Yearly Archives: 2010

Spending Awareness – A New Year's Gift

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We get a lot of questions in webinars and one on one coaching sessions about how to know how much to budget for categories, particularly from folks who are just starting out. And it’s a legitimate question – if you’ve never budgeted before or even tracked your expenses, it’s difficult to know how much you spend each month on something like gas, groceries, or entertainment. Then there are those really tricky categories like gifts – I know I certainly had no real idea what we were spending on gifts before I became a budgeter.

So when we’re first budgeting, it’s okay that there’s a fair amount of guesswork in there. Thankfully, the YNAB Rules help us deal with that by making sure we’re at least giving every dollar a job (Rule One) to start with and that we’re rolling with the punches (Rule Three in action) when our estimates aren’t quite right.

For those of us who have been using YNAB for some time, the new year also brings a special little bonus to help our financial awareness grow – in the form of YNAB’s Reports function. If you’ve been using YNAB since last January, you’ve now got a very handy twelve-month average for all your spending categories.

Just click on over to that Reports Tab and make sure you’ve selected “SPENDING” in the top left corner of the window

and “TRENDS” on the right.

Once you’re there, make sure the slider at the bottom of the screen runs all the way from January of 2010 to December of 2010 (don’t select January of 2011, or you’ll have two Januaries, one without much spending in yet, going into your average).

Now in the top section of this beautiful report, push the scroll bar all the way to the right. You’ll see the months of the year go by at the top, and then just at the end, find your gold-mine of spending awareness:

Scroll down that “AVERAGE” column and you’ll find your average outflows (or inflows) for each category in your budget. You’ll not only build your awareness of how you spent (or saved!) in 2010, you’ll also find a powerful tool for working with Rule Two – Save for a Rainy Day – in 2011. Armed with information about how much you spent on average per month in each category in 2010, you can feel all the more confident about assigning those Rainy Day Funds in 2011.

Turns out that monthly average for gifts was $47? Go ahead and plug it in in January, even if there’s not a birthday or holiday in sight. Your average monthly cost for that golfing habit was $160? Go ahead and start building those funds, even if you won’t play again until May. Spent an average of $390 at the grocery store each month? Well, that makes it a pretty good place to start in the new year, or gives you a target not to top if you’re looking to cut back. Each category from 2010 provides a great place to start as you move into 2011.

[TIP: One of the other things we often tell people in coaching sessions is that it’s okay to start over with a new budget. One of the reasons people find themselves hesitant to do so is they don’t want to lose old data, data just like what I’ve been describing. I want to be clear that, in this case, you can have your cake and eat it too! I’ve actually been thinking of starting a new file myself for the new year - but if I do, I’ll still have this old one, and all the information I need should I want to go back and look.]

Don’t have twelve months worth of data in YNAB? That’s okay. Really cool reports aside, each and every time you work in YNAB, you build a bit more awareness. If you’ve got two months or five, that’s likely more information about spending than you ever dreamed of before YNAB helped you uncover it – use whatever you’ve got to help you peer forward into the next month, and begin 2011 feeling confident!

Heading into 2011 CONFIDENT About Money

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We received this email from Elizabeth and it was too great not to share!

YNAB has totally changed my life! Budgeting and money management used to reduce me to tears and cause me and my husband to argue. Not any more! We’ve been able to build up a healthy buffer and pay down some debts as well as start to plan for larger expenditures like a new mattress and new computers. Going into the new year I feel confident about money in a way I never have before in my LIFE. Thank you, thank you, thank you! Best wishes for 2011, and keep doing what you all do so very well.

Help Us Tell the Real YNAB Story

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I know you guys have ‘em: Success stories!

Many of you have already written to me and posted on the forums, excitedly telling us how YNAB has helped you. And now I’d like to ask you to help us by sharing your story with us in an even bigger way!

For sharing your story with us, I’d like to give away a Macbook Air…

And three iPads.

And two $100 Amazon gift cards.

We’ll talk about the Prizes, then work backward

Our favorite success story will win a Macbook Air. The three runners-up will receive iPads. That’s right, runners-up get iPads.

(Your success story will be voted on internally by the YNAB Team–Ian, Erin, Steve, Anne, Andrea, Sebastian, Taylor and Jesse).

And just for submitting a success story, you’ll be randomly entered to win one of two $100 Amazon gift cards.

What We Need from You

(1) A great success story telling us how YNAB helped you pay off debt, save a lot of money, or otherwise improved your life! We won’t be judging them solely on the numbers. You get points for style, tenacity, turnarounds, persistence, dogged determination, creativity…etc.

Our questionnaire will provide you with some questions to get the juices flowing, but this is your success story so we want to hear from you.

(2) Some nice, high-resolution pictures (three or four) of you, with friends, or with family, etc. We’ll want to put these pictures on the website (see an example here) so others can be inspired by you and your success. (People are hugely motivated to see that real people have done what they’re trying to do!)

(3) This probably goes without saying, but by submitting your success story and pictures, you’re giving us permission to use the story and pictures in marketing material, which may or may not include your picture plastered across a blimp as it hovers over the Super Bowl.

Rules and Guidelines

1. The story needs to be true.

Deadline

Success Story submissions will be due by midnight, December 31st, 2010 Friday, January 7th, 2011. Click the button just below to get started:

Submit Your Story

(January 14, 2011): The competition is now closed for new submissions. We’re working through the 20 finalists.

We welcome (and love) your comments below, but remember: To enter the contest, you need to click the big red “Submit your story” button above!


Twas the Night Before Christmas(You Need A Budget)

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Twas the night before Christmas, when all through the couch
Not a dime could be found, for which I could vouch.
The cards were all maxed in my wallet (so bare),
Two still had balances from Christmas last year!

The children asleep, thinking everything’s fine
While I sat crunching numbers–occasionally crying.
My wife, resolute, and without any delay
Starts listing last year’s gifts on eBay.

Then out in the front room we hear a loud crash!
I spring from my chair and take off with a dash.
The gifts stacked so high (the tree looked as to drown),
Couldn’t hold longer, and had fallen down.

And then, as if that wasn’t surely enough
The lights in the house go from on to–well–off.
Then back on again. Whew! I just felt a chill!
I thought we’d swapped Princess shoes for a bill!

Then starting to rebuild our credit altar
I reach for a toy then suddenly falter.
A book I’d received, but only begrudged it,
I see on the far shelf: “You Need A Budget”.

I cross the room, beckoned by Logic and Reason
Guessing I’ll soon commit credit card treason.
I crack open the book, finding page twenty-eight,
A dead-simple rule to change our Christmas fate.

‘Save for Rainy Days’. It’s Rule Two of the Four.
These non-monthly expenses you can’t ignore!
Take the total expense–now don’t try and hide,
Take that total and then by twelve you’ll divide.

My mind isn’t reeling–this makes really good sense
Christmas, though yearly is a monthly expense!
Now I see visions of Christmases yet to come,
Where cash flow is normal with this rule of thumb.

I look to my wife, (whoops, she’s still stooping and stacking)
“Honey! We’ll soon send the credit cards packing!
Imagine: no stress, chasing end-of-year dimes,
We’ll celebrate Christmas this next year–twelve times!”

I reach in my pocket and pull out my wallet,
Bursting with cards that now cause me to vomit,
I feel deep in the pit of my debt-ridden gut
That we’ll dig ourselves out of this Christmas rut.

As I think to the future, and what it will bring
My heart surges with joy and I want to sing.
Joy to the world! I’m not a slave to the man!
Christmas is mine. You see, it’s a 12-month plan.

I log into the bank and check my small balance
(A shortcut I used before each cash advance).
I take some dollars and call them Christmas Next Year,
I’ll be set for Christmas. with nothing to fear.

- Jesse Mecham

(If you found this rendition of “Twas the Night Before Christmas” entertaining or educational (hopefully both), please pass this along to your friends. Heaven knows at this holiday season, we could all use another forward in our inbox.)

YNAB will Wag its Finger at Your Budgeting Shenanigans — Tsk Tsk Tsk…

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Major kudos go to Ian — our newest developer — who made all of this magic happen.

I just started our internal build 3.2.3.2709.

I opted for what we’re temporarily calling “strict budgeting.”

And wow. I have four warnings:

I can also see from my tab view that four transactions need some attention:

I clicked on the notification at the top of my Checking account and am shown the four offending transactions (after making sure I’m showing at the top-right of the register:

Woops. Those two for Porter and Harrison are recent. From less than a month ago! I select them both and bulk-categorize them as Income : Available Next Month. (For those wondering, I was shuffling money from their own ING accounts into their new bank savings accounts that we opened for them. The outflows happened in December as “Income : Available This Month” so I figured I’d set the inflow timing to also happen in December so it’d wash completely.) Our new build doesn’t like it if I just let things wash through the budget without a category!

I’m now dealing with two transactions:

You can see from the Split that I was making an adjustment to my budget because it was overstated. It was overstated because I…had forgotten to categorize some transaction(s) in the past and couldn’t find it to fix it! (Or didn’t want to take the time to).

But wait… I fixed it with a $22.19 transaction. And my first “forgot-to-categorize-this” transaction was only for $20.50. If I delete the $22.19 adjusting transaction (because I no longer need it) and categorize my HOA fees transaction…my budget will still be overstated by $1.69.

Hrm.

Oh wait. I no longer use a credit card and that account was hidden a while ago. It was also a Budgeted Account:

Woot!

And Taylor tells me we’ll actually notify you when Hidden accounts have actions that need to be taken, so there won’t be any sleuthing necessary at all.

You can optionally turn this feature on. I love it on.

And for the record, the first time I did this (when it was “for reals”), it took me about 45 seconds to find the transactions and take care of them.

Goodbye errors. Goodbye budget being out of balance. Good night moon.

YNAB for iPhone will soon be "geo-smart" with Payees

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I’m pretty excited about this. You can probably guess what we’re going for here :)

Screenshot of YNAB for iPhone settings page

This will speed up transaction-entry time dramatically.

And if you’re a fAndroid, you’ll want to make sure you’re notified when we release (no, I won’t give an estimate).

We’ll continue to improve YNAB for iPhone. Nothing’s helped me stay more on top of my budget this year.

Rudder Run Aground, but You Need A Budget to the Rescue as an Alternative

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In the world of personal finance software, those once on board with Rudder will be happy to know financial help can still be found in the arms of You Need a Budget. With Rudder having closed its doors on November 3rd, many of it’s users may feel stranded. No doubt they are searching for a new program to offer them easy assistance in money management. Although several programs offer a seamless transition from the Rudder system to theirs, we welcome Rudder refugees with open arms (and an entirely new way of approaching your finances).

Rudder worked hard to simplify and streamline financial activity. However its greatest weakness was that it didn’t allow the user to add input or make changes beyond the initial set-up phase. Users became a spectator of their money. We’re all about making users pro-active and highly aware of their actual financial situation, and then giving them the tools to make positive change.

Where Rudder notified the user of their account activity and balance, We force users to stop living under the impression that, because there’s money in the account, there must be money to spend. As part of our four rule methodology—the bedrock of YNAB—users create categories under the first and foremost rule of “give every dollar a job.” As a result, real numbers are used, awareness is raised, and a clear financial status is given.

Rudder users will also enjoy the community feel overhere. An email a day may (or may not) have been informative through the Rudder system, but YNAB’s forum of active users is truly enlightening. YNAB Newbies and proven gurus alike, roam the pages of the forum, answering questions, discussing personal budgeting tips, and rejoicing in one another’s success stories. Rudder users will instantly be taken with and taken into a new financial family of people working towards the same kinds of goals.

If Rudder wanted to give users financial direction, we offer that, plus a map, a full tank of gas, and a personalized police escort. In order to educate users, YNAB gives continuous online classes, instructing users on it’s software, budgeting, and smart financial practices in general. The best part is, they’re free, even for people who haven’t bought the program.

We are not just about the software. We’re about raising awareness, providing tools, and supplying ongoing support for those determined enough to change their financial lives for the better. Most people know what direction they’d like to go with their finances; they just don’t know how to get there. You Need a Budget serves up the vision, the tools, and the power. With this financial software, Rudder users will notice a sense of control they didn’t know they lacked. They’ll realize just how good it feels to be at the helm on the good ship.

Lavish Spending, Merciless Cost-Cutting (But Secretly This is About Pricing to Infinity and Beyond)

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A few weeks ago I played lagged-out, totally-delayed-to-where-I-couldn’t-participate webinar host to Ramit Sethi (of I Will Teach You To Be Rich) while he taught YNABers interested in earning more money on the side about…earning more on the side.

Participation was impossible since I was about 20 seconds behind the live performance. That gave me the opportunity to scan the comments as they came rolling in throughout the presentation. Wow, did the comments roll in.

I should have written this post the next day, because my memory isn’t as fresh now, but I’ll give it a shot anyway.

$9 on Chips — Even in New York That’s “Pricey”

Ramit opened by saying that he purchased a bag of chips, didn’t check the price, and was floored to see they cost nine dollars. In a hurry, he purchased them anyway. Long story short — he loved the chips. He now purchases them regularly. He said they could cost $20 — he’d still buy them.

The other example he gave — a $300 shirt.

The comments began rolling from everyone, just dripping with incredulity. I watched, mildly amused, and wondering just how good those chips really must be. And what color the $300 shirt is.

Ramit closed by repeating something that he repeats a lot. And it’s good he repeats it, because it’s an important lesson:

Spend lavishly on the things you love, and cut costs mercilessly on the things you don’t.

And I find myself wanting to write this as the next sentence:

Here are a few of my lavish spending sins...

Because I want to confess. And I want to use the word ‘confess.’ But that right there is wrong. By using the words ‘sin’ and ‘confess’, I’m implying that lavish spending is wrong. And then we all get to decide what’s lavish.

Congress called. They want you as part of their Lavish Spending committee…

…which is my way of saying that it’s futile. And a waste of time. And probably a bit lame for all of us to judge everyone for how(ever) they use their money.

As long as they’re thoughtful about it. Conscious about it.

Lavish on Purpose

Ramit’s use of the word ‘lavish’ is a bit to blame here because lavish–just the word itself–signifies that it’s a bit over-the-top. It’s kind of saying that you’ve perhaps gone overboard a smidge or two. And I don’t think Ramit’s use of the word ‘lavish’ is a coincidence. I think he’s using that word to drive home the point that YES it can be lavish and there doesn’t need to be any guilt associated with your purchase because you’re proactively planning and choosing what you want to do with your money.

You’re budgeting my friend!

The fact that some of you spend lavish amounts of money on fishing tackle just blows my mind. Really? For fishing?

And you ladies out there that own 437 different stamps used for scrapbooking. Really? A little lavish don’t you think?

You just don’t need to feel guilty about those 437 different stamps. Or those 90 lures that all look the exact same (to me…). You planned for it. You paid cash for it. You get to be lavish about it. Whatever that means.

Merciless Cost Cutting and Snooty Restaurant Choices

If you noticed recently that you’re only watching network television anyway…cancel the cable. If you noticed that you aren’t going to the gym…START GOING :) If you’re not using all of your minutes, downgrade your plan. Cut costs mercilessly.

Look at the value you’re getting. Look at what you’re paying. Make sure those two things make sense. Both sides of that equation matter!

Here’s something snooty to chew on. I will not eat at the following restaurants: Olive Garden, Chili’s, Applebees, TGIFriday’s, Outback, Texas Roadhouse, McGrath’s, Joe’s Crabshack… the list goes on. Julie can cook those places into the ground. Every time I went, I would walk out feeling slightly sick and completely unsatisfied. I’d rather begin a fast than eat at those places. You could call me and tell me that you want to take me to lunch (great!) and it’s all on you (even better!) and you want to go to Chili’s (nOoOoOo!!!) and I’ll tell you just to come over to my house and we’ll split the difference ;)

Because I’d rather pass four times on Olive Garden to go once to Bambara’s.

It’s just about conscious decisions. No guilt. Just planning. Thinking. And no more knee-jerk reactions.

So those of you that were a bit incredulous at the $9 chips… you’re doing that too! You’ve got your lavish thing. Enjoy it. You planned for it.

[Enter the business connection postscript here, so read on if you want to get insights into the pricing aspect and the Big Tie-In that I think was missed.]

Later on in the webinar Ramit was talking about targeting your niche. Really targeting it. Where you decide on a very specific demographic/end client case and you target that person. All of your language should be that target client’s language. If they say “allocate” instead of “budget”, you should start saying “allocate.” If they’re always talking about how they want more “time”, you should stop selling them on the flash-bang feature that does this-or-that and talk about every feature through the lens of time savings.

I’m remembering the example Ramit gave about having a newborn baby where you’re picking between two photographers. One takes pictures of everything (and does a great job). But this other photographer, his whole site has great pictures of newborns. Every single line of copy on his site talks about photographing newborns — about the different nuances taken into account…all of the details he mentions (that you didn’t know you cared about until now)…

The specialized photographer makes the sale nine out of ten times. And you know that’s true!

So…with the photographer pricing for people that know they really, really want his service. Or for the bag of chips that is remarkably delicious… doesn’t price become basically moot?

And that’s where you can price to infinity and beyond.

Trust your Budget and Close Some Accounts!

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I am growing more and more convinced that the reason a lot of people struggle with budgeting is because we live in a world that is too focused on accounts.  Most people have more than one account, typically checking and savings at the very least.  Some folks have two checking accounts – one for bills and one for everything else.  On average most people have between three and six Savings Accounts based on what I see through webinars and coaching.  They have one savings account for property taxes, one for emergencies and so on.

Then there are credit cards.  Most folks have a few of those as well.  Many people have a credit card they use for purchases and pay in full each month and some folks have cards they have stopped using entirely and are just trying to pay off.

It’s not unusual for me to look at a YNAB file and see ten accounts.  In an effort to understand the people I am working with, I always ask the purpose of each account.  When it gets right down to it, many times people are using accounts to budget.  “The money in this account is for XYZ.”

Why are we so hyper focused on accounts?  Because if you do not have a budget – you do need some structure to manage your money, and accounts are the structure that society provides.  (See?  You are secretly craving a budget!!) Everyone has a few accounts, and we are in constant contact with them. Money goes in and out all the time.  If you are using an account for a specific purpose – more than likely – you are trying to budget through accounts.

It can be really hard to let go of that structure, but the budget can simplify things for you if you let it.

Let’s say you have two checking accounts as mentioned above – one for bills and one for everything else.  If you create categories for the bills – and everything else – you could easily have one checking account.  Track WHAT the money is for in the budget.

In fact to take this a step further, when you finally go to spend money, checking the account balance is no longer even necessary.  Check your budget instead!  Let’s say you have budgeted $300 for groceries and your total account balances are $1000.   It doesn’t really matter what account you use for the purchase. You can hand over cash, a credit card, a check, a debit card – the budget doesn’t care HOW you pay for this.  The budget needs to know that it was for groceries.  The point is that $300 is what you have set aside for groceries.  Your other dollars ($700 of them) are busy doing other jobs!  So you cannot spend all $1000; your allowed amount for groceries is $300 and it’s the budget, not the bank balance, that tells you so. 

Do you have multiple savings accounts? Condense that down to one!  Set up savings categories on the budget to track your savings goals.  Instead of having a savings account for emergencies, and a seperate one for vacation, and yet another one for property taxes, set up a master category for savings, and  sub-categories for each of those things.  This is what the budget is for!

Honestly, if I could find a checking account that paid a great interest rate, I’d have one account and let my budget take care of everything else.  Because ultimately, accounts are just storage containers for our money.  (Dollars by location)  The budget is where we keep track of WHAT our money is doing.  (Dollars by job)  When it comes right down to it, the budget doesn’t care WHERE your money is.   You can keep it all in pennies in a sock drawer if you want – as long as you tell the budget what you spent those pennies on.

Can you imagine how simple things would be with one account?  Think about it.  No transfers, no wondering how to move things around.  Look over your existing accounts and ask yourself “Am I using this account to budget my money?  Could I take care of this by creating a category instead?”

Simplify your life.   Trust your budget.  Close some accounts! 

Two Months Left for Tax Planning

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Casey, my tax guru (and author of Tax Insight (new version coming soon), has been posting some fantastic content over on the Tax Insight Blog. You should definitely check it out: