This is part 2 in a series I'm doing comparing two budgeting products I've used, Mvelopes and YNAB. When using a budgeting program, a key question one should ask is, "How am I going to actually stick with this?" Budget programs are great, but if you don't stick with it, they're worthless.
A key element of sticking with a budget program is how well is adapts to your changing financial picture throughout the days, months, and years. Coming up with a spending plan is only a first step; the real power comes with sticking with a good plan for where your goals are at right now.
With Mvelopes, you're mostly focused on the envelope balances and how much you have to spend. When something unexpected happens, you transfer from one envelope to another to balance it out. They even have a nice "sweep" feature that helps balance everything out. Mvelopes does a great job telling you how much money you have to spend.
Unfortunately, though, there is too much of a separation between the question "how much do I have to spend?" with the other relevant questions, "How much have I spent?" and "how much have I budgeted for this, and is it realistic?"
Without having the latter two questions in front of you all the time, you have boundaries around your spending categories (your envelopes go to zero, then you're done), but you don't have any context around those boundaries to take them seriously or adapt to them if they're unrealistic.
Let me give an example. Let's say you budget $500 a month for groceries. With Mvelopes, you would see that number go down and possibly go negative at the end of the month. You would then take money from another envelope (say Entertainment) to even it out. Then you would start over again.
But let's say you consistently go over. And you do that song and dance every month. You're doing a lot of work to move money around, when the real problem is that you should probably have $600 a month for groceries. Without that spending plan in front of you, though, you don't know that and, if you're the member of the family that doesn't do the spending plan, you probably won't care either.
This is the genius of YNAB. You have a budget screen which is more complicated than Mvelopes. The envelope balances are there, but they are sitting next to the amount budgeted and amount spend. With that context, though, you'll see trends that you wouldn't see with just an envelope balance.
Another great thing about YNAB is what they call Rule #4, which is to roll with the punches. With YNAB, if you overspend in groceries, it will just come out of next month's budget and you can have a lean month next month. If you see that happening a lot (which you will, because the months are right there for you to see), then you can adjust your budget. No more scrambling around making envelope balances budget.
YNAB shows a great principle of software: sometimes a user needs to see the context around which their decisions are made. Simplifying the view that they see to only one part (the "how much do I have to spend" part, in this case) can actually keep the user from seeing the big picture enough to have a sustainable, adaptable, financial plan.
But because changing the spending plan is so much of a chore in Mvelopes (due to having to split up each check into categories), you tend to try to not change your spending plan very often. So problems with your spending fund go unnoticed longer. For example, if you are underfunding your grocery envelope, you won't know it with Mvelopes for a few months if you're a normal person using the normal program.
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