One of the best aspects of YNAB’s methodology is to save for future expenses and goals. This ensures that you’ll be ready for whatever you’ve planned ahead. Forecasting takes this principle even further and gives you greater visibility over your future.
While planning ahead is also essential with Nova, the other aspects of YNAB budgeting are either greatly simplified or not required anymore.
<aside> 🎯 With Nova, your job is to stay cash-flow positive and use your Free Cash Flows to fund your goals.
</aside>
YNAB being the most advanced budgeting software, ex YNABers easily make the mental switch to forecasting.
| YNAB method | Forecasting method | |
|---|---|---|
| Purpose | Ensure the money you have in the bank goes to the right place | Ensure your current and future money go to the right place |
| The money you assign | $ sitting in your bank accounts into expenses and targets | Your future inflows into expenses, savings, investments… |
| Horizon | Present | Present and future |
| Main constraint | You can only use your cleared balance to plan ahead | Stay cash flow positive now and in the future |
| How to track spending | The “Available” amount on each single category | The zone of your Budget Line (holistic view) |
| Things to watch out | - Total Ready to Assign = 0 |
| YNAB rule | Nova rule |
|---|---|
| 1. Give Every Dollar a Job |
This means assigning every dollar sitting in your accounts to a category: expense, goal, future expense…
Dollars unassigned: not allowed | 1. Be cash-flow positive
Plan ahead your future inflows & outflows to see if you’ll be cash-flow positive or negative.
Dollars unassigned: Unassigned inflows are automatically treated as Free Cash Flows, which you can allocate to your goals (whenever you want). | | 2. Embrace Your True Expenses
Rather than simply budgeting for the current monthly expenses, YNAB encourages you to anticipate less frequent expenses such as car repairs, annual insurance payments, or vacations. | 2. Forecast beyond this month
Same as YNAB.
| | 3. Roll With the Punches
Each category is a budget that needs to be funded. Whenever you overspend on a category, you need to cover it by reducing another one. | 3. Stay below your Budget Line
It doesn’t matter whether you spend on shopping or going out. What matters is to control your spending pace by keeping your variable expenses below your Budget Line. | | 4. Age Your Money
Break the paycheck-to-paycheck cycle by waiting 30 days before spending the money you earn. | 4. Keep a cash buffer
Beak the paycheck-to-paycheck cycle with a safety net covering 1-3 months of your forecasted expenses. |
| YNAB | Nova Money |
|---|---|
| Bills | Recurring forecast |
| Variable expense | Variable expense |
| Non-Monthly expense | One-time forecast |
| Category: Assigned | Category: Forecasted |
| Category: Activity | Category: Spent |
| Category: Available | Category: Left to spend |
| Mark a transaction as “cleared” | Mark a forecast as paid |
| £1,000 ready to assign | £1,000 forecasted Free Cash Flows |
| Cleared balance | Today’s balance |
| Working balance | Today’s forecasted balance |
| You assigned more than you have | You will be cash-flow negative |
| Reconciliation Balance Adjustment | Offline balance adjustment |
| Target: Monthly Savings Builder | Monthly recurring forecast |
| Target: Spending category: Weekly / Monthly / Yearly | Recurring forecast: Weekly / Monthly / Yearly |
| Target: custom needed | One-time forecast |
| Target: Savings balance | Savings goal (coming soon - see https://novamoney.notion.site/aeba60824b8546e2b9877df08b28a1e1) |
| Target: Monthly Debt Payment Target | Debt free goal (coming soon - see https://novamoney.notion.site/aeba60824b8546e2b9877df08b28a1e1) |
| Target: Credit Card Payment - Pay off balance by date | One-time forecast, then select the account you’ll pay from |
| Target: Credit Card Payment - Pay specific amount each month | Monthly recurring forecast, then select the account you’ll pay from |
| Scheduled transaction | One-time forecast |
| Uncleared transaction | One-time forecast |
| Reports/Spending/Trend | Analytics/Trend chart |
| Reports/Spending/Total | Analytics/Budget line |
| Reports/Net Worth | (coming soon - see https://novamoney.notion.site/aeba60824b8546e2b9877df08b28a1e1) |
| Reports/Income v Expense | Analytics/Trend details |
| Reports/Income v Expense: Net Income | Analytics/Trend: Free Cash Flows |
| All Accounts | Balance |
| Transfer - Category not needed | Internal transfer |
The 6 financial concepts to grow your net worth