Using YNAB for Small Business Finances

I've used YNAB for a while now, and as you can see from my blog, I like the program. My wife and I are not perfect and sometimes we hit financial setbacks that are beyond our control; however, each time we do we stick with our budget. What we see is that we always have enough to pay for bills and get food. YNAB does work, and it works well for personal finances. 

However, what about small businesses? Does YNAB work for a business owner? 

The answer is... It depends.

It depends on your business. YNAB does extremely well for cash flow budgeting and cash based businesses. If you use a cash based accounting system (you get paid when a product/service is rendered and you pay bills when you receive them) then YNAB is great for you. If you need to have an accrual system, YNAB may not be the best choice.

I have a small company that I run part-time, I sell items online and also do some consulting work. I have QuickBooks Pro (since I am a QuickBooks consultant), but I find myself using YNAB more often. Even though I use both systems, there isn't a lot of work since both programs are able to import and categorize transactions. 

I use YNAB to help me keep my cash flow steady and also keep my spending under control. It has the same effect on my company's finances like it does on my personal finances. There are some things that QuickBooks does that YNAB doesn't, like track and manage taxes. Also, YNAB doesn't track inventory. Lastly, the reporting features are lacking when it comes to business reporting, and it cannot do a balance sheet yet.

However, Jesse (the creator of YNAB) is working on improving YNAB for small business owners, so I believe these features will be available eventually. 

If you want more information follow these links:

YNAB for Small Business

Different businesses who use YNAB

Video about YNAB for small business

The Pareto Principle of Personal Finance

The Pareto Principle or also known as the The 80/20 Rule is simple:

"Roughly 80% of the effects come from 20% of the causes"

A quick glance at the wiki article above sums up that the 80/20 rule is applied to different areas from economics to nature. I suggest we apply the same rule to personal finances. 20% of your income should generate 80% of your wealth.

How is this possible? Live off of 80% of your income and save the other 20%. That 20% should then be divided according to your family needs. Do you have an emergency fund? If you don't, you should take that 20% and build a 3 month one first. Have debt? After you have an emergency fund, take that 20% and pay off debt. Once you finish those steps then save 10% of that 20 for retirement (especially if your young). If your older save 15% for retirement out of that 20%.

The rest of that twenty should go into saving for items that you may want like a new car, furniture, vacations, college, and so on. This method will allow you to pay in cash for items, and gives you negotiation room when haggling. It will free you from using "90 days same as cash" or other financing scams that will put you in the hole. 

The very act of paying off debt is equal to getting a raise. The money you spend every month on credit card minimum payments could go to savings. Once the debt is go, you can pay using cash for the things you want.

I suggest using YNAB to start you off on the road of financial management. Once you have a buffer, then move to Quicken to maximize the money you earn and keep.

YNAB vs Quicken 2014

While on the surface YNAB and Quicken do the same thing, help manage your money, but that is where the similarities end.

YNAB is a purely devoted budgeting system. It does have some report abilities, but its primary goal (which it does flawlessly) is to manage cash flow. Remember, like businesses, cash flow is the life blood of a family's finances. To sum up the importance of cash flow, I like to quote Frank Hebert' Dune: "The Cash Must Flow"

YNAB cost 60 dollars to purchase (you can buy Quicken Deluxe for the same price). What you get is a program that does not have a sunset policy (Quicken expires after 3 years), and a program that comes with a unique money philosophy.

The philosophy tries to move the family from the paycheck to paycheck lifestyle to a living on last months income for the current months expenses. This is done using a buffer, as the YNABers call it. This buffer tends to be the most confusing part of the philosophy; however, once you move past the initial confusion, you are left with a wonderful budgeting tool.

But let me say it again, YNAB is a budgeting tool that only works as long as you follow the system the developer created. How YNAB tracks your money is similar to any financial software. Just don't expect fancy reports outside of a few basic ones they provide, but in all honesty, how many reports do you really need for your personal finances?.

Quicken is for people who want to manage there money on a level that businesses do. Other than spending reports, net worth, and spending analysis that YNAB offers. Quicken tracks taxes, investments, business expenses, run financial scenarios  analyze loans, track mortgage interest, and the list goes on.

While it might be easy to say that one may never need these abilities, I would disagree. Personal finance is all about knowing what your money does. YNAB gives every dollar a job, but lacks the ability to track and analyze how those dollars work. Quicken takes the past to create reports to see where you've been, but lacks the ease, flexibility, and forward thinking that YNAB offers.

The end decision is simple. When it comes to YNAB vs Quicken the choice is clear. Get both ideally. If you cannot afford both. Buy YNAB ($60) then save up to get Quicken (buy at least the Deluxe version). Use YNAB to manage your budget, and use Quicken to run reports and track taxes, investments, and analyze future financial scenarios that may impact your life.

How To Track Gold and Silver in Quicken

Many people, in times of economic uncertainty  run to precious metals to hedge against inflation. I believe that having physical on hand gold may be a little extreme, but having precious metals in your portfolio isn't an extreme or far-out idea. Precious metals bring a constant and steady rate of return. Precious metals have done great the past couple of years because of the uncertainty in the world market. I do believe that silver might be over sold, but gold would be a good hedge since it is the international unit of exchange after the US dollar.

But this post isn't to talk about the value of precious metals or why you should or shouldn't buy them. The point of this post is to explain on how to track them in Quicken. I  believe the more you know of your finances the better you are at understanding how well you are. Knowledge is important. You have to know what your net worth is. You have to know the value of the gold you keep in a safe in your bedroom behind the painted portrait of your mom. Why? Knowing your net worth is a way to see how well you are doing. If you have a negative net worth, you know you are doing something wrong or its been a bad year. If you have a net worth of over a million? Congratulations, you are a millionaire.

Since some people have physical gold on hand, and not in a brokerage  how would you track it in Quicken? You could just create an asset account and update the total amount using transactions  but that takes time and is inefficient.

The best choice is to go to add an account-->Advanced Set-up-->Click I want to enter my transactions manually-->Create account name "Gold in safe, or gold at Bank of America"-->Set the start date to the beginning of the year with the account amount being zero (This will allow my purchase of a gold to become a transfer into my account)--> Then enter the ETF symbol for gold (GLD)*** or SLV*** for silver, Quicken will automatically adjust your value every time you update you stock quotes-->Once Quicken finds you quote for gold, click other-->Enter your total shares (for gold see note below)-->Click done--> Say no to the mutual fund option that Quicken gives.

Congratulations, you are now tracking the value of your physical on hand gold in Quicken!

*** NOTE: The Silver exchange-traded fund tracks the price of one ounce of silver, so if you have 10 10 troy ounce ingots  then you say you have 100 ounces of silver. Gold is tracked by one tenth an ounce of gold, so when you enter your investments, you’ll need to multiply your quantity by ten. For example, if you buy two ounces of gold, you would enter this as a purchase of 20 shares rather than two.