You read that correctly. In order to use YNAB (and to be in compliance with Rule #1 of YNAB), you will need to save one month’s expenses. The typical response?

How the heck can I do that? I can barely make ends meet as it is!

It may seem that way to start, but I’m going to provide you with a few money saving ideas (also, some money earning ideas) that will get you to your one month’s expenses in no time.

Easy Money Saving Ideas - Implementation however…
Alright, let’s get one thing right out in the open: this is not going to be easy. You’re going to really have to get radical in order to pull this off effectively. You cannot expect to reach a whole month’s worth of expenses (your #1 Fund I like to call it) by just haphazardly putting money away now and again. No way - no how. You need to get INTENSE in your desire to stop living paycheck to paycheck and reach deep down inside your soul for some major resolve.

You’re about to do what 70% of Americans cannot manage to do. Live below their means, save for a rainy day, and get out of the paycheck to paycheck cycle.

I’m providing these money saving ideas for you to implement not mull over! You must ACT on these ideas! ACT!

A List of Ideas to Save (or Earn) Money
1. Work overtime. If your job allows it, put in as many hours as you possibly can until you get your #1 fund. Remember, this is a temporary fix for a long-lasting solution (no longer living paycheck to paycheck). You may see a bit less of your family for a short time - but that’s okay. What you’re doing for your family in terms of getting your finances in order has a much more profound and far-reaching impact.
2. Get a part-time job. You can make a thousand bucks a month delivering pizzas. Do that for three or four months and you’ll have your #1 fund. Be diligent and have a smile on your face (more tips)! Check out possible temp jobs, graveyard shifts, UPS, etc.
3. Start a small business. Some people laugh when I share this idea with them. I don’t say it to be funny. I have a cousin that built up a lawn care business in one summer. It’s been a couple of years since he’s put anything into it, and it still makes him money every month. Imagine what it could be doing if he was actively going after it? If you mow 8 lawns for 8 weekends at $20 a pop you’ll have a nice stash. Don’t forget car washing, window washing, dog walking, etc.
4. Have a garage sale. That’s right - get rid of the junk you don’t need but think you might. Sell everything you forgot you had. People sometimes make enough from their garage sale to save some major money toward their #1 fund. Typically you make between $500 and $800.
5. Ebay. Like a garage sale, but with a wider audience. If you don’t know how to ebay, ask the person next to you. They’ll most likely know how and will be able to help you.
6. Car pool. Gas prices are high right now. Sure it might be a bit inconvenient, but imagine if you could cut your gas bill in half!?
7. Brown bag it. Don’t eat out - at all. Remember, a short-term solution for long-lasting blessings. Sacrifice. (You’ll probably trim down a bit too - I know I tend to trim up if I eat out a lot).
8. Cash in vacation. Sacrifice a few vacation days for your peace of mind. Many employers will allow you to ‘cash out’ of vacation. It’s a great way to get some cash.
9. Save all windfalls. You do get windfalls. They happen. Stash ‘em.
10. Stop contributing to your retirement. Here’s where I usually get a bit of backlash from people. You are talking to a guy that knows the value of an invested dollar. Trust me. But remember, these money saving ideas are not long-lasting, permanent changes you make to your finances. They are short-term ‘bursts’ of financial feistiness that will get you to your #1 fund that much faster. Once your fund is in place, you can immediately begin contributing toward retirement. Email me if you have a question about this.
11. Cut your phone bill. Consider cutting your phone down to the very basics. Do you have a cellphone where you could get out of the contract inexpensively? Remember, short-term solution for long-lasting peace.
12. Dont’ buy bottled water. Seriously.
13. Don’t go to the mall. Seriously.
14. Cancel cable, satellite, etc. Seriously.

These money saving ideas will get you toward your #1 fund faster than you can truly appreciate until you have actually lived this.

BE INTENSE

TAKE ACTION!

The other day I received an email from a guy that was looking for some help with his budget. What he really wanted was to run his family like a business.

While I think it’s a great idea to have the mindset that your family does operate with a bottom-line (that can’t or shouldn’t be masked by credit cards and borrowing beyond your means), you also need to remember that creating a home budget needs to be simple - and stay simple.

This guy wanted to know if the personal budget that I sell would allow him to do accruals. Heavens no! An accrual is basically where you might pay for an expense (such as car insurance) every six months, let’s say it’s $300. But you know that the expense really applies to the next six months. So you would spread that $300 over the six months - recognizing the expense on a month-by-month basis.

Sound confusing? It’s really not too bad. Businesses do it all the time because it gives a more realistic picture to their net income. (Imagine if a company had a big expense relating to the prior year that happened just after the new fiscal year started. It would understate that prior year’s expenses.

As a family, if your home is being foreclosed on, does the lender care that your net income looks good if you don’t have any cash to make the mortgage payment? Of course not. Families need to operate on a cash basis. Cash is, really, all that mattersi in the end (financially speaking of course).

Your First Step in Creating a Home Budget
Write down everything you spend for one month. This will give you a realistic idea of how much you will need to be budgeting into different categories. It’s crucial that you write down every penny you spend too. I’ve talked a lot about the power of writing things down when you first begin the process of creating a home budget.

Some people get after me on this and say they want to begin budgeting right now. Well, you are. Recording your expenses is at least half of your budget. The other half is planning what those expenses will be.

Actual Creating Begins Here
Once you’ve written down your expenses for one month, you’ll have a pretty good idea of where you spend money. So, write down every single fixed expense you have (these don’t have to be monthly). A fixed expense would be rent, car insurance, subscriptions, property taxes, internet, phone etc. Break those all down so they are monthly fixed expenses. So if you paid your car insurance premium every six months, you’d divide the premium by six to get your monthly car insurance expense (this is kind of like the accruals we talked about above, you’re just doing this to stock up cash, not recognizing the expense over the period in which it was used…).

Now that you have your fixed expenses, brainstorm all of your variable expenses. These might be electricity, gasoline, groceries, toiletries, gifts, entertainment, restaurant, etc.

Add both your monthly fixed and variable expenses together. That’s where your money is going. You’ve used what you’ve written down to help you be realistic about what these expenses really are.

Allocating the Budget
Now, if you have a spouse, sit down with them. If you don’t, sit down with yourself. Turn off the TV, radio, etc. This is time to focus. Decide on paper how much you want to spend this month in each spending category. Some categories will be easy (Rent), others will be tough (groceries). Take a look at what you wrote down and be realistic.

When you first create a home budget you’re kind of stepping into the darkness a little bit. That’s okay. Just don’t expect to be able to predict every expense the first, second, third, or even fourth month. If you’re abiding by Rule #4 of YNAB then you just roll with the punches when it comes to accidentally overspending. Resolve to do a little bit better each month.

Sticking with Your Home Budget
Stick with your budget. Don’t give up. Don’t throw in the towel. The budget is the most powerful tool you have to manage your money and make it do what you want it to do, instead of the other way around. Continue recording every purchase you make. Your spending will drop from that alone. Work together as a team if you’re married. Encourage each other to stay on the budget. Do not be domineering or coersive when creating your home budget together. Be honest and openly communicate your needs and wants. Be accomodating and sympathize with your spouse. Do not give up! I promise you after three months of active budgeting (1-2 hours per month) you will (seem to) have more money. Each dollar will work harder and longer. And you will finally gain some financial ground.

I’ve written about the value of a form for your home budget several times. I’ve also written about the value that is derived from writing down your home budget. I want to bring these two principles together:

1. Your home budget form need not be complex.
2. You must write your budget down.

I do a lot of research on the internet regarding budgeting. I try and see what people are really looking for to manage their money. This helps me market my product better, and helps me get to know my audience (I’ll take a small bow for any copywriters reading this…thank you).

What I’ve noticed over the years is the constant searching for some type of form for your home budget. People are looking for something they can use to get their finances in order. And where do finances feel the pinch the most? In your home.

But something is missing: ACTION!

What makes one form better than another? Will one method somehow spring your budgeting into action, while the other will do nothing at all? Of course not.

The form is not important. It’s your use of the form that is key.

Allow me to share my personal experience with this several years ago. While I was in high school (yes, high school) I thought it would be smart (and I was curious) to track my spending. I wanted to know exactly what I was spending all of my money on. Did I look around the internet for several hours trying to find the perfect solution? No. I took action. And created this:

Download this form

If you’ve taken the moment necessary to download the .pdf of this, you might be laughing. To quote Han Solo in Star Wars, “Laugh it up.” Because this form cut my expenses in half baby! Now I’m laughing all the way to the bank (I won’t mention the fact that I was working for $5.50 an hour at the time - they were small deposits at said bank).

Let’s go through the bitter simplicity of this home budget form. I stuck it in a binder for starters. The binder sat inside my desk drawer. At night, when I was getting ready for bed I would think to myself, “Did I spend any money today?” This usually involved digging around in my pockets for any receipts. If the answer was affirmative I would pull out the binder, open it up, and record something like this:

If the answer was negative, I would go brush my teeth.

My point of all this is to illustrate that you do not need some fancy-dancy form to get your budget under way! A piece of paper and a pencil will suffice. Heck, I didn’t even put the numbers in a spreadsheet. When the paper was filled, I would manually total it up, print out a fresh copy, and put it on top in the binder.

Now, I mentioned writing down your budget. This form does not actually allow you to do that. What it does do is put a major emphasis on your spending. My spending went from $440 every six weeks, to $215 every eight weeks. And the beauty of it all? I didn’t even feel I was depriving myself of anything. Why? Because the things I cut out were not giving me real value anyway. They were impulses.

Keep that in mind. The most powerful tip I can give you on how to manage your money is to write it down.

Now, we’ve all gotten a bit more sophisticated since I was in high school. And everyone’s a bit (lot) more in debt too. The same rules still apply. Use something simple that will get you in the habit of writing down your purchases, saving your money, and getting out of the paycheck to paycheck trap.

Regardless of what you use, begin writing down every penny you spend today!

TAKE ACTION!

I recognize that this can be a very, very emotionally-charged issue at times. My writing style is direct (read: blunt). I will be blunt here. But I want all readers to know this:

If you are having financial difficulty, and are possibly contemplating personal bankruptcy, that does not mean in any way you are a bad person. It happens to the very finest of people. It is not a reflection of your character. You are still of immeasurable worth.

I’ve outlined below 7 ways to avoid personal bankruptcy. These are most likely the same suggestions I would give anyone having financial difficulties. If you are considering filing for personal bankruptcy then you certainly should read on. It just may be that you can avoid filing bankruptcy all together.

Get on a Written Budget
One way to avoid personal bankruptcy is to immediately get on a written budget. You will need to get absolutely intense about your money. Money that is told what to do prior to it landing in your wallet will work harder, last longer, and keep your finances stronger than any other financial move you can make.

The simplest budget may work best for you: pencil & paper. Others enjoy the use of excel spreadsheets or fancy software packages. The key is not in what you use, but that you use it. You can take a look at this article on setting up a personal budget. We won’t go into the details here.

Just know that the #1 way you can avoid personal bankruptcy is to get on a written budget.

Sell, Sell, Sell Your Ball and Chain
What is causing this extreme financial pressure? Have you purchased too much home? Is your house payment representing 40% of your take-home pay (that’s too much)? Do you owe money on any vehicles? Many times personal bankruptcy can be avoided by people just taking a good, hard look at what they owe and why they owe it. While it’s true that most bankruptcies have been caused by health-related costs, we still need to analyze why a medical bill caused the ultimate pressure that led someone to want or need to file personal bankruptcy.

Not only do you need to assess what types of ball-and-chains you have lying around, you also need to see what type of junk you can sell quickly to cover any month-to-month cash shortages you may be experiencing. Do you have a ton of books or CDs that you could sell? Any hobby items you no longer use or need? Freeing up this cash can go a long way in giving you a clear head about your finances. It will give you breathing room - which will allow you to think clearer about other ways to avoid personal bankruptcy.

Cut Up Your Credit Cards
In no way - under any circumstances - should you be using a credit card. Destroy them. Cut them up. Even the one for “emergencies”. We’re talking about ways to avoid personal bankruptcy, not walk right into it.

But Jesse, I don’t have the cash right now to be able to handle any emergencies. And life is surely going to happen! I’ll just use it for emergencies.

That may be true. You might just use it for emergencies. But I guarantee that your definition of an emergency will become much stricter if you don’t have the ability to charge anything in the first place. All of a sudden having the air conditioner going out in the car isn’t an emergency. Why? Because you can’t afford (right now) to repair it.

Please don’t fall for that line of thinking. Until your finances are completely under control, you shouldn’t be using credit cards.

Negotiate or Surf to Lower Interest Rates
That’s right. After telling you to cut up your credit cards, I’m now telling you to surf high-interest-rate balances to new cards. But that doesn’t mean you actually keep the card - it’s cut up. You do want to take advantage of any low-interest offers you receive (take a look at the 50 you get each week for starters).

Your object in doing this is to create some short-term positive cash flow. Getting down to a lower interest-rate will bring you that much closer to avoiding personal bankruptcy. True, you won’t be getting out of debt any faster, but you will be freeing up some cash you might need to get by month to month. Not only will the extra cash help out there, but you’ll feel better, a little calmer, knowing you’ve got a bit of wriggle room.

Increase Your Income
While this might seem a bit obvious, it’s overlooked very often. You shouldn’t just look at cutting expenses. What can you do to increase the other end of the equation? The income side? Can you work overtime, get a second job delivering pizzas? Work for UPS? Can you mow lawns, trim hedges, paint houses, wash windows, flip burgers, etc.? A part-time job that brings in just $500 extra per month will do wonders for your monthly budget.

This is not a time to be prideful. You need money. You’ll need to work for it. You might even need to do less-than-glamorous things (I listed some above), but you’re doing this for a short amount of time so you can avoid a long-lasting curse: personal bankruptcy. Avoiding this financial pitfall by gutting it out for the short-term will bring you long-term benefit.

Avoid CONsolidation
Nine times out of ten this leads you to personal bankprutcy - it doesn’t help you avoid it. Do not fall prey to predatory companies that hunt the weak, desperate, and vulnerable for customers. CONsolidation will free up your monthly cash flow (which is a good thing) but it does this by extending the length of time you will be in debt (this is not a good thing) and hurts your credit badly (this is also not a good thing). Please, avoid the illusion of debt consolidation. Focus on increasing your income, cutting your expenses, lowering your rates, selling your junk, getting rid of any ball-and-chains (new car?) and getting on a written budget.

Maintain Your Perspecive
Times are most likely very emotional for you right now. Your marriage is probably stressed to the max, and you think about your money problems constantly. This is not a time to jump into any crazy ideas. You need to gain the advantage of many minds and consult with trusted friends and family. Consult before you decide to make any financial moves. Above all, remember that your worth is not tied to your net worth. You are not a bad person for being in this situation. While I do not completely write-off your contribution to this predicament (we’d have to talk one-on-one for that) I do recognize that life happens - sometimes in a very harsh way.

I admire your desire to look for ways to avoid personal bankpruptcy, instead of just filing and not taking responsibilty for your financial life. If you need free personal counseling or advice, please don’t hesitate to contact me directly.

Recently I gained an insight into the affluent lifestyle. Having had a baby recently, we’re still on the prowl for a rocker. I guess some people call them gliders. We want to go all out and get one that swivels, reclines, and - of course - glides. With the car having 3,420 miles since its last oil change, and the fact that it was a nice Saturday morning, I set out to buy myself some oil, ramps, and an oil pan. The ramps were $19.99, the oil pan $3.50. The filter cost $3.50 and six quarts of oil about $8. To get the oil changed at Jiffy Lube it would cost me $27. So the ramps and oil pan are a one time purchase - from here on out I save myself about $15 every 3,000 miles. I don’t make enough per hour to justify not doing the oil change myself.

At any rate, on my way home I saw a few garage sale signs, so I took a detour to one in particular in hopes of striking gold and getting my wife a rocker/glider.

It was typical garage sale stuff: dusty, stained, a few nice things here and there, and a couch that looked almost as worn as ours. There was a lady there, browsing around. Lots of people were there still setting up the displays, so it was just she and I, parousing the merchandise. She picked up old clothes, looked them over, folded them back up nicely and laid them down again. I wouldn’t have noticed her except for the fact that she didn’t look like your typical garage sale lady. Allow me to elaborate:

I was wearing my oldest pair of jeans (at least 6 years old), a shirt I won when I was 15 at an ice skating arena, a Hard Rock Cafe baseball cap, and shoes that squeak when I walk. I fit the garage sale mold. This lady, on the other hand, looked nice. Her hair was done, she had on nice-looking clothes, and looked very well kempt. She looked as if she might live the affluent lifestyle. Yet she was at a garage sale. I didn’t find what I wanted, so I headed back to the car. As I pulled away she also got into her car - a Lexus.

My suspicions were confirmed. She was affluent, well-to-do. Now, just because someone appears to be living the affluent lifestyle doesn’t mean they’re necessary affluent. For all I know Joe BigCar is up to his eyeballs in debt and is one paycheck away from bankruptcy. I feel confident, however, that she is indeed affluent. Why? Because she shops at garage sales. She recognizes the value of a dollar. She is frugal. And a Mentality of Frugality leads to financial security. I’d be willing to bet that her very nice Lexus was purchased slightly used and with cash. Welcome to the true lifestyle of the affluent. Not quite as glamorous as you thought eh?

One more thing. I love garage sales for two reasons. (1) I find bargains. (2) I practice my negotiating skills. When you’re haggling over an old sewing table (yes - I did) with an asking price of $5. It’s just great practice to go up to the guy and offer $2. (I got it for $2). So the next time I go to buy a car, I won’t be without practice when I have to go head to head against somebody who’s negotiated hundreds of times. Sure $3 at a garage sale is nothing. But $3,000 off a slightly used car? Now that’s something.

The “well-to-do” recognize that garage sales are not just gathering places for junk. They’re negotiation training grounds. Hone your skills there - then save big when you’re up to bat against the big dogs.

Most marriage and money problems pop up in almost every marriage - with both newlyweds and veterans - especially when you’re newlyweds though. Money gets complicated when you’re married because you might have a hard time adjusting to the “hers is mine and mine is hers” mentality that is required for a marrige to function financially. When you marry, you are pronounced one - and that includes your checking accounts.

Root Cause of the Marriage and Money Problem
Communication. Spouses need to communicate a few things about money. And when you talk about this you need to be open and honest:

1. Goals: What do you want to do with your money?
2. Limits: What is a reasonable amount to spend without needing to discuss it previously with your spouse?
3. Budget: How much will you spend on various expenses?

Goals with Your Marriage and Money
Problems ensue when both spouses (whether they’re both income earners) are not on the same page regarding goals. When you set and strive for goals together it will bring you closer as a couple. It is important that the goals are mutually agreed to. If the husband’s goal is to build a shop out in the backyard before he is 50, and the wife’s goal is to redecorate the house, perhaps both goals should be worked toward. Either way, the goals need to be agreed to, written down, and reviewed on a regular basis.

It can be frustrating for the income earner to feel the money is just slipping through their fingers - or feel they are working “just to get by.” It can also be frustrating for the non-income earner to feel they won’t ever have a chance at their goal because they didn’t “earn” the money. (This line of thought is prevalent and completely wrong. Where there is a stay-at-home Mom - or Dad - there is a definite and very real economic value that is being provided by the spouse. That needs to be recognized and appreciated.)

Marriage and money problems abound when one spouse feels they “do all the work” because they’ll also feel that their goals then supercede the other spouse’s. Both spouses need to appreciate the work of the other, and give room for each other’s desires in the financial picture.

Spending limits stop marriage and money problems before they start
You might be required to negotiate reasonable limits and/or goals. If the husband wants the spending limit at $10 (control freak) and the wife wants it at $100 (spend-a-holic), you’re going to need to reach a compromise. The husband cannot simply impose his will on the wife to have it at $10, and the wife can’t expect the husband to be comfortable with her proposed spending limits.

The couple needs to talk through what they want, why they want it, and then listen and compromise to reach an agreement that both are comfortable with.

Remember, the spending limit is the limit above which point a discussion must occur if a purchase is to take place. The limit tends to rise as the couple’s income rises.

The Great Peacebringer: Budgets solve money problems in marriage
A budget is really the culmination of all three points of discussion with a couple’s money. The budget is a mini set of goals for the month. Each month the couple should sit down and assess what they have available to budget for the month (if they’re following Rule #1 they’ll be doing just that).

As the couple moves down the categories, they need to assess and realistically project what they will be needing for the month. You’ll have problems with the money side of your marriage if just one spouse budgets. Why? Because they’ll expect the other spouse to go along with it - and the other spouse certainly won’t.

There is usually one spouse in the family that is a bit more detail-oriented. They might spend more time working with the budget, and that’s okay. The important part is that both spouses sit down and hold a conference of sorts - a board meeting - and discuss where the money will be going for that month. It is critical that each spouse is completely on board with the entire budget. You can’t cut corners and you can’t be domineering. You need to give a little, negotiate, listen, compromise, and express your true concerns and wishes about your money. You’ll find these monthly sessions to be therapeutic to your marriage and money problems.

Root Cause of Marriage and Money Problems: Selfishness
If you are selfish with money when it comes to communicating and sharing with your spouse then you have major, major issues. I might as well paint with a broad brush: If you are selfish in any aspect of your marriage, you have major, major issues. Consider the golden rule: Treat Your Spouse as You Would Like to be Treated. Concede where necessary, and pick your battles. Remember, you are not a joint venture - you are ONE.

Your marriage and money problems will melt away if you implement these few basic principles: (1) Set and strive for common financial goals, (2) Set a spending limit that necessitates a discussion prior to purchase, and (3) Budget together on a monthly basis. And one final thing: make sure each spouse has a bit of spending money for which they do not have to be accountable to the other spouse. It does wonders for money stress and strains.