Ok, so I have this bad habit. I’m someone who is really bad about researching something to death before committing to anything. I don’t just drive my wife nuts, I drive myself nuts. I actually have discovered that I think it’s because I’m an enneagram 6, which really does explain a lot about why I am the way I am(if you don’t know your enneagram number, I highly recommend that you find out).
So all of that too say that I’ve tried a bunch of different budgeting methods out there.
I am a huge Dave Ramsey fan and we did do the cash envelopes there for a while when we were first married. Now I will say that doing cash for a while did teach us a lot. I felt like I learned to pay much closer attention to how much something actually costs when I was having the get the cash out. Instead of just glazing oven when you hear you price of something, you actually have to pay attention.
Like many people, we also used Mint for a time. Even though many people like Mint and Personal Capital, I think that both programs miss the boat that you need to really get control of a budget. Those programs are a little better for tracking spending you’ve already done.
Not to mention, you know how everyone always talks about how if you’re a Facebook user, you’re not really the customer? The people who pay for your eyes are the customer?
It’s the same with Mint. It’s a free service that does provide some financial tools, but really, I just don’t like how you’re constantly provided advertisements for financial products.
I also created a detailed spreadsheet that would plan out our spending. Many people that use the spreadsheet method like it, but I think there’s too much to manage, especially, if you’re building it from the ground up. I spent more time managing the spreadsheet than actually using it to track our finances.
Now there are some super cool spreadsheets out there. Tiller is a great program that works with your google sheets account. They’ve done all of the heavy lifting by creating a super advanced spreadsheet that automatically imports your financial transactions.
It was while we were on a spreadsheet for our finances that I discovered YNAB through a Facebook ad in 2013.
YNAB stands for You Need A Budget. It’s an awesome budgeting program and I believe that it’s the best. I’m not an affiliate for them, although I think you can become one…(I should probably look into that)…I am just such a strong believer in the software that they are creating and the positive influence that they are having on people’s finances.
Let me be clear, I think that YNAB is the best budget option out there. Do I think that Every Dollar is terrible? Absolutely not. Do I think it’s as good as YNAB? No, I do not. So, no matter which method you use to track your finances, the same principals are the same, it’s just that I think YNAB is the best way to get it done.
There was a bit of a learning curve but I really liked the program. At the end of the 30 day trial, I didn’t continue to buy the program. I think that it was $60 back then and it was a program you actually downloaded to your computer. I just thought that for the price, I could create the same thing with my spreadsheets.
Spoiler alert: I couldn’t.
It turns out that a year later, I was still remembering how much I had liked that program. So I went back to it, and I’ve never looked back.
I want to take a look at the peculiar way that they handle budgeting your income and that’s taking a look at the To Be Budgeted at the top of the page.
To Be Budgeted
Now what makes this number a little different from other budgeting programs is that your amount in your To Be Budgeted in the amount of money you actually have right now to spend.
Take a look at the green To Be Budgeted at the top of this screenshot.
With other budget programs, it asks you how much you are planning on making this month. With YNAB, it asks you how much you have in your bank right now.
When you’re starting a new budget and input the amount of money you have in your accounts, that money is going to go into the To Be Budgeted and wait for you to assign it to a job.
YNAB on the other hand, just deals with what you have right now.
So, what do those dollars need to do now before you get paid again?
That’s the only question that matters. What do you need that money to do?
Don’t worry, when you get paid again, that money will also go to the To Be Budgeted at the top and you’ll ask yourself the same question. Now what does this money need to do before I am paid again.
Scarcity
This creates scarcity.
You’re only working with the cash you have on hand, so it makes you more careful with how you’re going to spend your dollars.
Do you need to set aside this money to pay some bills that are coming up before your next payday?
Do you need to set aside a little money from this check because your next paycheck won’t be big enough on it’s own to cover rent?
If you know that you only have $50 to spend on food for the next two weeks until you get paid again, it’s going to make you a little more careful. You might feel a little more comfortable if you’re planning on spending $400 this month, even if you don’t actually have that money in your bank account yet.
That’s the real trick. With most budgeting programs you are going to put your expected income for the month and you have this big chunk of imaginary cash that you have to spend.
The problem with that is that you haven’t actually earned it yet. It’s not really sitting in your account, and depending on if you are on a salary or not, you don’t actually have a guarantee that you’ll make that much this month.
This works perfectly for people that are not on a salary. I hear all the time from people about how budgeting doesn’t really work for them because they don’t really know how much they’re going to be paid.
This framework works perfectly for them! They are the people who need to budget more than anyone.
With YNAB, you’re only spending what you’ve actually earned.
You have to make those decisions. You’re only basing your decision on the money that you actually have, which is a great place to be.
That’s why the scarcity that YNAB teaches is so perfect.
Taking Action
So let me really put it to you.
Have you started budgeting yet?
If not, you’ve got to get yourself on a budget. I know there may be some obstacles or some preconceived ideas about why it won’t work, but everyone needs to budget.
So like I said, I’m not an affiliate for YNAB, although I ought to be, but I want you to go sign up for their 30 day free trial at ynab.com. They have some amazing educational resources on getting you set up and started, so I won’t try to reinvent the wheel here, but I’m happy to help if you get stuck.
So, get started. And then I want you to let me know how it’s going. Where are you stuck? Where are you doing great? How can I help?
You’ve got this.
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