—but the next car was paid off even faster. And once the cars were done? That snowball was aimed squarely at the mortgage.

One Caveat on Paying Off Low-Interest Debt

I’ll admit: there’s a point where throwing extra money at secured loans might not be the best move. Our mortgage, for example, has a fixed interest rate of about 3%. Meanwhile, high-yield savings accounts are earning closer to 5%.

So instead of paying extra on the mortgage, I started moving the Debt Plan money back into the “Next Month” category at the end of each month. We still keep that flow going—but we’re building buffer instead of shrinking the mortgage. And in the background, that buffer is sitting in a high-yield savings account, not our checking account.

YNAB doesn’t care where the money physically lives—just that you give every dollar a job.

Wrapping It All Up

In the end, budgeting with YNAB has completely changed how we manage our finances. What started as a way to pay off debt has turned into a system that gives us confidence, control, and peace of mind. We’ve learned how to live within our means, plan for the future, and take advantage of any windfalls that come our way.

Whether you’re starting with debt, trying to get ahead, or already debt-free, YNAB has a method that works for you. The key is giving every dollar a job, being mindful of your goals, and adjusting as life happens. With YNAB, you’ll always know where your money is going, and that knowledge is power.