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A structured approach to setting up your YNAB categories to give you a better overview of your finances. Find out how to be financially savvy in this post.
If you are using YNAB and struggle to use it because you have too many or too few categories set up, keep on reading.
I will go over the main categories I found out to work the best, and the subcategories to give you an overview of where your money goes.
You should get your financial goals in line with your long term goals to supplement them and achieve what you really want to achieve.
Why YNAB categories are not easy to setup
So first of all, it IS easy to set them up – but it’s not as easy to set up meaningful and structured categories. You want to use your YNAB, and if you just started out with it, you will most likely not do so if you micromanage too much.
If you split up your budget into 100 categories, the chance is, that it will be a chore using it. If you only use 3 you don’t have a good overview. We have to find the golden middle.
I will tell you which categories I have and which subcategories I am using, so you get a grasp on this topic.
The basic routine explained
I already told you about batching. The only time I don’t do that is when putting in transactions into YNAB. This is because most of the time I don’t have a receipt and would forget it.
Every second Sunday I sit down with my girlfriend and she wires me the money I spend on her behalf and I reconcile my accounts after that. So I am on top of my finance every second Sunday.
Which main YNAB categories are good to start out?
The main categories are the highlighted bold written lines in your budget.
I have 10 main categories set up.
Everything I am subscribed to goes in there. For example:
YNAB: Yeah, I wouldn’t write about it if I don’t use it right?
If you don’t use premium at the moment but you want to, you can use this link, so we both get a free month of premium if you subscribe.
Todoist: My go-to todo app. If you want to sign up for it, head over to this page so we both get 2 months of free Todoist premium.
Amazon Prime: I am an avid user of prime. I have the amazon visa card and got a cashback of 170€ for 2020. This and the 50% cost my girlfriend pays makes up for the price of 69€ a year.
Mobile phone + internet contract: It’s self-explanatory I guess.
Webhosting: It’s the service I pay to operate this website.
There are a few more, but I guess you understand what goes into this category.
2) Insurance and taxes
I don’t have many insurances, but there are a few I really recommend to have. Keep in mind that I am located in Germany, so you might not need it in your country.
International health insurance: If I travel outside of Germany and something bad happens, this insurance pays for everything and get’s me home if needed. It’s only 1€ per month, so it’s a no-brainer for me.
Household insurance: If there is a water leak in my home and things get destroyed this insurance will cover the cost.
Legal expenses insurance: If I ever get in a lawsuit, I don’t have to pay anything. This insurance covers all the costs. It’s nice to have, but you don’t really want to ever have to use it.
Car insurance: Obligatory if you own a car in Germany. Any damage I deal with it will get paid.
Car taxes: The state wants to earn a bit as well, am I right?
3) Living expenses
Everything I pay to live will go here. It’s my basic needs category.
Groceries, cantine, and hygiene: Many people divide the toiletries and groceries, but honestly, this becomes a chore I don’t want to handle. I told you that you can split up your YNAB categories into hundreds. But always think about what you achieve with that – what’s the benefit of knowing that you paid 20€ for toiletries? I don’t see any.
Rent: My monthly rent payment goes here. If I ever own a house, my mortgage would go in this category.
Electricity: No need to say anything!
Gas: I need gasoline for my car to get to work and to do things. That’s why it’s a living expense, duh!
4) Spare time and hobby
Partying: When we are allowed to do that again (corona!) I will spend ALL of this money.
Gadgets: New things for my apartment will go here
Takeout/restaurants: I put the Chinese takeout box here and when I get a coffee with a friend
Gifts: All the Christmas and birthday gifts I buy over the year will be funded in this category.
Health: Supplements for my sport and gym membership go into this category, since I don’t buy protein powder every month, it’s okay for me to just have a broad topic like health sitting on top.
Vacation: I want to travel the world, so this category gets funded every month. I talked with my girlfriend about this, and she puts away the same amount of money, so we can go together!
Clothing: I don’t buy many things, but when I do, it’s not very cheap. I always prefer quality over quantity.
ETF + House: I save around 30% of my net income for retirement and buying a property to be set for the future. It’s incredible what 100€ a month can do for you with interest over the next 35 years. Have a look at it, that’s something I recommend doing all the time.
Brother: I want to help out my brother a bit, so I fund some money every month in this category to help him.
Repairments: In case of anything breaks I set away some money, so I don’t have to use credit for it. You really want to avoid using credit to spend a few hundred euros on repairment – try to save it now!
Emergency fund: This is when shit hits the fan. When I lose my job or have to leave my home because of any problems and insurance doesn’t pay right away. Note that I won’t pay repairments with it, because I know that something will break, it’s not an emergency.
7) Active: Wishes
If I want to buy something, I set up a category for it. Whenever I have money left over, I put it into the according category so I can buy it whenever I have the required amount of money saved up.
After buying the thing, this category get’s deleted and all the transactions and money get transferred to the “spending budget”.
You always know that something has to be replaced. This category is really bonus, many people use their savings category for it, but I like to be prepared.
New phone: I guess my smartphone has to be replaced after 3-4 years, so I already save up enough money to be able to buy it right away.
Household machines: The drier, washing machine, and fridge will break in the next 5-10 years, so I want to be prepared to buy new when I have to.
9) Credit card payments
This is a standard YNAB category, they use it to account for your credit card spending.
Whenever I have to use credit it would go here. I am lucky enough to not use it.
These YNAB categories are the ones I found the most useful. They are very detailed so that I can use the data given by them, but they are also generalized enough that it’s not a chore using YNAB.
I hope you could learn something from this post and it made your life a little bit simpler – let me know! You can find more productivity-related posts on the right-hand side.
As always, I would be happy to hear some feedback on this post.