Author Archives: erin

Join us for the March Spending Fast Challenge!

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From March Monday 25 through Sunday 31, we’re going to do a YNAB community spending fast.  That means no unnecessary spending during that week.   Let’s bring March to a close by bringing some of our categories in under budget!

We’ve created an event on facebook so you can comment on how it’s going, share what you’re learning and support others.  If you don’t have a facebook account, you can leave thoughts here on this blog post.

Obviously, you’ll want to pay your bills and all that good stuff.  It’s important to be responsible. But everything else is on the chopping block!

So what’s unnecessary?

I think that’s a line that each of you should draw for yourselves.  It’s easy for me to say “No eating out! Period!” as a guideline, but I don’t know your specific situation and you may have to eat out for a very legitimate reason.  (Work lunch meeting, too far away from home at meal time, etc.)   I myself have a dinner meeting next week and I’m going to proceed with that.  So look over your budget, think about the upcoming week and set your own parameters.  This is really about increasing awareness on YOUR spending habits, so I’ll leave that up to you.

 Here are my personal parameters.  I will not spend money during that week on:

  •  Groceries (If you choose to not spend on groceries make sure you have enough food in the cupboards for the week ahead)
  •  Restaurants (except for the pre-scheduled dinner meeting)
  •  Pet Stuff (I tend to go overboard with stuff for the dog, and there’s plenty of pet food in the house right now.)
  •  Gas
  •  Household Stuff
  •  Clothes
  •  Entertainment
  •  Hobbies
  •  Software, technology, etc.
  •  Books

Basically, I’m just going to make sure bills get paid.  That’s about it.

A spending fast isn’t sustainable over the long term, and that’s certainly not the goal.  This is just for a week.  Hopefully, that’s long enough to be meaningful.  The point is to become aware of places where you could cut back and where you might be spending wastefully.

So join us and comment as the week goes along to share what you’re learning about your spending habits!  Naturally, we’ll be giving away a handful YNAB T-shirts when it’s over for insightful comments, deep words of wisdom for others, and meaningful lessons learned.

Share your successes and challenges with us as the week unfolds.  And be sure to keep track of what you think you’re saving so you can share that at the end!

Are you riding the credit card float?

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Every time I explain the credit card float to people, I feel like I’m breaking bad news to them. It’s not fun, but it is an important concept to understand, so I’m going to take some time here and explain it.

When you charge on a credit card, you’re given a grace period to pay things off. It’s usually around 25 days.  As long as you pay it in full within that time frame, you are not charged interest.  Many people take advantage of this.  They charge this month, then pay it off next month.

First, let’s be clear:  That’s debt.  It’s debt from the second you charge on the card.

It’s like a library book.  If I go to the library and borrow a book, they’ll say, “No problem, take the book!  Just make sure you get it back to us in two weeks.” I have to return it.  It’s not my book.  Even if I plan to bring it back tomorrow, that doesn’t make it my book today.  I may have possession, but that doesn’t give me ownership:  there’s a difference.

Keep that in mind.  Now, let’s step back for a second and talk about what YNAB recommends when it comes to cash flow.

We teach people to live on the money they made last month, so they’re a month ahead. (Rule Four)  That’s the goal.  That’s nirvana.  It works like this: Money comes in, then you budget those dollars.  Then you spend, letting the budget guide your spending decisions.

People who are riding the float are doing those things in the wrong order.  They spend, wait for money to come in, then budget to cover the spending.

Let’s walk through it. Follow me through time. It’s January. You charge everything on your credit card.  Bills, groceries, gas, everything.  You’re not worried because you’re going to pay the whole thing off next month.

Then you get paid in February and the bill comes.  Sweet!  You can pay it! Here’s the catch. Right when you pay off that credit card (with all of last month’s spending on it), it’s now time to buy more stuff!

People who pay the credit card balance in full often can’t cover the current month’s spending.  So what do they do?  They charge all the spending on the card and pay it next month. Do you see the cycle? It perpetuates itself.  You’re trapped a month behind.

Still not sure if this applies to you? Here’s the test to determine if you are trapped in the float: If you can’t pay the credit card in full right now AND meet your current obligations, you’ve got debt.  You’ve probably been riding the float.

If you’ve been riding the float and then decide to try YNAB, you get a huge wake up call. YNAB is like that really honest best friend.  You know what I mean–the one who tells you the truth even when you don’t want to hear it.

YNAB wants you to create a budget with money you have.  So YNAB sees this credit card debt and puts it in your face, saying, “Hold on there, Cowboy!  You only have enough money to pay off the credit card OR budget for this month’s expenses.  You can’t do both!”

If you pay off the spending from last month on the credit card, you’ll have nothing to budget with this month. If you use the money to budget this month, you can’t pay off the whole balance on the card.

You may be thinking, “How did this happen?!?  It’s not fair! I was being so responsible! I paid it off every month.” It happened because every time you charged on that card, you promised away future income.

So what to do?

1:  Acknowledge that this is debt.
2:  Make a decision.  Do you want to break the cycle quickly or slowly?

If you want to break it quickly, stop paying the card in full.  It’s painful, I know.  But it will allow you to budget for your current obligations.  You’ll gain powerful awareness when you start connecting the money you have to a concrete plan.  You can still budget to pay off that balance a little bit each month.

If you want to break it slowly and continue paying it in full, cut back on all unnecessary spending. Slash wherever you can for a while.   Stop using the card unless you absolutely have to. You’re going to see a lot of overspending in YNAB,  so budget to cover it as soon as you get money.

Remember, you don’t own the money that you borrow despite the fact that it is in your possession.  It’s a loan. Work as quickly as you can to pay it back and get to a point of true ownership.  At that point, you’ll have moved from living on next month’s income to living on last month’s income.

I want to be clear–I’m not against taking advantage of the grace period on a credit card.  I just don’t want you in a vulnerable position where paying that debt depends on future income.  Always remember: the future income is not here yet and is not guaranteed, but the debt is here right now–that’s a sure thing!

Once you’re living on last month’s income, you can use that credit card to your heart’s content because you’ll be budgeting with money that you already own, and you’ll know you can pay that bill anytime you want.  That’s freedom.  That’s peace of mind.

That’s where YNAB wants to take you.

 

We’re hiring! Do you want to teach YNAB?

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UPDATE 2/22/13:  Applications are no longer being accepted for this position.

We’d like you to help us teach YNAB!  We are looking for an additional teacher to run our live, online classes.

You’re qualified if:

  • You love teaching and helping people learn.   You enjoy breaking down complicated problems so people who are struggling can understand them easily.
  • Not only do you love teaching, but you have a background in education. Preferably you’re a trained or certified teacher.  It’s a bonus if you’ve had experience teaching online, but not a deal breaker if you haven’t.
  • You use YNAB and know it very well.  You’re a YNAB success story.
  • You enjoy collaborating with other educators.  You can give constructive feedback and embrace it to improve your own skills.
  • You know your way around a computer.  Since you’ll be teaching online, you’ll need to understand how to navigate and access information from different programs behind the scenes.
  • You can multi-task and don’t mind being put on the spot.  Teaching a live online class requires running a web conference and  teaching at the same time–all while being asked multiple questions about budgeting and YNAB.  What we’re saying is, you’ll need to be quick on your feet and have fun doing it!
  • You can work from home (or anywhere), as long as you have  a fast, broadband connection.
  • You are available to teach some evenings and some weekends.  That’s when our customers are most available to attend classes.
  • You run YNAB on your mobile device.  (You’ll need to display that in class.)
  • You can show empathy.
  • You’re friendly, courteous, kind, cheerful, creative, flexible and passionate (did we mention passionate about teaching and about YNAB?).

Hours
Hours will vary depending on how busy we are and how many classes we are running.  It could be as few as 2 hours a week, or as many as 10-15.

Pay
Pay will be determined based on experience. However, we like to hire awesome people and pay them well. :)

How to Apply
Please include a cover letter that explains:

  1. Why do you want to help teach people about YNAB?
  2. Tell us about a great teacher you’ve had and what made him or her so great.
  3. Finally, we’d like to see you teach, so please create three screencast videos demonstrating on the screen how you would use YNAB 4 to answer each of these questions.

Please use jing which can be downloaded for free at:
http://www.techsmith.com/jing/
1. Why doesn’t my available to budget number match my checking account balance?

2. How do I handle savings in YNAB?  I’m afraid I’ll spend that money on groceries so I don’t really want it in my budget. What should I do?

3. Can I fill out the budget even though my checks haven’t arrived yet? I’d rather budget for the whole month at once.

Send your application to jobs@youneedabudget.com.  Make sure you include “I want to teach YNAB!” in the subject of the email, or else we won’t see it or read it.  That would be sad.

We look forward to hearing from you!

Housebreaking Your Spending

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I’m getting a puppy! His name is Charlie. As you can see from his picture, he’s ridiculously cute. I’ve never had to house train a puppy before, so I’ve been gathering information like crazy.

I know Charlie will have some accidents in the house. This could be for any number of reasons. It could be:

  • because he doesn’t completely understand what I want him to do.
  • because I wasn’t as consistent as he needs me to be.
  • because he can’t quite hold it as long as I think he can.
  • that he tells me he needs to go out and I misread that signal.

The point is, when you’re housebreaking a puppy, accidents are a normal part of the process.

If…no, not if…WHEN Charlie has an accident in the house, it won’t mean that I failed as a dog owner. It won’t mean he’s a bad dog. It just means I need to pay closer attention to what’s going on and adjust my actions accordingly. That’s it.

Maybe we shouldn’t call them accidents. “Accident” has a negative connotation to it. Maybe we could call them…opportunities. That’s what they really are – opportunities to get better at this house training thing.

Okay, maybe that’s too far over the edge. :)

Anyway…this whole house training thing made me think about budgeting. (I know, I know…I really need to get out more.)

Budgeting has some components that “feel” like accidents.

  • You budget $400 for groceries. You end up spending $436.49. Shoot. You’re over by $36.49.
  • You manage to save up $500 for car repairs and you feel super proud of yourself. (You should feel proud!) Then the car breaks down and the repair is $700. Dang.

What worries me about these “accidents” isn’t THAT they happen. It’s the way people feel about them. We tend to feel shame when things don’t go perfectly. For some reason, we go right to:

“See? I knew I wouldn’t be able to do this budgeting thing.”

We’ve been taught that you shouldn’t ever change your budget. You’re supposed to stick to your budget, right? Nah. Trust me…a little flexibility with the short term stuff will help you stick to your budget in the long term.

Overspending is normal. It’s expected. In fact, I can pretty much guarantee that it will happen. You will overspend. I overspend every month. I’ve been doing this for quite a while and I’m pretty good at this budgeting thing! Yet I consider myself a successful budgeter every time it happens.

In the beginning, you may find yourself overspending more. This is normal. You’ll get better at it with practice. Charlie will get better with practice too! He’ll gain a better understanding of my expectations and I’ll get better at reading his signals. Soon there’ll be less accidents! You’ll get better at knowing how much to budget in certain areas and where your trouble spots are. You’ll adjust and adapt as things crop up.

But remember, you can’t see everything that’s coming. Just do the best you can and repeat these words often: Overspending is a normal. Overspending is expected. I am doing fine.

Please trust me on this. It’s normal. It really is.

Listen to Dory. Just keep swimming.

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Great movie. I LOVE Dory. She has such a positive attitude.

I’m convinced that we live in a “succeed or fail” society. Success is good, failure is bad, and in many areas it seems to be an all or nothing thing. That can be a very destructive mentality to bring into budgeting.

“I overspent in groceries, I failed at budgeting.”

“I haven’t updated my budget for 2 weeks. I failed at budgeting.”

“I didn’t save enough for that car repair. I was short $100 – I didn’t realize the car would need brakes and tires. I failed at budgeting.”

“Ugh, I’m going to have to lower my clothing category so I can have more money to cover that birthday present I bought. Maybe I shouldn’t have spent so much on it. I failed at budgeting.”

That’s just silly.

I remember learning to ride a bike. I fell down a lot in the beginning and crashed into a lot of bushes. I skinned my knees and my pride over and over again. But falling was actually a good thing, because it made me focus on balance more. I learned how to brake quicker so I didn’t crash into things. I learned when I needed to pedal harder so I could get up the hill. I learned when I could just coast.

You could say all that falling down and crashing taught me how NOT to ride a bike.

While working on the lightbulb, Edison said, “We now know a thousand ways not to build a lightbulb.”

Now, that’s more like it.

So let’s just remove that ‘failure’ word, okay? It’s counter productive and it’s not going to help you move forward with budgeting.

(Side note: It doesn’t help with dieting either.)

“I overspent in groceries, I failed at budgeting.”

If you overspend in a category, maybe instead of failing, you’ve just learned that next month you should budget a little more in that area.

Or maybe not. Maybe the overspend was for a very specific reason and you know that reason and you know it’s not likely to happen again. Cool.

“I haven’t updated my budget for 2 weeks. I failed at budgeting.”

So? Update it today. It’s not too late. Yeah, it may take a little bit of work to update it. You know what? If it’s really overwhelming, just do a fresh start.

It doesn’t matter that it’s been a day, a week, or two weeks. It only matters if you stop. As long as you keep going, you’ll learn and get better.

So perhaps you’ve just learned that two weeks is too long to be away from your budget.

“I didn’t save enough for that car repair. I was short $100 – I didn’t realize the car would need brakes and tires. I failed at budgeting.”

I’ve never been able to predict with 100% accuracy everything that will happen to me financially.

You won’t be able to either. Let it go. Adjust. Move on. It’s really okay.

Be glad you saved something toward car repairs, it could have been worse. Your accuracy will improve the longer you budget.

You’ve just learned to budget a little more toward car repairs in the future.

“Ugh, I’m going to have to lower my clothing category so I can have more money to cover that birthday present I bought. Maybe I shouldn’t have spent so much on it.”

Or maybe getting that present was more important to you than buying more clothes. Celebrate the fact that you HAD money in your clothing category to move around. You were being proactive. You saw something go wrong and you adjusted. Hooray!

“To err is human, to forgive is divine.” ~ Alexander Pope

It’s okay. This is all part of the learning process.

Forgive yourself.

Move on.

Just keep swimming, just keep swimming, just keep swimming…what do we do?

We swim!

~ Erin
Lead Teacher, YNAB

A Workout for your Finances

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I’ve finally gotten to the point where I look forward to going to the gym.

I’ve been waging war against an 30 extra pounds for more than 5 years. About a month ago I decided to try again, and I joined my local YMCA. This time, I tried a different approach.

I decided to go to the gym more instead of less. So instead of going a couple of times a week, I’m going five times a week. As a result, it’s become more of a habit. I’m there more days than I’m not. I set up a schedule each week on Monday, and I stick to it. If someone asks me if I want to do something, and it’s during my workout time, I say, “No, I can’t. That’s my workout time.”

The other thing I did differently was I got some help. My local YMCA offers a great program where you can get one on one time with a personal trainer and a dietician. This has given me a measure of accountability I really needed. They set me up with a great plan and I get to check back in with them every few weeks to see how I’m doing.

This support helped me get over the biggest hurdle – the beginning. My level of fitness was pretty sad when I started. I think that may be one of the reasons that people have a hard time developing a fitness routine or habit. It’s really hard to work out when you’re out of shape.

Support helped me get over that hurdle and now it’s not painful and I don’t dread it. It seems to be working as I’ve lost 5 pounds in the first month. I still have a long way to go, but now I can see how I could maintain this.

As you may imagine, I think a lot of this applies to budgeting.

When I started budgeting, my finances were not in good shape. That made getting started much more difficult. I was in a credit card nightmare that felt insurmountable. But I had support through that because I joined the YNAB forums. Getting feedback from others really helped me stick with it.

I also updated my budget more frequently than I do now. I probably checked it every day. That made me aware of what my money was doing. That awareness led to much better decisions about my money.

Over time I’ve grown into a maintenance mode with my budget. I know what I need to do and how often I need to do it to keep things rolling along. I suspect I’ll get to that point with fitness as well.

If you’ve had a hard time getting started with your budget, double your commitment! Get in there and look things over and update it every day. Most likely, if you check it daily, it will only take a few minutes. You probably won’t need to do that forever, but you may find that it helps as you get started.

Set up a routine for checking it. Maybe it’ll work best for you in the morning when you first get up. Maybe you have kids and that’s a horrible time and you’d be better off doing it in the evening after they’ve gone to bed.

Finally, take advantage of all the support we offer. There’s a lot more support now than there was five years ago when I started. We still have the forums – and they’re more fabulous than ever.

We also have a large number of video tutorials and some recorded on demand classes. If you haven’t checked those out, you really should.

We also have free live classes. We run an Intro to YNAB course frequently – several times a week. You may be aware of that, but did you know we also have a class called the Budget Workshop? It’s interactive – you get to work on setting up your budget while we help and answer questions. If you want to get started on the right foot, that’s a fantastic way to do it. We even have a separate class to help you if you are starting in overdraft.

We’re also running an eight week series called Weekly Meet Ups. We cover a different topic each week, have a tip of the week and then open the floor to your questions. It’s not too late to jump in!

Finally, we have a great customer support team. Really, they are awesome. You can email a question to the team and they’ll jump right on it. They know YNAB and they love helping.

Double your commitment to your finances and grab some of the free support we offer. In no time at all you’ll be financially fit and it won’t be a chore to check your budget.

You’ll look forward to it, and it’ll be easy.

~Erin
Lead Teacher, YNAB

Suggest a topic for YNAB's Weekly Meet Up

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Hi folks,

YNAB’s two teachers met today to develop YNAB’s upcoming Weekly Meet Up Classes which are beginning in March.

Todd Curtis and Erin Lowell

Each Weekly Meet up will begin with a short presentation on a Topic of the Week and the topics will be generated by participants. This will be followed by Open Q&A on whatever you want to discuss about YNAB!

Weekly Meet Ups will be free, of course. You can attend once, or every week.
Here are the dates and times for March:

March 14th – 8:00pm EST

March 22nd – 9:00pm EST

March 27th – 7:30pm EST

We’d like your feedback on topics! Please take a second and fill out this short 2 question survey.

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! 

Are you stuck in perpetual overdraft? We'd like to help!

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Do you find yourself in perpetual overdraft?

Are you being charged an overdraft fee every time you turn around?

Not quite sure how to use YNAB to beat this?

During November, I’d like to work with a small group of people who are in this situation to see if I can help you dig out – and stay out. I’ll help you use YNAB to budget your way out of the overdraft. I’m calling this “Overdraft Camp”.

We will meet for three consecutive Tuesdays in November beginning November 9th. We will meet through a web conference the same way the YNAB webinars meet. The dates are:

November 9th – 7:00 PM EDT
November 16th – 7:00 PM EDT
November 23rd – 7:00 PM EDT

Each session will last one hour. If you decide to apply to participate, you will need to be available for each of those dates and times.

While I won’t be able to work with everyone who applies, my longer term goal is to develop better supports to those who are starting YNAB in Overdraft. I’ll make sure I make all that information available to everyone once we are done.

Click here to apply for Overdraft Camp.

How much should you budget for food?

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Every now and then I get asked during webinars about the “grocery” category. People who are new to budgeting aren’t sure how much they should be spending on groceries – food specifically – and are looking for some type of a guideline.

Of course, every household is different. If you are a single person, your grocery budget will vary considerably from that of someone who is married with four children. Further, everyone has different tastes and likes different things.

When I first started budgeting, this was one of the most difficult areas for me because I really had no idea what to do, and I also had no idea what I had been spending.

I’d like to share a site that may give you a little direction. I don’t consider this to be the end-all, but you may find it helpful.

The USDA has this site which calculates the cost of food at home at four different levels:

USDA – Cost of Food at Home

They offer a Thrifty, Low Cost, Moderate and Liberal Plan. The following is taken directly from their July 2010 Report:

The Food Plans represent a nutritious diet at four different cost levels. The nutritional bases of the Food Plans are the 1997-2005 Dietary Reference Intakes, 2005 Dietary Guidelines for Americans, and 2005 MyPyramid food intake recommendations. In addition to cost, differences among plans are in specific foods and quantities of foods. Another basis of the Food Plans is that all meals and snacks are prepared at home.

You can download a report for each month going back to 1994. They show the numbers either weekly or monthly, so make sure you know which column you are looking at.

What I found helpful was being able to look at how much I spent each month on food and how that lined up with their plans. It just gave me a barometer of sorts – a starting point for analyzing my spending.

So again, I offer this in the hopes that some of you may find it helpful as a reference tool. Keep in mind though, food budgets do vary greatly between households and ultimately you should set your own goals based on what you think is right for your family.