Behind the scenes with YNAB: Managing cash flows

When you link your accounts to YNAB, what’s actually happening behind the scenes? How is a simple little app coordinating cash flows across credit cards, savings accounts, payroll (and even Venmo).

Let’s start with a hypothetical example. You get a stroke of inspiration and decide that it’s time to start Budgeting Like a Boss on June 15th.

Day 1: Starting Balance

On this day, your accounts look as follows:

  • $1,200 in checking
  • $500 balance on your credit card

YNAB will basically take a “snapshot” in time and freeze these amounts as starting balances.

A Credit Card transaction

On June 25th, you buy an iPad ($600) on your credit card. This will show up as a transaction in YNAB (allocated to your Credit Card account) which will increase your balance to $1,100

A cash transaction

Then on 6/28 you meet up with a friend for a Soulcycle class ($35… ouch!) and use your debit card. Once again, it will show up as a transaction (under checking), but this time the app is smart enough to automatically decrease your checking account. That’s because cash actually left the account (which would also happen if you went to an ATM or Venmo’d someone).

Now, let’s assume you pay your credit card bill in full on 6/30. Assuming you pay off your bill each month (ahem, that’s like the number 1 rule of personal finance) you now owe $1,100. This includes the balance you transferred in ($500, and those transactions leading up will not show up in YNAB) plus the iPad ($600).

Clearing the ledger

So the final ledger clears out your Credit Card spending and leaves you with a “net worth” of $65 bucks. And the two transactions will be classified both to their respective accounts AND categorized accordingly, so that they live on in your glorious budgeting history.

Now that’s a wrap. And make sure you join our #YNAB Slack channel by clicking here.

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