This is first and foremost about a completely new way of managing your money.
STOP
- Living paycheck to paycheck
- Going into debt
- Worrying about your money
- Putting off retirement
- Over drafting your accounts
- Arguing with your spouse
START - Paying cash for purchases
- Living on less than you earn
- Getting out of debt
- Investing for retirement
- Making your money work!
- Working with your spouse
You’re welcome to check out the long version of how YNAB came to be, but the short of it was something like this: We were a just married couple, both still in school with no money, no car, and part-time-low-paying jobs.
But we had an idea.
The idea was to budget using Four Rules. The software (either spreadsheet-based, or as a standalone Windows program) is built around these Four Rules.
If you choose to implement, it will change your life…
YNAB is so helpful. Seven months of success in our house with the program. We are successfully living on one income in our house now as a result of YNAB. We are paying down car and student loans at the same time, with a 9 month old baby in tow. We live on a not-for-profit worker salary, too. Pretty cool. Go YNAB. Best impulse buy I ever made. source
The real victory from living on a budget will be the debt we will be able to pay down with the wife’s seasonal income. Looking longer term, we have a plan to have everything but the mortgage paid off by this time next year. Then the snowball used to pay off the debt will be freed up to really start us down the path towards the dream. I feel we’ve come a long way to learning healthier financial behaviors. source
…and it’ll do all of that in less time…
I spend sooo much less time on the budget every month and everything is TOTALLY organized. I used to fear balancing everything under my old method because it took too long so I would inevitably put it off. Now I look forward to entering everything and I do it every 1 to 3 days at the latest and it takes no time at all. source
Anyone who is considering this program, I would strongly suggest giving it a chance. This software is so easy to use, my wife and I spent 20 minutes setting up December’s budget and I spend maybe 5 minutes every couple days updating the receipts and reconciling the checking account. Definitely not a time intense process. source
So let’s talk about these Four Rules.
Stop Living Paycheck to Paycheck
YNAB will require some work on your part–work that will pay big dividends in the future. The methodology and software will help you work toward living on last month’s income. What you earn this month, you’ll spend the next. Most people take between four and six months to save enough money to live on last month’s income. What really matters is that you work toward it (Rules Two, Three and Four will all help you get there).
Why Follow Rule One?
You’ll finally have some breathing room. (Don’t underestimate this)
Pay your bills when they arrive — no more wasting time by timing paychecks with bills!
The “I can’t budget, I’m on a variable income” problem is eliminated.
We’re now living a month ahead, and I’m completely geeking out about it. Yesterday I paid all the bills we’d gotten so far for January. Today I got the water bill, and instead of putting it aside to wait for the next paycheck–I just went ahead and paid it right away. Next to my desk I’ve got a little box with 31 slots, for keeping bills in. That way I know when they’re due, so I can schedule which ones I have to pay now and which ones can wait until the next paycheck. Now NONE of them need to wait until the next paycheck. I’m going to give the box to Goodwill.
source
See Rule One in Action
Give Every Dollar a Job
Each month you’ll sit down (with your spouse if applicable) and allocate the funds you have Available to your spending/saving categories where they are needed. You’ll do this until there are no more available dollars. The process takes twenty minutes and will revolutionize the way you think about your money. Every dollar will be given a JOB (rent, car insurance, savings, caribbean vacation, etc.)
Why Follow Rule Two?
Dollars are like teenagers, unless given some (strict) guidance, they’ll own you.
Your awareness will increase immensely. Your spending will align with your values, and that brings contentment.
Communication between spouses about money improves greatly.
Once I started using YNAB, within 10 days I am very clear about my financial goals. YNAB gives me a very clear picture about my spending and where I can save etc. source
Making more money doesn’t make you smarter or better with money. It doesn’t magically enable you to not need a budget. Though I lived that way for awhile. I could get away with it while single — but as a family man with a mortgage, a new car, a flooded basement, a new dog with surgical needs, etc. Well, that just wasn’t going to cut it. YNAB quickly, and easily, got me living to a managed budget this summer. source
See Rule Two in Action
Prepare for Rain
Everyone has rainy days. The car insurance is due, you need new tires, the tax man cometh… YNAB will help you anticipate those larger, less frequent expenses. Have an insurance premium due in six months for $600? Stick $100 into your Car Insurance category for each of those months and watch the balance grow until the bill is due.
Why Follow Rule Three?
Even out the crazy ups and downs of your financial life.
Gain a true picture of your discretionary income.
Ease the stress of opening the mail. (The money will be sitting there waiting to be used to pay that bill!)
My car insurance bill came today. It comes once every 6 months. I have the money to pay it and it won’t hurt at all.
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