"jessiebird on the YNAB forums posted:

So sorry you are having trouble. I would say you are correct; something's not clicking for you. The point of YNAB is to show you exactly what you have, and if that's not the case then something is amiss. My guess is that you haven't made the mental leap to budgeting as "dividing the money you have into categories" and are still thinking of it as "writing down what you should spend/save each month." Does that raise any flags?

Basically with YNAB, you go with the money you have in the bank today (your "available to budget" amount if you are starting out) and put it in the various categories where you will need it before you get paid again, until your available to budget amount is zero.

If you are overbudgeted, that means that you are putting in projected expenses that haven't happened yet. This is the traditional budget concept many people cling to, so it's not a huge leap to do this by accident in YNAB. The problem with this method is that you immediately lose the connection between your budget and your current bank balance. YNAB only wants you to deal with the money YOU ALREADY HAVE. That means never entering income before you have received it, and never entering expenses before you have paid them.

If this sounds backwards to your past view of budgeting (projecting), it's OK. You still need to know, ideally in a list or spreadsheet, how much to put in each category each month. But the point of YNAB is knowing exactly what you have available to spend RIGHT NOW. If you enter projected amounts, then your budget won't match your current balance.

My advice, as I have told tons of others here who are probably sick of hearing it, is to pretend that YNAB is real cash going into paper envelopes, like in the good old days. Back then when you got paid, you brought home cash and tucked it into envelopes labeled "rent," "phone," "groceries," etc., and there it sat until you spent it. There was no overbudgeting; when you ran out of money to put in the envelopes it meant you had "budgeted to zero." Then when it came time to pay bills, you took the cash out of the envelopes for the appropriate bill. YNAB is the virtual version of this system. With cash, you can't overbudget; when you have zero left to put into envelopes, you're done budgeting. And you can't overspend either; when an envelope is empty you either stop spending, or take money from another envelope as needed.

If my interpretation of your frustration is correct, once you shift your thinking from the typical Quicken-type budget to this more real-life, hands-on approach, it will all make sense. Just remember: BUDGETING is dividing up money you have into categories; it is not entering idealized numbers for the month and hoping that at the end of the money you were correct. That gives you no concrete numbers on which to base your spending decisions in the moment.