Tracking Cash with You Need a Budget

You Need a Budget (aka YNAB, referral link) is a budgeting app for web and mobile that helps you track your spending and save for the future. Here's how I track cash spending in YNAB without wanting to tear my hair out.

What's YNAB?

If you're already familiar with YNAB, feel free to skip ahead! For those of you who haven't used it, YNAB is a bit like a spreadsheet in Turbo Mode. As a budgeting app, it lets you allocate your money into categories of your choosing, like a virtual "envelope" system. You can track spending by category or category groups, differentiate between budgeted funds and other assets like 401(k) or investments, and link accounts to a bank to import transactions.

If you're using a debit card, YNAB is pretty straightforward. You plug your paychecks in as income, that money goes into a "To be Budgeted" pool, you allocate those funds into your categories. Enter in your transactions, assign each to a category, and the "balance" in your categories goes down. If you overallocate or overspend a category, YNAB will warn you that you've spent more money that you have. Credit cards are a just a shade more complicated, but the basics are the same.

For more background on the basics, check the quick intro video on their help site.

Why cash?

Credit and debit transactions are convenient, because both can be auto-imported right from your bank or card company. Missing a transaction isn't the end of the world: you can just get it off the credit card statement later. Your wallet has no such safety net.

But, cash is a necessity in lots of situations. I tried to fudge it for a while, using throwaway categories like "Stuff I Forgot to Budget For" (yes, this is a default category). That wasn't helping me understand where my money was going, which was one of my early goals. Rather than continuing to ignore the problem, I tweaked my setup. Now I can use as much cash as I need without breaking my budget.

Taming your Wallet

The first thing I did was create a new Cash account. The initial balance of the account should be whatever's in your wallet. YNAB will add that money into To be Budgeted, and you'll have to allocate it to categories.

At this point, your wallet is now part of the budget. Just as importantly, your budget is just a pool of money spread across several debit and credit accounts. What's in your wallet isn't specifically allocated towards coffee or gas or groceries or anything else. If you stop at a food truck to spend the last $10 in your Dining Out category, YNAB doesn't force you to spend from a certain source. Cash only merchant? No problem, it's in the budget.

This sounds straightforward but it takes discipline. You can't be lazy with entering your expenses: the auto-import safety net is gone. There are a few things that make cash tracking easier for me:

  • Enter ATM withdrawals as a transfer. You don't have to recategorize transfers. Move money around between your checking and cash as it suits you, without affecting the budget.
  • Try and enter expenses as you make them. It's tempting to batch receipts, but you can lose track of them, or the stack can become overwhelming. If that's a risk for you, try to enter your transactions as soon as you make a purchase. Added bonus: the app will associate the Payee with a location and suggest it next time.
  • Round up to the nearest dollar. This one is critical for me. It's too overwhelming if I have to track pennies and reconcile them away when my wallet doesn't match YNAB. I usually make a handful of cash transactions every week, and the change gets donated or saved for parking meters.

Tracking cash helps me every week. I can carry cash without guilt that it's unaccounted for. I can stop at cash-only shops. I have a few dollars on hand for a tip. My spending habits are more accurately reflected in YNAB, not quite down to the penny but certainly better than before. My budget is about as accurate as it can be. 💸