I just finished ordering a 3-yr subscription for Kiplinger’s Personal Finance. A lot of people say this is a great magazine for “beginners” in the personal finance arena. Plus, this deal is so unbelievable I just had to pass it on. Thanks to RJB1180 over at the SavingAdvice forums for the tip off! From their post:

Kiplinger’s Personal Finance 3 year subscription 36 issues for $4.91 after $40 coupon! (Reg. $143.64!)
$40 off 3 year subscription Kiplingers Finance Use Coupon DCMPS40D exp 4/9

Here’s the link

We’re talking Three Years for less than $5. My jaw dropped and I grabbed my wallet all in the same motion.

While I haven’t yet addressed the currency issue in some slick way where international users could easily switch the currency format, I have fixed the bug that is was present in 3.0. Basically, the Register data was not being gathered on the Budget sheet. This was because of the date criteria used on the Budget page to pull in that information.

So, the fix:

You can now choose an “International” date option on the Overview sheet. That should solve the problem. I’ve tested this for quite a while, running several different scenarios and it was behaving consistently. Famous last words though!

UPDATE: YNAB 3.1 handles date formats automatically. There’s no longer a need to designate between International and US date formats.

Mary Hunt has popularized a method of budgeting that I absolutely love: Freedom Accounts. Over here in the world of YNAB, we call those things “Rainy Day Funds” – either way you name it, Mary’s advice to set up freedom accounts is spot on.

A freedom account is basically a fund that you build up over time to help you pay for big expected (or unexpected) bills. I suppose the word “freedom” in there is pretty applicable. Most of the time if people don’t plan for these large purchases, they end up taking on credit card debt – which is the antithesis of freedom.

According to Ms. Hunt’s advice, you should set up freedom accounts for things like your car insurance premium, Christmas, birthdays, property taxes, health insurance premiums (especially if you do this privately and not through an employer), vacation, and – I’m not sure she says this – but I’d throw a vehicle in there as well. Yes, you can save and pay for a reliable vehicle with cash.

Bear with me as I throw a bit of the YNAB Personal Budget into the fray here, but it has this “freedom account” idea built right in. For instance, if your car insurance is due every six months, and the bill is $300, you’re going to need to budget $50 into your Car Insurance freedom account. In six months, if you’re true to Mary Hunt’s advice, you’ll see a $300 balance in that account and you’ll be able to write the check with no problem at all. YNAB tracks that accumulation for you with ease.

You can use freedom accounts for just about anything. Remember, I mentioned above that they can be both anticipated (car insurance premium) and unanticipated expenses (a new transmission).

Case in point: my wife and I haven’t needed car repairs for our Chevy Prizm for several months. Well, actually the air conditioner is broken, it’s leaking freon, but it’s been Winter here for the last several months so we haven’t needed to repair it. At any rate, even though we haven’t technically needed to spend anything on repairs for the last long while (knock on wood), we know that it’s going to happen. That’s just a fact of life. As a result of facing the music of reality, we’ve been quietly budgeting some money into the car repairs freedom account each month. It has a nice balance built up now and it should get us through a moderate repair without having to touch our emergency fund.

In applying Mary’s advice, you might be asking yourself what you should be doing with that money while it’s waiting, ready to do something for you. I use the rule of thumb that if the expense is going to happen within eight months, I’m going to leave it in the checking account. If it’s something annual (such as Christmas) you could benefit from getting a competitive interest rate at an online bank such as ING. Actually, the great thing about ING is that they let you open about a bazillion inter-linked accounts with no hassle at all. You can set up separate automatic transfers between them, from your checking, to your checking, etc. The sky’s really the limit there.

Going back to our car insurance example, if you wanted to make a bit (and it would just be a bit) of interest from the money you’re stashing away in your freedom account for car insurance, you could do the following:

• Setup an ING account with the minimum $1 required deposit (the setup is all online, it’s quite slick).
• Setup an automatic withdrawal from your checking, to your ING Car Insurance account, for $50. Make sure it happens monthly.
• Setup another automatic withdrawal from your ING Car Insurance account to your checking account for $300 just before the next bill due date

…and walk away. Now that’s automated baby! Currently, ING doesn’t let you schedule recurring items with less of a frequency than monthly. You would have to go in every six months and set the new date for the withdrawal. Also, you’d need to remember that there is a 2 to 3 business day lag for the money to actually land in your account (they seem to be faster when taking it out…hmm…) – don’t cut things too close with the due date of your bill and the arrival of your money.

This is one way to take Mary Hunt’s advice and put it into action. The freedom account takes the peaks and valleys of your money situation and smooths them into a nice, level, walk in the park. Brainstorm what possible things could represent freedom accounts for your personal finances. You can use YNAB to help you track it with a few minutes each month, and you can use ING to help you carry out your budget automatically.

I just finished counting and there are 60 category slots available in YNAB. The other day I received a request to “beef up” YNAB a bit and give a guy another 25 categories. I set him up and he’s on his way. No offense whatsoever intended, but I’d classify him as a Data Geek. (I’m an accountant…definitely the pot calling the kettle black, eh?)

NOTE: YNAB Pro has no limitation on categories. Data geeks can have a ball…

When creating a personal budget, the obvious question to ask yourself is this: how many categories should I use? Ten? Twenty? Fifty? Eighty-five? The short answer is that I have absolutely no idea. If I remember correctly, when I was developing YNAB 2.0, I stopped adding categories when I grew tired of it. I happened to stop at 57. Well, I stuck it out and added three more to get an even 60 categories.

I’d venture to guess that deciding exactly how much of a geek you want to be is an important step in creating your personal budget. Have a look at these two pictures and decide which one fits you the most:

Ah, okay. I’m kidding. I was just dying to use a stock Microsoft photo. I’ve also never seen “Revenge of the Nerds” and don’t plan on it.

There are two important questions you need to ask yourself when you’re deciding just how granular you’d like to be with your personal budget. Creating only a few categories has its advantages and disadvantages. Creating tons of bugeting categories also carries its share of advantages and disadvantages.

Question One: How will I benefit from having this as a separate category?

Perhaps you’re debating the ever-important question:

Should toothpaste have its own category?

Well, if you want to know how much you spend on toothpaste each month, you should use a separate category. Are you curious to know what type of year 2005 was, in terms of toothpaste? Well then, it’s important you track it! Curious to know if your own “basket of goods” price is rising in terms of inflation? You’ll need to know the trend of toothpaste price increases for the past few years in order to extrapolate…

Question Two: Is the added benefit of this category worth the extra hassle?

If that toothpaste information (and countless other data bits, you geek!) is worth the extra hassle of tracking, well then, you’ve found your answer.

The creation of your personal budget need not take several hours. As a matter of fact, I’ve created default categories for you to get started. Change them, add to them, overwrite them to your heart’s content. Just remember to ask yourself those two questions:

1) How much will I benefit from the added information this category will give me?
2) Does the benefit outweigh the hassle?

Contact me in a decade. We’ll compare toothpaste pricing trends.