My Transition from Mvelopes to YNAB

I successfully transitioned from Mvelopes after using it for many years (I used both Mvelopes 4 and 5).  I am writing this post because I wanted to share my experience with everyone and let them know how I transitioned and adjusted from Mvelopes to YNAB.  I hope that others who are looking to switch from Mvelopes to YNAB finds this information helpful.  If any one has a question about Mvelopes, please feel free to reply to this thread and I will gladly answer any questions I can.

 

Overall, I am very happy with my decision to switch.  I really like the interface and the mobile application (iOS), and YNAB support is phenomenal!  Honestly, my biggest frustration with Mvelopes was support (among other things like features disappearing as the product was upgraded), which is why I decided to switch.  The final straw was having my credit card and bank feeds down for over a month and asking for help and not getting a response other than "you can import manually" - that doesn't work for me long term and defeats the purpose of using an app.  YNAB is about double the price if you pay annually, but the added features and more importantly incredible support from YNAB justified the price for me.  Well worth $7/month ($84/year).

 

I’m listing the sections below in the order that I did them/discovered them.  This follows my train of thought in setting up and learning how to use the YNAB application.

 

Category and Category Groups: The very first thing I did in YNAB was setup my categories and category groups.  These are similar if not identical to envelopes and groups in Mvelopes.  I pretty much set them up exactly the same, eliminating the “junk” envelopes I had created in Mvelopes to fix issues with account balances and in the inability to delete transactions in Mvelopes (Yuck!).

 

Bank and Credit Card Accounts: Next I connected my bank and credit card accounts.  I originally had some issues connecting them, but I posted a question in the chat section on YNAB, and OMG I got a response within a day or less like they said they would.  How wonderful and refreshing to have someone actually respond with helpful information instead of apologizing and then providing incredibly general and unhelpful information from Mvelopes (Blah!).

 

Budgets and Funding: Next I transferred my budget information.  I started by entering the amount I budget each month in Mvelopes, but I could not figure out how to “fund” the next month.  I was used to saved budgets and funding plans in Mvelopes.  With the help of the YNAB support team, I realized that what I really wanted to do was to set a monthly goal for each category for the amount I budgeted in Mvelopes.  This makes it really easy to “fund” the next month because all you do is select all the categories and then go to Quick Budget and select the “underfunded” or “goal” amount.  All of the categories then turn from yellow to green, indicating that they are funded.   I also discovered you don’t have to fund everything at once - more of that later when I talk about how I budget incoming funds in real-time. 

 

Envelope Balances: Next I had to figure out how to transfer my envelope balances.  In Mvelopes, I budgeted envelopes in one of two ways.

  • My first type of envelope was for bills due every month (e.g. mortgage, utilities, etc.), or for items that had a monthly spending budget (e.g. groceries, eating out, etc.).  These are simple because I budgeted a fixed amount for each envelope each month, and then at the end of each month, I would “sweep” any underspending out and overspending in.
  • My second type of envelope was for bills due at different times during the year (e.g. property taxes, HOA fees, pest control, etc.), or for savings goals (e.g. vacation, holidays, etc.).  I still budgeted a fixed amount for each envelope each month, but I don’t sweep these envelopes because I let the amount accumulate each month so I can pay the bill when it’s due, or spend the money when I plan to.  I would only “sweep” in/out of these envelopes once the bill was paid and realized the amount was different than what I planned.  Usually, the bill would be slightly more (rarely less), and I would then adjust the monthly budget so that I’m budgeting the right amount each month.  For example, my HOA fees are $150 every 6 months, due in June and December, so I budget $25/month and let the envelope accumulate over time.
  • I started using YNAB in October.  So using my HOA fees as an example, I had saved 4 months, or 4x$25 = $100 (for July, August, September, and October).  I figured out the easiest way to enter this into YNAB was to go to the previous month (i.e. September in my example) and then enter the balances of these envelopes as of the end of September.  Since I was entering it in September, I entered in an amount of $75 (for July, August, and September).  Then the budgeted amount of $25 I entered in October brought the available balance of that category in YNAB to $100, which is exactly what I wanted. I had originally entered $100 in September, but then realized that YNAB was adding another $25 in October, bringing the balance to $125, which was incorrect.  Since I had already funded my envelopes in Mvelopes for October, I had to subtract out one monthly payment for each envelope carrying a balance and enter that into the previous month (i.e. September).  Although the “To Be Budgeted” amount was negative, when I looked at the current month (i.e. October), my “Funds for October” (which shows at the top of the Web UI) was the sum of all my bank and credit card accounts minus the amount I had funded in September, which is exactly what I expected.  Now the money remaining is used to fund the current and future months.

 

Category Assignment: Next, I started assigning categories to incoming transactions.  And OMG, I discovered auto-assignment rules!  YAY!  Mvelopes disabled this feature at some point in Mvelopes 4 (even though you could still setup rules, they just stopped working and never told anyone), and then in Mvelopes 5 there were completely removed, never to return.  I was really upset when Mvelopes removed this feature as it was a time saver.  So I started reviewing transactions every day and assigning them to envelopes manually in Mvelopes.  The nice thing about YNAB is that the rules automatically set themselves up as you start assigning categories (you don’t have to set them up yourself like you did in Mvelopes 4), and the next time a transaction comes in, the category is automatically assigned and you just need to approve the transaction.  Beautiful and very exciting!  I was able to turn off auto-assignment for names like “Amazon” because you buy so many different things into Amazon and there is no way to auto-assign that type of purchase.  To find this hidden gem, click on the “Payee” dropdown when viewing a list of transactions after selecting a bank account and choose “Manage Payees”.  You still have to approve the incoming transactions, but I like this feature because if I don't recognize an expense, I can ask my wife if she recognizes it.

 

Sweeping and Funding: My next struggle was trying to understand how I would “sweep” and “fund” in YNAB.  At the end of each month, I was used to envelopes have balances in Mvelopes, some were overspent, some were underspent, and I would sweep them. Then I would take a saved budget and use that to fund my envelopes.  YNAB has a different way of doing this, and it happens more in real-time.  Once you understand the YNAB methodology and the reason behind “giving every dollar a job”, it actually makes sense.  It takes some getting used to, but I think the biggest benefit of this approach is that it forces you to make decisions about how you spend money and where it comes from, instead of doing things like I used to do in Mvelopes like let envelopes go negative month over month to “save money over time” and leave my “savings” envelopes untouched.  Instead in YNAB, you immediately correct overspending for a category, and you immediately fund categories when you receive new income, and you manage your budgeting with goals for each category.  In Mvelopes terms, you are sweeping and funding in real-time, which I think gives you a better picture as to where you stand financially.  I’ll explain how I do this in the next few sections.

 

Funding in YNAB: In Mvelopes, I had a saved budget that I would apply each month.  The equivalent to this in YNAB is setting a monthly goal for each category.  This accomplishes the same result.  By setting a monthly goal for each category, you can then easily “fund” your categories by selecting the ones you wish to fund and then use the “Quick Budget” button and select “Underfunded”.  This will move money from the “To Be Budgeted” category (“Unallocated Money” in Mvelopes) and move it to each category in YNAB.  It is helpful to put categories in groups that are funded in the same way (e.g. are of the same importance) so that you can select all categories in that group and fund them with one click.

  • When you receive new income, instead of letting income accumulate in the “Unallocated Money” envelope in Mvelopes, I immediately assign any new income that shows up in the “To Be Budgeted” category to next month’s budget.  This keeps my “To Be Budgeted” amount at 0 at all times.  My wife and I both receive paychecks bi-weekly, so every other week, I go into YNAB and start assigning that income to categories in next month’s budget.  I start with the category groups that are critical (e.g. monthly bills like the mortgage, utilities, etc.) and fund those first.  Then when the next set of paychecks come in later in the month, I fund the rest.  This is a little bit of extra work, but I found that it does two things: (1) it prevents you from spending that money elsewhere, and (2) when you start the next month, it’s already funded for you.  Personally, I like seeing the “To Be Budgeted” amount at 0 - it just feels good.

 

Sweeping in YNAB: At the end of each month in Mvelopes, I would sweep before funding the next month.  This allowed me to take care of overspending and underspending and take the total difference and put it somewhere.  In YNAB, this is done in two different ways.

  • Overspending: In Mvelopes, I would allow envelopes to go negative.  YNAB immediately notifies you when overspending occurs.  What I decided to in YNAB whenever a category is overspent is to either move funds from a different category into the overspent category, or move it from savings.  To move, just click the amount and tell the system where to move the money from.  By funding overspending immediately as opposed to waiting to the end of the month, it forces you to make a decision where the money is coming from.  And when you take it from savings, it hurts.  So if you stick to your budget and take it from a discretionary category like “eating out”, you may decide to eat at home instead.
  • Underspending: If you have funds left over in any category at the end of the month, just select those categories and choose the option “Set Available Amount to 0”.  I can only find this option in the Web UI.  This moves the remaining funds back to the “To Be Budgeted” category where you can allocate them to another category in the next month (or put it into savings).  If you put categories that you want to do this with in the same group, or put those groups together, you can easily select those groups and then release the remaining funds.  Note you can select multiple groups or categories by different groups by just checking the boxes next to the groups or individual categories when using the "Quick Budget" feature.

 

Reconcile Balances: In YNAB, you can reconcile your balances.  I do this once a month to make sure my YNAB balance matches my bank and credit card balances.  This is something that Mvelopes used to have and was also taken away.  Usually these balances always match because I link my bank and CC accounts directly and import all the transactions.  But if for any reason a discrepancy is found, YNAB lets you make an adjustment to the “To Be Budgeted” category in one click to reconcile the difference, which makes it super simple to get things back into sync.  One of the things I hated about Mvelopes was that I was not able to delete transactions that were imported.  This was incredibly frustrating because sometimes duplicate transactions were created and there was nothing I could do about them.  And sometimes I did not catch duplicate transactions and I would end up in a situation where Mvelopes said I spent more than I did, and I ended up creating offset accounts and envelopes to try and fix it.  It’s so nice being able to reconcile and delete things if you want.  And I have yet to find a duplicate transaction in YNAB, but if it does happen at least I can delete it myself.

 

Funds for X in YNAB: Another challenge I had in YNAB was the “Funds for X” calculation that you see at the top of the screen in the Web UI.  I had no idea where this number was coming from.  I realized that it was the sum of all transactions assigned to the category “To Be Budgeted” and have a date in the same month, which actually makes sense.  

 

Credit Card Category: The credit card category took a little bit to get used to.  In Mvelopes, I made sure that my credit card envelope always showed my current balance.  When I would make a credit card payment in Mvelopes, I would enter a pending transaction so that my debt was reduced (since I would often schedule this payment to happen later in the month).  Sometimes I would have to do a transfer to a fictitious envelope which I called an “offset” to get the debt balance to match.  In YNAB, I discovered that YNAB wants you to budget for your credit card payment, which the amount comes out of your “To Be Budgeted” amount.  In Mvelopes, I was not used to doing this.  Since I always pay my credit card balance off each month, I simply budget the amount that YNAB tells me, and it works great.  There are special goals you can set in YNAB for credit card categories, which are different than regular category goals, either paying a fixed amount each month or paying it off each month, so you can adjust this however you want to manage your debt.  The default is to pay the credit card in total each month to avoid building up debt.

  • NOTE: When I first setup my credit card, I had used the reconciled balance feature to adjust for transactions already paid.  This caused YNAB to set the incorrect goal amount to budget for the credit card payment.  To resolve, I removed the reconciliation and the starting balance entries and then re-reconciled the account.  This fixed YNAB's total calculations.

 

Reimbursable Expenses: I had to handle reimbursable expenses differently in YNAB (i.e. expenses that we incur that are reimbursed by our employers).  In Mvelopes, I was used to assigning these expenses to an envelope and letting it go negative, and then when we were reimbursed, I would transfer the incoming amount to that envelope to bring its balance back to 0.  In YNAB, I still assign it to a category for reimbursable expenses, but I fund the overspending with money from savings (again, the money has to come from somewhere until you get reimbursed).  I also create a scheduled transaction under our credit card account with a date I expect to be reimbursed and split the payment with the amount of each transaction and set the category to “To Be Budgeted”.  This reminds me to expect this incoming payment and to put it back into savings once we are reimbursed.  I would be nice if the system could automatically create this scheduled transaction, but this doesn't happen that often so its not a big deal for us.  

 

My One and Only Complaint about YNAB: There is really only one thing I don’t like.  I use Capital One and I have re-authenticate myself every time I want to import transactions.  (This doesn’t happen for my other accounts with other banks).  I usually like to check my transactions this daily, so this is a bit annoying.  But honestly, Mvelopes had the same problem and it has something to do with Capital One's recent change in security requirements (its news all over Google).  The good news is that it is easier (and faster) to re-authenticate in YNAB, especially if you do it on your phone (iOS has a neat feature that will pull a code from an SMS onto the clipboard so you can paste into YNAB when you receive the SMS with the code).  I would love YNAB and Capital One to figure something out so this isn’t necessary every time you wish to import transactions, but I’ll take this annoyance any day as I feel YNAB overall is a much better product.  And like I said, support is wonderful, and that combined with a well-built product with additional features like auto-assigned categories and the ability to delete transactions, convinced me to switch to YNAB.  

 

Like I said, if anyone has any questions about switching from Mvelopes, I'm more than happy to answer if I can - just reply to this thread.

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