15. YNAB’s 5 Question Budgeting Framework
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If you’ve been in my world for any amount of time, you likely know that YNAB is my favorite budgeting tool! And for years, YNAB has taught its Four Rules as the cornerstone of using their software effectively.
Rule 1: Give every dollar a job.
Rule 2: Embrace your true expenses.
Rule 3: Roll with the punches.
And Rule 4: Age your money.
We went through those four rules in last week's episode, so go take a listen if you haven’t already done so. These days, YNAB has refined its guidance into a more question-based framework. And those five questions are what we are diving into today.
Think of these Five Questions as building blocks, a pyramid of financial clarity that needs to be built from the ground up. You might find yourself focusing intently on the first question initially, gradually progressing through the others as you gain more control and awareness over your money. As you make your way through the questions, each time, you will add another block to your pyramid, making it (and your finances!) stronger each and every time.
So, what are these questions?
The Reality Question: What Does This Money Need To Do Before I'm Paid Again?
At the base of our financial pyramid lies the Reality Question. This is the most immediate and crucial question you need to ask yourself every time money hits your account. What are the absolute necessities? What bills are due? What spending is unavoidable before your next income arrives?
Think about rent or mortgage payments, groceries to keep you fed, transportation costs to get to work, and essential utilities like electricity and water. These are the dollars that have a non-negotiable job to do right now.
YNAB excels at helping you answer this. By allowing you to categorize your income as it comes in and assign those dollars to specific categories, you’re giving every dollar a job. This ensures that your immediate obligations are covered, forming the bedrock of a stable budget. It’s about understanding your present financial reality before you can plan for the future.
The Stability Question: What Larger, Less Frequent Spending Do I Need to Prepare For?
Once you have a handle on your immediate needs, the next level of our pyramid focuses on Stability. This involves looking beyond your next paycheck and considering those larger, less frequent expenses that are still predictable. These are the costs that, if not planned for, can often lead to financial stress.
Think about car maintenance, insurance premiums (paid quarterly or annually), holiday gifts, back-to-school shopping, or even that annual software subscription. While these don't occur every month, they are a reality, and ignoring them is a recipe for budget disaster.
YNAB helps you to answer this question by setting up categories that effectively act as “sinking funds.” This is where you can allocate a small amount of money each month towards these categories so that, when the time comes, the funds are already there. This proactive approach builds financial stability and prevents those “surprise!” expenses from derailing your budget.
The Resilience Question: What Can I Set Aside for Next Month's Spending?
As you gain control over your immediate needs and start planning for those less frequent expenses, you can begin to build Resilience into your budget. This question is about creating a buffer between the time you get paid and when you spend that money. Another way to think about it is as setting aside money this month to cover expenses next month.
Living paycheck to paycheck can be incredibly stressful. The Resilience Question encourages you to break that cycle. By intentionally allocating funds to next month’s categories, you give yourself breathing room. Imagine knowing, at the start of June, that your essential July expenses are already funded. (Trust me, it’s a great feeling!)
The more you can set aside for the future, the more resilient your financial situation becomes and the more options you start giving yourself. And these options are what allow you to weather unexpected expenses with clarity and ease.
The Creation Question: What Goals, Large or Small, Do I Want To Prioritize?
With a solid foundation, stability in place, and a growing buffer, you can now focus on Creation—or aligning your budget with your biggest goals and aspirations. This question moves beyond just covering needs and starts focusing on what you actively want to achieve with your money. This is what I like to call living Your Greatest Life!
This is where you get to start thinking about your financial goals, both big and small. What do these goals look like for you? Perhaps you are saving for a down payment on a house? Planning that dream vacation? Paying off debt? Investing for the future? Building an emergency fund?
YNAB’s targets and goal features allow you to visually track your progress towards these priorities. By asking yourself this question, you can start intentionally directing your money towards what truly matters to you, making your budget a powerful tool for creating the life you envision.
And finally, The Flexibility Question: What Changes Do I Need To Make, If Any?
At the top of our pyramid is Flexibility. Life is full of change, and your budget should easily allow for adjustments. This question encourages you to regularly review your budget and make changes as needed.
Did an unexpected expense pop up? Did your income change? Did your priorities shift? YNAB’s strength lies in its flexibility. You can easily move funds between categories to reflect your current reality based on whatever new information you have at the moment.
Asking yourself the Flexibility Question regularly ensures that your budget remains a relevant and useful tool. It’s about staying engaged with your money, making conscious choices, and continuously optimizing your plan to meet your evolving needs and circumstances. This ongoing process is key to long-term financial mastery!
While these five questions may sound very similar to the four rules—they are, but they also aren’t. YNAB’s Five Questions provide a powerful and intuitive framework for taking control of your finances. Instead of strict rules, they are guidelines or questions that are there to help guide you along your financial path. They take you from meeting your immediate needs to planning for the future, building security, achieving your goals, and staying flexible along the way. Because the last thing we need or want is a restrictive budget where there’s no room for fun!
Both the rules and the questions are there to guide you, so whichever ones resonate with you more, go with those! I learned YNAB on the four rules, so I definitely reference those a ton. But you will also hear the YNAB community referencing the five questions.
Here’s a review of all five questions:
What does this money need to do before I’m paid again?
What larger, less frequent spending do I need to prepare for?
What can I set aside for next month’s spending?
What goals, large or small, do I want to prioritize?
What changes do I need to make, if any?
By consistently asking yourself these questions and utilizing the features within YNAB, you’ll gain a newfound clarity and confidence in managing your money. And while the journey to financial well-being is ongoing, YNAB’s Five Questions are here to help provide a roadmap to navigate it effectively.
Because, remember, your biggest, wildest dreams are within reach. Let’s make some money moves so that you too can start to experience financial freedom.
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DISCLOSURES
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YNAB Disclosure: I am a YNAB Certified Budgeting Coach, which means that I have been trained to coach people on using YNAB software and the YNAB budgeting method. I have met select requirements of You Need a Budget LLC in order to receive this certification, which means that I have the ability to competently coach YNAB to others. I am not an employee of YNAB, and all non-YNAB related opinions and recommendations are my own. My views do not reflect the views of YNAB and its employees or affiliates.
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