I’ve been using You Need a Budget (YNAB) for almost 2 years now, and I think it is the *best* budgeting tool available.  I’ve used Quicken and iBank (and MS Money ages ago), but none of them helped us start the process of getting out of debt.  YNAB is not just a piece of software, but a methodology of four rules – the software just helps implement those four rules.

The specific order of the rules has changed over time, but the current rules are:

1. Give Every Dollar a Job
2. Save for a Rainy Day
3. Roll with the Punches
4. Live on Last Month’s Income

By following these rules, I feel a lot less stressed about our finances.  I think the biggest one that helped me was Rule 4 – which was Rule 1 when I started, it’s also apparently the hardest to implement – which is why YNAB moved it to rule 4.  It basically requires you to have at least a one month’s “emergency fund” – aka a buffer in YNAB parlance.  We already did this for our biggest payment – our mortgage, so it was pretty easy to just not pay on debt for a month and be a month ahead.  It might not be as easy for others living paycheck to paycheck.

Rule 1 is basic zero-based budgeting, and Rule 2 is saving for those known expenses that aren’t monthly (like insurance payments every 6mths).  Finally, Rule 3 basically gives you the flexibility to change your budget if you need to.

I like that I don’t have to have the same budget every month – some months I could focus on debt repayment, others I could focus on building up my emergency fund – doesn’t matter, whatever you want.  We have a relatively steady income with random “windfalls” like bonuses or birthdays, etc, but it could be *very* useful for folks who have a variable income (like consultants, bloggers, etc), since you already know what you made last month, you know what money you have to work with this month, no guessing what your income might be and timing bills to paychecks.

What do you use for budgeting and why do you like it?

YNAB didn’t pay me to write this – I just really like it.