I love YNAB
6 min read

I love YNAB

Less a review of the YNAB budgeting software, more lessons of I learned from it
I love YNAB

There are few things that I would consider using for the rest of my life, and I never thought that this budgeting software would be one of them. Hell, I never thought I would ever be the kind of person who budgets. It has a weird stigma attached to it (“isn’t budgeting for people who lack self-control?”), and it’s typically marketed for people who are trying to get out of credit card debt, or for the fringe-frugalists who are counting every penny. I am none of these.

But after 6 months of budgeting with YNAB (You Need A Budget), I’ve changed my mind.

The simple reason around why you should budget at all is that it restrains you from spending more than you should. How much should you spend? Well, that’s up to you, and ideally, when you are most rational, and not when you’re least rational (e.g., when you’re actively shopping, which leads to impulse buying). For me, budgeting is almost–dare I say it–fun. It gives me a sense of control over my finances in a concrete way that being a general frugalist doesn’t. I can reach spending goals yet also feel stress-free about splurging–the best of both worlds!

In the past 6 months, what I’ve learned from YNAB and budgeting helped me formulate a new personal philosophy around what personal finances should include:

  1. Obfuscation
  2. Virtualization

Obfuscation layers

Before YNAB, my personal finance mantra had always been simple: spend as little as possible, unless spending more is cheaper in the long-run. I never saw the need for a budget because this has always kept me in the green. But now that I have a big boy job, I have been justifying bigger expenses that fulfill the “long-run” corollary, and expenses that fit a “life is too short to eat shitty cheese” lifestyle. I get paid significantly more now than when I was a graduate student, and with it came an abundance mindset wherein I started to forget that good cheese is a luxury, and not an every day expense.

This is why I’m a firm believer of having obfuscation layers to my personal finances. The obfuscation layer does one simple job: It makes it hard to perceive how much money I actually have.

Transparency is not always a good thing when it comes to your money–Parkinson’s Law would suggest that knowing too well how much money you have could lead to more spending. (In the same vain, having a credit card obfuscates how little money you have, leading you to spend more). If your goal is to spend less money, a good obfuscation layer should make you feel poorer than you actually are, quelling a perceived abundance.

The first layer of obfuscation that you probably have is electing to pay your taxes on the employer’s side of the paycheck. This eliminates you ever believing you had that money to begin with. The second is to taking advantage of your 401(k) or any tax-deferred savings (HSAs, etc), again, on the employer's side of the paycheck. If you don’t even let it touch your bank account, you start to think of it as not your money, but future-you’s money (which is how it should be). I like to think of it as hiding a Jackson in a coat pocket for a pleasant surprise for future-me. A third layer is having passive investment accounts that you deposit to immediately after payday, so that you can forget about it while it grows. (It’s important that it’s passive, because if you’re constantly checking its performance through active trading, you’re constantly reminded of how much you have, and that defeats the purpose of the obfuscation layer.)

Throughout graduate school I went a step further and added other layers of obfuscation. I was trying out different fintech products (Wealthfront, Qapital, Robinhood, Schwab, thinkorswim, etc) which inadvertently dispersed my money to different investment accounts, and it was hard to keep track of the total amount that I had–which ended up being a good thing because it engineered a scarcity mindset. I felt like I had less than I actually did. Conversely, by the end of graduate school, I consolidated my accounts and noticed spending increase in the following months.

The least energetic solution to spending less is to create a passive, psychological perception of scarcity, rather than actively reminding myself to not spend. This is where that obfuscation layer comes in. YNAB helped me do this because I almost never look at the total sum in my bank account any more. 99% of the time, I look at the categories that I get to spend in. From my point of view, it feels like I have 20 different bank accounts even when I only have one, which brings me to my next point.

Virtualization layers

YNAB became the operating system for my finances, in that it takes what is physical (my money) and virtualizes it into logical components (what the money is used for). Rule #1 of YNAB is “give every dollar a job,” which forced me to manage my resources more actively and efficiently (see the four rules here). The way to visualize this is a pile of cash (pre-YNAB) transformed into neatly divvied up stacks of bills with labels on them (“rent”, “dining out”, “software subscriptions”, “hardware refresh”, etc).

But the real magic is the process of divvying out cash to my different categories, because in the process, I start a continuous audit of my expenses (one could say that a budget is basically a reverse audit). One example is amortizing the yearly cost of my credit card annual fees across 12 months. Instead of having a surprise $550 charge every year, I allocate $25 per month for this expense, which also adds a different perspective to the value of something (I prefer to think of expenses as a percentage of monthly income). This all adds up in one category and by next month, I look at the previous month to know how much to budget for next month (and then I wonder, is x dollars worth it in credit card fees?). Another example is when I divvy out money for “vacation,” which is inclusive of driving out to see my long-distance partner or taking a trip together. I allocate $100 to this fund every month, so I don't need to go back and wonder if I had spent too much. I know that I spend exactly $100/month on vacations. Continuous auditing at a high frequency helps me feel more connected and more purposeful in my finances.

Budgeting also helps make the opportunity cost of financial decisions feel more tangible. For example, I recently bought a new phone, and also splurged on a $50 case for it by expensing it out of the “hardware refresh” category that is used to buy a new laptop (because phone is also hardware to be refreshed). The act of expensing it from the hardware refresh category helped me feel how much I’ve set myself back from my future laptop because of the splurge that I made today. In other words, it helps me feel the pain of future Wes. Being able to feel the future pain today is a magic power I wish I had in more areas of my life (waking up early is hard for me because I keep forgetting that pain by bedtime).

The last point about virtualizing my money is that it makes my finances feel like they’re working towards something rather than sitting in a bank account waiting to be called. My partner and I have a fund for a long SCUBA diving trip we want to take. Being able to put money aside into a virtual piggy bank twice a month helps me remember the good things in life to look forward to. I’ve been finding that it feels just as good to allocate the money than it is to spend it. Also, whereas spending $50 on a phone case sets me back on my laptop goal, the converse can work to accelerate my goals. Because I’m moving the money around on my “operating system,” I can feel sacrifice of eating out one time less this month gets me $20 closer to the diving trip we’re looking forward to.


In terms of transparency, both obfuscation and virtualization seem to be at odds with one another. One on the one hand, I hide how much money I have in total; on the other hand, assigning every dollar a role helps me feel more in control because I truly know how much I have to spend. The ultimate effect is a trippy psychological revolution in how I think about my financial resources, and budgeting feels like a new language that I’m beginning to intuitively “think” in. One of those language features is that I see everything in one common unit, dollars per month. (My laptop doesn't cost $1,600, it costs $50/month.)

Lots of other things are happening to my financial psyche, but in the same way that a language is a barrier, the “original text” (aka my experience) that I’m trying to translate to you just won’t cut it. You’ll have to try YNAB and learn the language yourself.