There’s a great scene in the movie “The Patriot” with Mel Gibson. Mel Gibson’s character is giving his young sons some final shooting pointers before they engage the British in a battle to save his oldest son. After he is finished with his instructions, he says, “What did I tell you fellas about shooting?”. They both respond sheepishly almost in unison, “Aim small, miss small.”
In other words, the more focused your aim on a target, the more likely you are to be successful. If I am simply aiming for the target on the wall, I may miss the target completely. However if I aim for the center of the target, while I may not hit the center exactly, I’m more likely to at least hit the target somewhere.
To improve your “budgeting” aim, you’ll need to make one major shift in the way you think about, and approach your spending.
Stop making spending decisions by checking the bank balance, and use the budget to guide your spending instead.
I see this frequently in working with people one on one. They spend a lot of time focusing on accounts. Why? Well, that’s the structure that society has in place for money management. Think about it. Isn’t that where you handle things, in a way? You get money, you put it in the bank. To spend money, you remove it from the bank. It’s easy to see why we get so focused there.
But imagine that you have $1000 in your bank account. You want to buy some new clothes. You check the bank balance. There’s money – so you can spend. It seems logical enough.
But your aim is so unfocused, you may be spending money you need for the light bill, or gas for the car, or groceries. You may not hit the money you’ve set aside for clothing. So how can you tell? Well you can’t – if all you are aiming for is to stay above zero in your bank balance.
Want to improve your aim?
Check your budget
How much money have you budgeted for clothing? Aim for that target when spending. If there’s not enough, at least now you know and if you want to, you can make an adjustment.
Are bank accounts important? Of course they are! They are the physical storage containers for our money. They represent where your money is. But the budget keeps track of your plan and what your money is doing. Your bank account has no idea what the plan is. It’s like asking someone for directions who’s never been where you are going.
Stay focused on the plan. Make sure your money is doing what you told it to.
Good points. As far as aim small miss small – it’s funny that I think the same thing when hitting an approach shot to a green in golf. If I just try to hit the green, I might miss it completely whereas if I aim for the pin and am not spot on with my shot, at least I’m putting hopefully.
Erin, this is such a great point that you make! I have to say it again: check your CATEGORIES and their balances before you spend – *not* your bank accounts! Even before I found YNAB, I had recognized that the dollars allowed to be used during the month for buying were only a FRACTION of the dollars I had on hand – and YNAB has crystallized this to perfection. It means that I have learned not to look to my bank balance because most of that money is HANDS OFF. Those dollars have jobs other than being spent for what I want to buy now. Indeed, those dollars are for car insurance/maintenance, property tax, Christmas, vacation, emergencies – all of which point towards the future, which is going to arrive and I will want those dollars ready to do their jobs when it does. Indeed there are dollars whose jobs are to be spent now. They are the tip of the iceberg and if you see their balances in their categories then it is much easier to keep from overshooting and spending into the dollars you wanted to keep intact. YNAB handily helps to build those important walls and gets you to aim at the center of your budget’s bullseye. I would actually say “Aim well, live well.” Spending from your categories lets you greet the future with confidence, since the bulk of your dollars will stay put where they belong until their time has come.
Thanks for the comments. @Andrea, I really like “Aim well, live well”. Nice!
Thank you Erin for your astute and succinct article which captures the essence of managing money in a healthy way. Thank you also to Andrea for expanding on the article with her perspective which so beautifully complements the message. I really enjoyed reading both. I have been a dedicated YNABer since November, 2008, and it has profoundly changed my life for the better. Yay YNAB!!
Erin, great article. It’s amazing how the “duh” things are the ones that many people miss the most isn’t it!?
Wow, this is so simple and yet it is the biggest stumbling block to making a budget work! Thanks for the mantra.
I would be fantastic if you guys could develop a time management app. I know it woulld be a hit!!!
Ooh, busted! I do look at the accounts first.
But DARN it, the accounts are the first thing you see at the top right of the page! ,,, and that “open wallet’ icon … well, it sure does catch the eye!
My solution:
Starting now, I’m going to keep the accounts “hidden” at all times.
out of sight, out of mind.
It’ll be inconvenient to unhide/hide every time I enter transactions,
but it’ll help serve to remind me where my attention SHOULD be going first.
Suggestion for next version of YNAB:
put the the budget and reports button at the top right corner,
the most prominent spot.
and
put the accounts button way down below…and with a smaller font !
I LOVE the analogy of asking directions from someone who’s never been there. I pictured my dollars standing around with their hands in their pockets going, “duhhhh” — total Beevis and Butthead.
It clicked.
Of course I need to ask the Budget first!…
The BUDGET is the visionary !
The Budget…is the mission statement !
If you’ve lost your way and want to know how to proceed,
go back to the mission statement.
Thanks for these pointers as they are very timely for me. I’m new to YNAB and am struggling with the shift to budgeting, as before I always just tracked everything in the accounts. I seem to be getting hung up on the different balances between the accounts and the budget and feel the need to know exactly what’s in the bank. I also am confused by the instructions to not categorize transfers to saving accounts. If I put $100 dollars a month into my savings each month, it would make sense to me that I should subtract that amount from my budget becuase the money is no longer available to me for spending. Can you provide any insight?? Thanks!
Jesse and Erin…love your constant insights into how a change of paradigm thinking will improve your finances. The budget categories keep us focused on the important goals…control over our plans for our money…the money just sitting our accounts (containers) has vague and/or no goals attached to it. Thanks for your constant encouragement and enthusiasm for budgeting, which I need.
@Steven – I suggest that you ask your questions in the forum. They will be viewed and answered by a wider range of YNAB users, and you will without doubt get the help you seek. Hang in there. I didn’t get it all at first, but it’s all second nature now after 10 months.
Great insights, perhaps the same reasoning can be up held with the phone apps to where it only show catagories if not been done already. I fess up, I admit that I also was on the same band wagon as everyone else who used to look at the total balance. Used to be WOW Money, then wow NO money. Maybe truely and honestly many of us have no actual concept of the worth of a dollar. When it comes to trying to save everyone says a dollar is a dollar. I’m not trying to say to be a penny pincher, but that dollar represents your worth of work you put into it. Now when I look at a purchase I equate them to all those hours of work and actually think about those hours of work to understand if its really worth my time, becaue time you can never get back nor can make up. Can we say QUICK DEfuser when it comes to impluse buying.
I’ve paid off $1500 in Credit Card debt thanks to YNAB. Woohoo! I can text my bank for a balance amount so it’s so easy to see that number while out and think I have a lot to spend. Now whenever I go out I think..”How much do I have in this budget category?” :) It’s a much needed shift in thinking about money.
You control your budget – your budget controls your spending. So simple, but so many people struggle with it!