YNABing When You’re Barely Getting By

It can be tough to figure out how to manage money when you don't have much of it. Not only are you trying to adopt a new habit, you’re also learning a new method of managing your money, figuring out the technology of a new app…and you still have to go to work, feed the kids, clean the house, and find money for the next bill.

Enter: a pounding, stress-inducing headache and a strong desire to avoid reality.

Hold on a second. Deep breath. You’ve got this! And doing it will ultimately make your life easier. Let’s get started.

How to Budget When You’re Broke

Let’s walk through what you can do—right out of the gate—even if you’re short on cash.

Step #1 : Rearrange your categories to better match your priorities.

Here’s an example:

The first group “Must” include fixed expenses. These are the bills that I know are coming. They absolutely have to be paid and I have a pretty solid idea of how much each will cost.

The second group “Need” is for variable expenses. These are the expenses I do know are coming, but I either don’t know when, or the amount varies. For example: Auto Maintenance. If you’ve got a car, it’s not a question of if it needs work, just when and how much.

The final group “Want” is optional expenses. These are the categories I hope I can budget for, but if things are tight, they may get put on the back burner. I don’t need to buy music right now. I hope to, but I can skip it if things are tight.

Not sure how to change categories? Watch this video to learn how.

Step #2 : Set up scheduled transactions.

The fixed expenses are probably the bills you dread most right now. Just when you get some breathing room, another one shows up to bite! But there’s some good news: these bills are predictable. We can spot them coming and get our budget ready to fight back.

Here’s how: set up scheduled transactions for each bill. YNAB will enter these transactions into the register on the scheduled date and reset the scheduled transaction to the next occurrence.

Because I added those scheduled transactions, if I look back on the budget I can see those orange alerts reminding me of the bills that are coming.

You can also drag your categories into the order they fall in the month. That way, when money arrives, you can budget your way down the screen.

Here’s how to set up a recurring scheduled transaction.

Step #3 : Add a target to each remaining Category.

Targets can help alert you about how much you need to fund other categories. I’ve added a weekly target to groceries, because I want to be reminded that I need to budget that amount for groceries.

To create spending and savings targets, just click on the category, select “Create Target” and decide how much money you need and by when. You can choose to create four major types of targets:

• Weekly: Weekly targets are designed for any bills or expenses that you typically spend money on once a week. It’s perfect for that once-a-week childcare bill, your routine trip to the grocery store, or your weekly date night.

• Monthly: Monthly targets are likely to be the most common in your plan. If you want to set aside a certain amount every month, this is the target cadence for you. It works for categories that you spend from only once a month (like rent or your monthly phone bill), but also for categories with variable spending patterns (like your personal fun money).

• Yearly: Yearly targets are for all your predictable yearly bills and expenses. Think Amazon Prime payment, your property tax bill, even your yearly YNAB subscription!

• Custom: You can set a custom cadence for your target with this option. You can also choose not to set a due date at all, and just track your progress toward a big goal.

Now as you do this, you may find that for some of your categories, you have no idea how much to budget. Don’t worry about that. Just guess. Most people guess when they get started; you’re starting a budget, not chiseling commandments into stone. You can always make changes later.

So go ahead—turn those guesses into targets.

Learn more about how to set up targets in YNAB.

If you select all the categories that have a target or scheduled transaction attached, you’ll see a total on the right-hand side in “Underfunded”:

That’s what you need to bring in to cover all those categories. If you know you’ll bring in less than that, start making adjustments to the targets where you can.

If you bring in more than that, you can start working on the optional categories.

Check out our comprehensive guide to learn how to break the cycle of living paycheck to paycheck.

Step #4 : Budget the dollars you have.

This is where it gets stressful when you’re figuring out how to budget when you’re broke.

Although it can feel overwhelming to make decisions when you don’t have enough money to cover everything, you need to make a very clear plan for the dollars you do have.

If you only have $148, it’s absolutely critical that you manage that money really well. Here’s the question you need to answer:

What does this money—this $148—need to do before I’m paid again?

Answer the question, and then assign those dollars where they’re needed most in the budget.

When you realize your money is a finite resource and you name one job—and only one job—for each dollar, the money starts to feel a little bit scarce. Don’t panic! Scarcity is actually a good thing—it gives you clarity.

You’ll start noticing as you give every dollar a job that there really is a limited number of them at any given time. That’s definitely a bummer, but it’s also the reason you need to be intentional about prioritizing what the money you have right now is going to do for you. Doing that helps build awareness and can prevent you from making costly mistakes.

Every time you spend a dollar, you’re making a choice. There’s power in that. Be the boss of your money.

Step #5: Track your spending.

Now that we’re organized and aware of what we have, and we’ve given every dollar a job, we need to stay completely on top of spending. That’s where things can go off the rails if you lose this awareness. We need laser focus.

Before you spend, check the category to see what’s in there. Don’t look at your checking account balance—that doesn’t tell you anything about what these dollars are for. You need the budget for that.

Let’s say you absolutely need $35 for gas. There’s no way around it. You check your Transportation category and, yikes, there’s no money there. The first step would be to check your other categories to see if you could “borrow” the $35 from one of those. We call that WAM-ing here at YNAB, because we love acronyms and because sometimes budgeting is like one big game of Whack-a-Mole where you have to quickly slam down unexpected expenses that pop up.

But sometimes the reality is that you absolutely need $35 for gas and you absolutely don’t have $35 for gas. Maybe you end up overdrafting your account and spending money you don’t have yet as you work your way through this.

It’s easy to feel frustrated, or even ashamed, about overdrafts, but it’s more important to face the reality of the situation. So, you’ll still record this spending in your budget—after all, it did happen.

You’ll be overspent in your gas category. And that’s true, even if seeing those numbers in red hurts a little bit. You also may have to add an overdraft fee to your “Interest and Fees” category (and, ouch, those hurt). However, you want to record what happened so that you have accurate information.

When you get paid next, first budget to cover that overspending. It’s worth mentioning that if you’re in this situation, you should strive to spend as little as possible—only spend what’s absolutely necessary. Those little cheap treats you buy impulsively to cheer yourself up are only a temporary cure. Let that money add up to something more significant.

Repeat steps #4 and #5.

Let time go by. This might be the hardest part, but these steps will bring progress. Money will come in, you’ll give each dollar a job, and you’ll check your budget (not your accounts) to make your spending decisions. You’ll start to feel less like you’re floundering and more like you’re in charge of your spending.

And believe it or not, you’ll start to like budgeting. Or at least not dread it. You’ll see it as a tool for feeling in control, organized, and capable. You’ll be able to buy those little treats when you want to because you’ll know you can afford them. Your feelings of guilt or anxiety about spending will gradually subside. It’s worth it.

Hang in there—being broke is a stressful time. But you’re here, looking for another way, and you’re rewriting your story right now. Keep it up and you won’t be budgeting while you’re broke for long.

(Because you won’t be broke!)

Want to start spending and saving in a way that will change your relationship with money…and your life? Try YNAB for free for 34 days—no commitment or credit card required.