How to Track Business Expenses Separately in YNAB
Freelancers and side hustlers can use one budget to keep business and personal finances organized—without the chaos.
When You Wear Every Hat, Your Budget Has to Work Harder
Freelancing, side hustling, running a small business—whatever you call it, managing self-employment is no joke.
You’re not just the service provider. You’re the marketer, the scheduler, the customer support team, and… the bookkeeper.
And when all your income flows into one bank account, it’s easy to feel like your business is tangled up in your personal life.
- “Was that Canva charge for my client project or my kid’s school newsletter?”
- “Do I report this Amazon purchase as a business expense or not?”
- “How do I even know if I’m making a profit?”
The good news? You don’t need complicated tools or extra subscriptions. With a few smart setups, you can track business income and expenses directly inside your main YNAB budget—or a separate one—while staying organized and audit-ready.
Why You Should Separate Your Bank Accounts (But Not Necessarily Your Budget)
If you’re earning any kind of business income—freelance, consulting, coaching, side hustles—a separate bank account is essential. It doesn’t need to be fancy, but it should be distinct from your personal checking account.
Why?
- It simplifies bookkeeping and taxes
- Keeps your business income and expenses clearly organized
- Helps prevent accidental spending of business funds on personal items
- Makes you look more professional to clients and partners
However, this doesn’t mean you need two YNAB accounts (or subscriptions).
You can still track both business and personal finances in a single YNAB budget, using clearly labeled categories and groups. This gives you a full picture of your cash while maintaining clean separation.
Prefer to keep your business finances totally siloed? That’s fine too. Many business owners choose to create a separate budget (or “spending plan”) within YNAB, especially if the business is large enough to require its own financial system.
The key is to choose the option that helps you stay consistent and confident.
Step 1: Create a Business Category Group
Start by creating a category group called something like “Business Expenses” or “Freelance Work.” Inside that group, add categories for the most common things you’ll need to track, such as:
- Office Supplies
- Subscriptions & Software
- Advertising & Marketing
- Client Gifts
- Equipment & Tools
- Education & Courses
- Taxes (we’ll come back to this one)
Keep it simple. Don’t build 20 categories before you’ve even made $200. Your setup can evolve as your business grows.
Step 2: Track Business Income with Category Context
Let’s say you receive $1,000 from a freelance project. Instead of leaving it in “Ready to Assign,” assign it directly to a category like “Business Revenue.”
You can also create a “Business Income” group and break it down by:
- Client name
- Project type
- Revenue stream (e.g., coaching, products, affiliate income)
This gives you insight into which parts of your business are working—and how much cash is actually supporting your goals.
If you reinvest that money into your business, move it from your income category to the appropriate expense category. If you “pay yourself,” move it to a personal category like Groceries or Spending Money.
Step 3: Use Notes for Tax Tracking
You don’t need accounting software to start prepping for taxes. You just need good habits.
For every expense that might be deductible, add a quick note in the category or transaction description. For example:
- “Zoom subscription for client meetings”
- “Business cards for networking event”
- “Software renewal for project management”
Come tax season, you’ll be able to run a simple report and filter all your business-related categories or keyword tags. No more scrambling through your bank statements.
Step 4: Set Aside Money for Taxes
This is where a lot of freelancers get burned.
Unlike a traditional job, no one’s withholding taxes from your business income. That’s on you.
Use YNAB’s Targets feature to build a “Self-Employment Tax” category and contribute a percentage of every freelance payment (usually 25–30% in the U.S., depending on income and location).
Example:
- You get paid $2,000
- Allocate $500 to your “Taxes” category
- Now you know you’re covered—and won’t be shocked in April
If you’re not sure what your tax rate should be, start with a conservative estimate and adjust quarterly.
Step 5: Use Color or Flags to Visually Separate Items
Even with well-labeled categories, visual cues help.
Try using YNAB’s flags to mark:
- Business transactions (red)
- Reimbursements (blue)
- Shared expenses (yellow)
It’s not a formal part of reporting, but it makes quick reviews much easier.
Step 6: Track Reimbursements and Shared Expenses
What if you pay for something business-related out of your personal funds—or vice versa?
No problem. You can:
- Categorize the expense correctly (business or personal)
- Create a “Pending Reimbursement” category if needed
- Move money between categories when reimbursed
If you share tools or subscriptions between business and personal life (e.g., Adobe Creative Suite), decide on a percentage split and allocate accordingly.
The goal isn’t perfection—it’s clarity.
A Real Client Story: Claire’s Consulting Clutter
Claire was a marketing consultant juggling multiple client contracts while homeschooling her kids. Her bank account was full of mixed charges, and her spreadsheet tracking system was falling apart.
We helped her:
- Build a “Consulting Income” group with client-specific categories
- Set up clear expense categories for travel, software, and supplies
- Create a recurring tax transfer workflow every time she got paid
- Use notes to track tax-deductible purchases and project-specific costs
“Now I can open YNAB and see exactly how much I’ve earned, what’s owed in taxes, and how much is really mine to spend,” she said.
Use YNAB’s Reports to Stay On Track
YNAB’s built-in reporting features—found under the “Reflect” tab—are especially useful for freelancers.
You can use the Spending and Net Worth reports to monitor:
- Total business income over time
- Business-related expenses by category
- Monthly profit margins
- Changes in your cash position
This helps you make informed decisions about raising rates, taking time off, or investing in tools that will actually help.
For more guidance, check out YNAB’s official post on budgeting for freelancers.
About the Author
Trent Ladle is the founder of Master Budget Coaching and a YNAB Certified Coach with degrees in Business Management and an MBA. With nearly 40 years of budgeting experience, he helps clients build values-based spending plans—guided by the belief that when you master your spending, you master your life.
Want to Build a Budget That Works for Your Business?
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