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ynab guides

Simplify Your Finances

Fewer moving parts is better.

This is the complete guide on how to build better money habits and radically simplify your financial life.

Financial success isn’t often about layers of complexity or convoluted setups.

It is, however, about creating a manageable system that helps you create clarity, peace, and direction when it comes to money.

This guide covers ways to build effective money habits, how to simplify finances, and why your current setup might be causing more stress than good.

It will change everything.

So, if you’re looking for a way to reduce your financial complexity (and send that added stress packing), keep on reading!

chapter 1

Your Financial Life is Complicated

Between the multiple cards, complicated tracking systems, and savings-to-checking dance, trying to get a handle on your money can feel like a losing battle.

It’s not for lack of trying. You’ve tried spreadsheets, envelopes, Mint, other spreadsheets, and budgeting apps— maybe even this budgeting app a time or two.

Perhaps you’ve tried different approaches within your own bank accounts.

“I’ll put all the grocery and gas money in this account and all the bill money in this account.”

And those strategies help you feel better initially. Hey—you took action. You invested your time into making it work, and maybe it does for a while.

However, nothing really changes. The tangle of complexity returns: you struggle to save, the credit card balance climbs, and overdraft fees sneak up on you. It’s overwhelming. You don’t know what to do next, so you throw up your hands and give up. You begin spending with just a quick glance at the checking account to guide you.

But then you feel bad, knowing you should have this figured out by now. Adulting, right? So you try something else, but the cycle repeats. It’s overwhelming. Every big expense feels like an emergency because, well, it is.

These endless loops turn into habits and become normal to you, but there is another way.

Icon of a dollar sign in a speech bubble
Your current habits aren’t working.

Your money management system—yes, you do have one, everyone does—is nothing more than a series of habits you’ve developed around money. It’s based on your experiences and how you’ve learned to handle your finances.

If you’ve read this far, it’s because your current habits just aren’t working. Let’s build some new ones!

chapter 2

Simplify Your Structure

We often develop habits out of our methods of organization and structure.

To rebuild your habits, start with your structure

You organize your money into two accounts: checking and savings.

Habits that follow:

  • You check the checking account before spending.
  • You need to transfer money from savings to get it in the right place when the time comes to spend it.

Sometimes, to make it easier to build better habits, we need to change the underlying structure. You probably could describe your system in one of the following ways:

Scenario #1: You have no formal organization.

Maybe you don’t have a formal system or structure that you’re following. You deposit money when you get it, then spend until it’s gone. However, this creates an opening for chaos when a large unexpected expense pops up. You’re left guessing if you can afford it, crossing your fingers that you don’t overdraft your account with other expenses.

Scenario #2: Your finances are very complicated.

Perhaps you’re using multiple accounts, several apps, or a complex spreadsheet to manage everything. You have to keep track of where you’re keeping money, how much to keep in each account, and ensuring that you keep the spreadsheet updated. Whenever you need information, you have to dig around to find it. It feels unsustainable and tiring because it is.

Scenario #3: Your finances are very simple.

Maybe you’ve kept things simple—one account—money goes in and out. This offers no way to look at the big picture or take any meaningful action. You have serious goals, like retiring early or becoming financially independent, but you just hope they happen eventually without a clear-cut path of when or how you’ll get there.

You need the right system for managing your money—you need a budget.

A budget:

  • Provides information in a way that allows for strong decision-making.
  • Helps build good habits.
  • Is easy to maintain.

chapter 3

Four Habits of Successful Budgeters

1. Set money aside for non-monthly expenses every month. (1 min/month)

Not all expenses come in nice little month-sized packages. Some are predictable, like the annual car registration. Some are unpredictable—who knows when the car will break down and how much it will cost?

Instead of scrambling when these expenses happen, start preparing for them now. This habit is best built off your budget structure, which requires adding in categories for each of these non-monthly expenses:

non-monthly expense categories: car maintenance, repair, vacation, and holiday spending
  • Car repair
  • Auto maintenance
  • Holiday spending
  • Even vacation!

Don’t let Christmas surprise you again. Start setting some money aside for it now. Your future self will thank you.

2. Budget your money as soon as it hits your account. (15 min/month)

This is YNAB’s Rule One: Give Every Dollar a Job. Every time you get a paycheck, budget that money right away. This becomes easier over time because you can draw on your historical spending to know how much you’ve actually spent (vs. how much you wish you had spent).

animation showing the Auto-Assign distributing money to all underfunded categories
3. Track spending and cover overspending as it happens. (1 min/day)

You can connect your YNAB budget to your bank accounts automatically to pull in transactions you might have missed. It matches with any transactions entered manually to eliminate double entries. Your budget also pulls in automatic payments like utility bills, mortgage payments, software subscriptions, etc.

Use habit-stacking to make this habit stick: approve new transactions over a cup of coffee in the morning. Cover overspending as it happens by moving money between categories. It takes about a minute. You’ll know exactly where all of your spending categories stand, and you can forget about money for the rest of the day.

animation covering overspending in coffee by moving money from dining oute
4. Reconcile regularly. (15 min/month)

Reconciliation is key to make sure the system matches up with reality. If you’re just getting started, YNAB recommends reconciling your accounts at least weekly as you get the hang of budgeting.

Reconciliation simply means you’re checking your accounts with your budget to make sure that they match. That’s it. Those are the four habits you need to master to turn vague money anxieties into spending confidence.

reconciling your checking account

chapter 4

Simplify Your Accounts

You can make these habits easier to adopt by simplifying the underlying structure. Fewer moving parts is better.

How many accounts do you have? If you’re like most people, you have too many accounts. Each account increases the number of moving parts.

Do you have individual checking accounts for each partner in your relationship, plus a joint account on top? Do you have separate savings accounts for vacations, holiday shopping, and your emergency fund? Maybe there’s one more for generic savings you haven’t figured out yet?

Every time you move money from between these accounts (and then back again, and then back again), you make your life more complicated—all for no added value.

You don’t just need a budget. You’re desperate for one. Those accounts are just different jobs for your money. If you have set up multiple accounts, your heart was in the right place, but it can be much simpler.

With a budget, you focus on your money’s jobs instead of being distracted by its location. Some dollars are intended for vacation, and others are for holiday shopping. Your budget keeps track of that for you. Those dollars can sit in your checking account or in a bag full of nickels under your mattress. It doesn’t matter. You won’t spend them on the wrong thing because your budget guides your spending.

So, close an account. Make fewer decisions and fewer transfers. All you’ve done is change the location of some of your money. Your budget will just keep on keeping on, telling your dollars what job to do—no matter where they live.

chapter 5

Simplify Your Credit Cards

Juggling credit cards presents another needless complication.

Do you have one credit card just for gas and groceries, because that one offers two percent back?

And then a separate card for traveling because you earn miles on that one?

Maybe you’ve got a third one for large purchases because you get one percent for your retirement fund, but only one purchase of up to $2,000 with a fluctuating monthly limit depending on your annual spending.

Have you ever stood in line and texted your partner because you didn’t know which of your five credit cards to use on your $57 purchase?

You’ve got too many cards. Your life doesn’t need to be this complicated.

Pick a card. Just one card.

Every time you purchase something, you spend time deciding on which card you’ll use. It doesn’t end there. You’ve got all those payments to make, each on a different schedule. When you return something to the store, you can’t figure out what to do with that positive balance on your card. You wish that that money was simply back in your checking account.

It’s complicated and drains your energy.

The solution isn’t to go to an all-cash system. There’s no need to resort to envelopes. Sure, all your credit card purchases should be backed up by money in the bank, but spending literal cash for everything isn’t workable in our world. You don’t want to carry all that cash. It’s not simple. You don’t want to pay for large purchases with cash, and there’s something to be said for the protection of purchases made with a credit card. Use a card if you’d like.

But pick one.

If you spend $10,000 a year on groceries and get one percent back by using a certain card, you’ll get an extra $100. That’s not a trivial amount of money, but it also may not be worth the headache, complexity, and hassle of juggling multiple cards—especially if you are just learning to manage your money and decision-making.

That complexity may cost you more than $100 in decisions you shouldn’t have made. How much would you pay to never have to do the mental gymnastics of which-card-am-I-supposed-to-use-now-and-when-do-I-pay-it-off?

Take some time and decide which card best meets your needs. Be satisfied with it, and then tuck away the other ones, knowing you just saved yourself about fifty decisions a month.

chapter 6

A Checklist for Minimalist Finances

We’ve covered habits and talked about simplifying your setup. What does that look like in real life?

We both know that everyone’s financial situation is different, but we wanted to give you a glimpse into how this may look in your own life.

  • Your bank accounts are consolidated.
  • Your retirement accounts are consolidated.
  • You have a single credit card.
  • You use a budget to guide your spending decisions.
  • You check the budget frequently.
  • You reconcile your expenses.
  • If you’ve left a job, your 401ks are all rolled into one brokerage firm.
  • You have your banking passwords written down and stored. You know where to find them.
  • You have a folder to put all your tax documents in for tax season.
  • You reduce as much paperwork as possible and sign up for paperless delivery or electronic notifications on your financial statements.
  • You reduce the amount of debt/loans you’re carrying.

Just like cleaning out a closet, simplifying your finances can seem overwhelming, but thankfully, you only need to do the bulk of the work once to set up your new simplified structure. Simplicity will follow. How sweet and stress-free that will be.

chapter 7

Additional Resources

Excited about simplifying your finances and ready to learn more about optimizing your personal finances? We’re here to help:

Free Change Your Money Mindset Workbook

Want to spend some time exploring and organizing your finances, future and feelings? Our free Change Your Money Mindset Workbook and email series will inspire you to change your relationship with money.

chapter 8

chapter 9

chapter 10

chapter 11