Today we discuss a simple equation to help you balance your on-budget accounts with your budget. It’s a simple formula, but a real life-saver!

If you’re interested in a more in-depth explanation that will be explained much better than I ever could, you should consider taking the free, live special-topics class we have on balancing your budget and accounts. The class schedule can be found here.

Hey everyone,
Whiteboard Wednesday won’t be recorded (and posted) until tomorrow. I’m holding down the fort (barely) while Julie recovers from a bug that’s infiltrated the household. Based on prior experience with three of the four kids, she should be better in about 14 hours.

Hey everyone! In today’s Whiteboard Wednesday we discuss how you can handle paychecks: Net or Gross.

I personally prefer the net method because it means there’s less work. One caveat: if you want to be able to prepare some type of tax report directly from YNAB, you may want to use the gross method. However, that same data that you’re providing can be found on your W2 at year-end…it sounds like a wash.

When I was growing up, all the kids in my neighborhood used to get together during the summer days to play wiffle ball. I admit I was a bit of a tomboyand LOVED playing backyard ball. I have to say, I was pretty much the star hitter. I batted left-handed and could hit that wiffle ball pretty far. As I got older, my eyesight started to get worse. As my eyes got worse, so did my hitting.

I started striking out. A lot.

It was frustrating because I loved playing, but I hated feeling like I couldn’t control my hitting. so I decided to do something about it. The way I saw it, I had another option – I could just learn to bat right handed. So I set my mind to do just that.

But boy it was hard, and I just could not figure out why. Everyone else said it was easy, but it took me a long time to get the hang of it. When you’re 12 and it’s summer and you aren’t playing, life is not good. But I stuck with it, and after hours of practice, and drill and repetition, I did manage to learn to bat right handed.

So why was it so hard? It was hard because it felt so unnatural and it wasn’t what I was used to. In reality the hard part was learning NOT to bat left-handed. Just as much as I was learning a new thing, I had to let go of another thing that I was far more comfortable with. Plus, I had to do all this in the middle of the season. It’s not like there is off-season training in Maine for 12-year-old wiffle ball players.

Sound familiar? After working with YNABers through private coaching and webinars for over a year now, I’m convinced that there are two main reasons why people have a hard time getting started with YNAB.

1. Learning YNAB isn’t necessarily hard, but UN-learning the way you were managing your money is.

Think about it. About the time you come to YNAB you’ve probably been handling your money one way for a long time – maybe decades. That’s a fairly strong habit to break. I’ve heard it said it takes 21 days to create a new habit. When you are feeling frustrated that’s a long time.

2. When people come to YNAB, things are not going well financially.

Let’s be honest, no one looks for a budgeting or financial solution if your money situation is going great. Often folks are in crisis, stuck in overdraft, mired in credit card debt, in danger of losing their homes. It’s difficult to learn a new skill in the middle of all of that.

It’s like learning to swim while you are drowning. Can you imagine how hard that would be? Of course, if you’re drowning, it’s imperative that you keep kicking so your head stays above water.

But honestly, if you had to learn to swim while you were drowning, you’d take all the help you could get. If someone threw you a life preserver, you’d grab for it wouldn’t you? I’m sure I would have learned how to bat right-handed much sooner if I’d had help or instruction.

So to those of you who may be new to YNAB, don’t be afraid to reach for a life preserver. We have many free resources available to you. There’s no question it’s hard to learn this when things aren’t going well financially, but we at YNAB are glad to help.

Batting right-handed did increase my batting average and learning to manage your money with YNAB will definitely increase your bank account balance.

Keep swinging!

Erin
YNAB Coach

March’s Success Story focuses on Tracy Alt from southeastern Michigan. Tracy’s success demonstrates that YNAB can have an immediate effect on your day to day spending.

Tracy just started using YNAB in February of this year. Her first success was at the grocery store. Using YNAB Tracy was making her spending decisions by the budget, instead of the account balance. She determined how much she was going to spend on groceries – and that was it!

“Before starting YNAB I would “tell myself” that I had a $100 budget, but I was really lying to myself because I knew darn well that I was going to buy everything in my cart even if I went over-budget.

I felt so proud of myself handing those items back to the store clerk and really, truly and honestly sticking to my grocery budget.”

Tracy explained to me that before YNAB she kept a chart of monthly bills.Until recently, her chart only included the bills that she paid regularly, every single month, such as the mortgage, car payments, utility bills, etc. As she paid each bill she would check it off on her chart so she could see which bills she had already paid and which were left to be paid.

Tracy went on to say, “Spending decisions were made based on comparing the bank balance to what bills were left for the month. If I felt confident that there would be extra money, we would spend. If not, we would not spend. We had absolutely no system in place to account for “lumpy” expenses such as hair cuts, dog food, car repairs, etc. We just sort-of winged it with these expenses.”

Now that she is using YNAB, things are much easier to manage.

“In just one short month of using it, YNAB has completely changed our financial outlook. There is no more guess work. Either the money is budgeted for a particular expense or it is not and we can spend accordingly. There shouldn’t be any more surprises now that we are budgeting for the “lumpy” expenses. The next time my husband wants to do an oil change on one of our vehicles, I know the money will be there, allocated specifically for that purpose.

The monthly bills are still taken care of and the non-monthly bills are being planned for by budgeting money to those categories each month. I can’t wait for fall, when I normally start worrying about how we will pay for Christmas. It’s only February and I already know how we will be paying for Christmas this year….with money that is already in our bank account waiting to be spent for that purpose.”

So if you find yourself frustrated because you don’t have a buffer in place yet, or you are still working on your credit card debt – remember – budgeting can have an immediate affect on your short term spending, helping you to reach those long term goals.

~Erin – YNAB Coach

Today we talk about handling reimbursements gracefully–from both the Register and Budget side of things. Also, I am now using a sweet lavaliere, so audio is much improved!

Enroll by filling out the form below. It’ll be free. And fun. (If you’ve already filled the form out, you’re enrolled and will be notified on Tuesday of course availability!)

• Begins Tuesday, March 2nd.
• All on demand. No scheduling necessary.

I shot this one on the same day that I shot the original Whiteboard Wednesday, so all the progress I made with lighting, markers, and the camera..aren’t here.

But the message still gets across!

I didn’t have time to shoot a new one today because of all the stuff I’m doing for the upcoming tax course (enrollment ends Friday at midnight — it’s free).

What we cover:

- A too-common situation between spouses where, even with good intent, things go awry
- How the budget comes to the rescue

This is a particularly good video to share if you know someone that has maybe run into these issues! (Sharing with high doses of tact — obviously).

I’ve been combing through the survey responses given by attendees to the upcoming tax course (enrollment ends this Friday at midnight — the course is entirely free). The course begins in exactly one week and it’s going to be fantastic! Educational, to say the least.

On the survey, one of the questions I asked was whether the respondent uses a tax preparer (human, not software) and if they don’t, their reasoning. I want to discuss the main reasons why a human preparer isn’t used. Some of the responses scared me a bit. Others made sense. :)

(Before I dive into this, let me be clear that I am not directly trying to make the case that everyone should use a tax preparer — hardly. I am trying to make the case that everyone needs to be much better informed about the black box we call the tax code.)

I’m worried about the cost. It’s expensive. Benefit doesn’t outweigh the cost.

The first two sentences there don’t make sense. To be worried about the cost isn’t a real reason. I’d have to ask why they’re worrying. My guess is that it’s because they feel it’s too expensive, or that it’s not worth the potential savings.

To “it’s expensive”–that needs to be qualified. Do we say something is expensive based on some fixed number in our head? Is a car expensive, but a tricycle inexpensive? Or do you need to evaluate “expensive” as it compares to the value of what you’re getting? That’s why I like that third related reason, where the respondent is weighing the cost and benefit of a tax preparer and making a decision.

Be careful about this. My hope is that the course will help people see that they would be benefited by help, or that they clearly wouldn’t be. But either way we’ll be making an informed decision and that’s what matters.

My situation is simple (straightforward, easy, etc.)

Simple because you understand it and have managed to file your taxes without ever being audited? How do you know you aren’t leaving money on the table? How do you define simple? Is your understanding of The Code great enough that you’re confident in saying you have a simple situation?

This is a tough one. How do you know what you don’t know? Scary! I imagine there’s someone out there operating a sole-proprietorship where they’re leaving thousands of dollars in tax savings on the table because they’ve had a “simple” situation for 10 years and nothing’s changed.

Again, my hope is that the course will help you understand “simple” a bit better, and motivate you to educate yourself more re: The Code.

I don’t trust my finances to someone else. I like the control.

It may just be a control thing — that’s fine. But the same person that doesn’t trust their finances to a tax preparer will trust their finances to a software package? I see a huge disconnect here. If you have privacy concerns, that’s a different story, but just know that the software was written by “preparers” in a sense.

What’s scarier about this isn’t the software side of the equation. It’s the you side of the equation. I would imagine that the odds of you making an error are much higher! Do you know the implication to your answering question 13c that way?

I tried an advisor and felt like they were simply doing data entry on my behalf.

People that have had this experience definitely need to find a new advisor! I had that same experience for two years and you’re right — it’s awful. You’re paying them to do nothing more than you could do yourself–except you’d be faster at it because you’d know all the answers to the questions.

I’d encourage you to hunt for a new advisor if you feel that the only thing they’re doing is simply plugging and chugging numbers. Your advisor should be informing you frequently about possible tax strategies you can employ that will save you money. If your advisor is in touch multiple times outside of the tax season then you’ve probably found yourself a gem.

I shouldn’t need an advisor. The tax code should be rewritten.

The tax code is absolutely crazy in its complexity. It truly is mind-boggling. But this answer just doesn’t cut it! This upcoming tax course will have nothing to do with policies or politics and everything to do with the situation we’re currently in, and what we can do to keep more of our hard-earned dollars in our own pockets.

You may hold a very strong belief that the tax code needs a rewrite, but that doesn’t change the fact that today, you’re being taxed under that code. You should be aware enough to minimize your taxes, and then continue your fight for tax reform as needed.

I don’t have anyone to prepare my taxes that I trust.

This one’s huge. At YNAB we’ve had the hardest time finding good developers that 1) share our vision and 2) can code to our standard. It’s a time-consuming process to find the “right fit” — trust your gut on this one. If you have any doubts about a preparer that you’re interviewing, walk out! (And yes, you interview them).

These are just a few of the reasons people aren’t looking to a preparer. Some of them are quite valid. Participating in next week’s tax course will certainly arm you with the knowledge you’ll need to knowingly decide if the benefit of a tax preparer will be worth the cost.

To those reading this that haven’t yet signed up for the free tax course, you can do that below. The course starts next Tuesday and will run through the week. It’ll be… easily digestable to fit any schedule :) Signup closes Friday at midnight.

Get ready to gain new tax insights beginning next Tuesday :)

Update 2/24/10: You can see my comment below, but based on some feedback I received, my apologies if I came across as condescending or belittling in this post. That was NOT my intention.

Here it is in a nutshell. I just want you to make an informed decision about how you handle your taxes. Remember, it’s likely your single largest expense (if you’re on a wage, it’s 7.65% from every paycheck, forever), so it deserves some attention! If you gather information, educate yourself, and feel comfortable using tax preparation software (personal preference, knowledge of your own situation, etc.) that that is the correct choice. On the flip side: if you gather information and, through learning more, decide you should be going about it a different way, that’s the correct choice.

There are certainly cases where you don’t need a tax preparer. After reading this over again, it sounds like I’m saying that a preparer is the only way to go. Not hardly! I just don’t want people blindly going one direction without having their eyes wide open. Hopefully that makes more sense.

About the Course
This will be on demand. I’ll be presenting a video each day for five days beginning next Tuesday. It will be mainly video and just a little bit of text. My goal is to keep each video to less than ten minutes. Also, my goal is to have these tax videos be not boring :)

The course will be high level. As I looked at the survey responses it was very apparent that we can’t drill down to specific situations because so many people have so many different situations. It just isn’t feasible. At this high level though, my goal is to have you understand the framework and then make decisions from within that framework. I’m hoping you’ll learn some principles that will help you make decisions in a more informed way.

And of course I hope you love the course and that it meets your expectations. I think most everyone will walk away learning something that will help them have their eyes more wide open concerning taxation.

Today’s Whiteboard Wednesday is an extension from another we did a few weeks ago on Simplicity.

I go over the usefulness of dashboards, and the danger in making them completely useless by providing yourself with information that 1) doesn’t change often and 2) isn’t relevant to any decision you’re currently making. (And the beanie’s back).

Please help us spread the word by sharing the video via the links below!