Budgeting is Better Than Willpower

Screen Shot 2014-04-30 at 10.14.03 AMThis week, a new budgeter popped into the YNAB forums with a question: How do you fight the urge to charge unbudgeted purchases to your credit card?

Before YNAB, I would have said willpower: Go for a walk, have a healthy snack or clean out your sock drawer until the mood passes. These are all workable approaches, but now that I have YNAB I realize there’s a tool that’s arguably more effective: awareness.

YNAB has an uncanny ability to remind you of your priorities. Sometimes that’s all it takes to keep you from spending. No willpower required.

Let’s take Penelope, a fictional YNAB user I just made up. She has had a long day at work and is too tired to cook. Tonight, she wants Chinese takeout.

But poor Penelope doesn’t have any money left in her Restaurant/Takeout category — she spent the last of it on pizza just last night. (Penelope is having a rough week at work.)

What should she do?

In the past, she’d put dinner on the credit card and forget about it until the statement arrived, when she’d kick herself for giving in to temptation.

But now Penelope has YNAB.

So before she calls the Panda Palace, she quickly checks the budget to see if any money has magically appeared in the Restaurant/Takeout category. (Spoiler alert: It hasn’t.) She then contemplates taking the funds from her other categories.

She goes down the list: Travel, New Sofa, Entertainment, etc. (Penelope, like you, knows fixed expenses like Rent and Insurance are off limits.)

She refuses to take money from Travel; she is saving up for her college roommate’s wedding in Hawaii and it is her highest priority. She similarly rejects several other categories, finally settling on the only one she might be willing to raid: Entertainment. She has $22 in there, but she was planning to go see “Captain America” this weekend.

Coming to a decision, she says either (1) I’ll wait for the movie to come out on video. Kung Pao Chicken it is. Or (2) I was really looking forward to this. Guess I’ll settle for a bowl of Cap’n Crunch and call it a night. (Of course, she still has the option to put dinner on her credit card and worry about the consequences later — but after a look at her budget, that idea has lost its appeal.)

So, does she end up ordering out or not?

Well, Penelope is fictional, so we’ll never know. But it doesn’t matter. The point is that she curbed her impulse — not through the power of her will, but through the power of her budget.

Going forward, Penelope may notice her priorities changing. She might start budgeting more for takeout. Or, uncomfortable with the pressure that puts on other categories, she might start planning meals ahead to make weeknight cooking easier. Regardless, YNAB is helping her think before she spends.

Penelope is setting a great example. Not bad for someone who doesn’t really exist.

12 Responses to “Budgeting is Better Than Willpower”

  1. Kristi

    Excellent example of budgeting strategy and letting the budget dictate our wants. Love this post. Thanks for sharing!

  2. Lissa

    Jessie, I have really been enjoying your contributions to the blog! This one, in particular, is such a thoughtful post that addresses one of the most common problems with sticking to a budget (tempting time- & energy-saver meets exhausted, low-willpower new budgeter) in a completely non-threatening way (I love this fictional character!) Packed with empathy, strategy, and a healthy dose of support, this is a post I hope everyone reads…on a lunch break, so the evening plan will already be in place.

  3. Lee

    Is the chinese fictional as well? Is there really a chinese takeaway called “Panda Palace” ? :)

    • jessiebird

      LOL, well, in my town we had a local restaurant called the Silver Panda that changed owners and became the Panda House. Somewhere there must be a Panda Palace!

    • RebeccaJN

      A Google search turned up several, across the US.

  4. Fiona

    I’ve been using YNAB for several years now and while I started out as an expense tracker (spending as I will, adjusting categories after the fact), I’ve noticed that I’m now checking my budget in the same way as your fictional example. The asset chart is my motivation, watching it grow each month is fantastic.

  5. Tom Bushaw

    Something that has helped me in this regard is to treat credit cards just like cash, checks, or debit cards. The difference, of course, is the money SEEMS free in the short term, but once you are “in the zone” paying off credit cards in their entirity each month they aren’t that much different from the alternatives and pretty much have to be treated the same way from a YNAB perspective. The remaining risk, of course, is that they do give you a few week period of no-interest “grace” (until the bill is due). If you’re using YNAB as intended and as Jesse describes (on Penelope’s behalf), you will make those “find the money” or “talk yourself out of it” decisions anyway and when the time comes to pay the credit card bill (in its entirety!), the money will be there to do so.

  6. Carola

    I’ve gone thru that thought process many times and it works, and usually food at the end of a stressful work day is what does it for me. Lately an orange has been my savior, while I peel it I have time to reconsider my priorities, relax, and by the time I eat it I tend to agree that I can wait to get home to have food.

    • msloaf

      I used to always struggle with buying take out on my way home from work. My nutritionist advised me to keep an apple in my car to eat on the way home (or even sitting in the car before I started to drive) in order to quench the hunger pangs so I could avoid making a bad decision for my health and my budget. It works! I have a very long commute now, and I keep a box of healthy snacks in my car for just this purpose. Of course this only works if I’ve remembered to keep my fridge at home stocked with food for dinner!

  7. ynabaff0

    This blog entry right here is exactly it: for anyone who thinks a budget is all about denying yourself everything, it’s so not. Its about making informed conscious financial choices. If you don’t track your spending or consult your budget as necessary at times like these, you are still a making choice, just an uninformed one!

  8. john

    I don’t understand.

    Your credit card payment is a transfer to your credit card account. It’s not a payment to a “credit card institution payee” or something. The Panda Palace is the payee, and it’s dated the day you order your delivery.

    People have to really divorce themselves from the idea that the money is free until you pay your statement. It’s not. The money is gone the instant you have Panda Palace run your credit card, not when your statement arrives three weeks later.

    If you see it that way – i.e. the way reality really works – charging it to the credit card and “worrying about it later” isn’t an option at all.

  9. Carina

    John! That´s exactly the point!

    I pay off my credit card every month, so it just gives me some time before the money is taken from my checkings account. But I never forget that i don´t own the money any more.

    I budget for it as spent right now on my credit card account (so the money available in my budget is reduced!). And then I transfer the money on ynab for all the payments of the month when the credit card payment is due from my checkings to the credit card account.
    I do go a step further: In real life I put the money on a savings account and transfer it two days before my credit card payment is due to the checkings account…

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