Your budget and your bank accounts have one of those “It’s Complicated” relationships. They’re involved, yet separate—linked to one another by your budget categories.

When new funds become available, you give every dollar a job (assigning each to a category). Then, as you record your spending, your category balances decrease so that you always know exactly how much money you have left in each.

Here’s Another Way to Think About It

YNAB gives you two completely different views of the exact same dollars:

The money in your bank accounts. The money in your budget.

It’s the same money, but one view is divided by category (the budget) and one isn’t (the account register).

The View From Your Bank Accounts

Your bank accounts have no idea what your dollars need to do. They can only tell you how many dollars you’ve got and where they’re physically located (your checking account, your savings account, the piggy bank on your dresser, under the mattress, your honey’s checking account, and so on).

The View From Your Budget

Your budget, on the other hand, knows that, hey, these dollars are reserved for paying the mortgage. Those dollars are for new shoes. And, the remaining dollars can be used for groceries. Through this lens, you don’t know where the dollars are (which account), but you do know exactly what you need them for. And, as you’ll soon see, that’s all that really matters.

From Both Views, Your Money Is the Focus

Your accounts give you a view of the location of your dollars, and your budget gives you a view of the jobs they need to do. But, either way, it’s the same money! That’s why your accounts are related to your budget.

Bank v. Budget: Related, But Independent

Consider this: You can move money between your accounts—say, from your checking account to your savings account—without impacting your budget, at all.

To keep things simple, I’ve got $100 budgeted in each category. There’s $1,000 in checking and $600 in savings.

What if I transfer $250 from checking to savings? I hit the transfer button to get the ball rolling:

Notice the transfer has no category.

We categorize income when new money arrives, but no new money has arrived—this money was already here. We categorize outflows when we buy something, but we aren’t buying anything. We’re just changing the location of the money.

Let’s look at the whole view again:

The account balances have changed, and that makes sense (we moved money between accounts). But notice the budget has not changed. That makes sense, too, because we didn’t change our plan for the dollars.

What if we move all $850 out of the savings account and into the checking account?

As you can see, the budget isn’t phased! It doesn’t care where you keep the money.

What if I had this same $1,600 spread across more accounts?

Again, the budget is indifferent. No change, there! My category balances are exactly the same. It’s more complicated this way, though, isn’t it? There are more accounts to reconcile, and a lot more transferring back and forth.

Now, you may be thinking, “Hmm, maybe I don’t need all these extra accounts?”

That, friend, is exactly my point.

Moving Money Between Budget Categories

Just like you can move money between accounts without impacting your budget, you can move money between budget categories without impacting your accounts.

So, for example, what if I move all of the dollars from each of my “True Expenses” categories (e.g., “Home maintenance,” “Renter’s/Home Insurance,” etc.) into my “Auto Maintenance” category?

Notice that my account balances didn’t change.

If you’re wondering where the money for auto maintenance is, the answer is that it’s spread across all of my accounts. But you know what? It doesn’t really matter where the funds are—by looking at my budget, I know how much money I’ve got for auto maintenance. The accounts don’t tell me that. They simply report on location. That’s it.

The real power in money management is focusing on what you want the money to do, not where it’s located.

We’ve been brainwashed a little bit to believe that account management equals money management. And, hey, let’s be honest, account management is better than no management. (That’s how I operated before YNAB, and it did help a little.)

But, once you start budgeting, you have a better way. Budgeting is the truest form of money management.

If you just scratched your chin, thoughtfully, and wondered, “So, theoretically, I could just have all my money in one account?” the answer is yes. Yes, you could.