With keeping things simple, I’ve tried to help people use fewer accounts (if you’re using YNAB correctly, a checking account and long(er)-term savings account is really all you need–with the savings account being optional). I want people to use fewer categories.

In fact, my goal, by the end of 2011 is to have our budget categories (these aren’t master categories, but the actual categories themselves) whittled down to the following:

Tithing
Savings
Bills (Fixed)
Cash

However, for many of you, you may want to go in the opposite direction, for a time. Remember, a short burst of unsustainable behavior can affect change. Something unsustainable you can try is to make certain categories very granular.

The saying goes, “Where performance is measured, performance improves.”

A YNAB user over at wi-fi voltage journals about YNAB fairly regularly. They decided to break out their grocery bill into two parts:

- Groceries
- Junk food

Guess what behavior they’re trying to improve there? It’s an excellent implementation.

Do you find that you’re addicted to purchasing shoes? Your “Clothing” category make look like this:

Clothing : Other
Clothing: Shoes

Do you want to quit smoking? For some, the financial drain can be motivation enough:

Miscellaneous : Other
Miscellaneous : Cigarettes

Do you play too many games? Buy too many comic books? Eat too many pizzas? Eat out too often? (Make these categories head south.)

Want to cook at home more? Want to read more? Eat more fruits and vegetables? (Make these categories head north. That’s right, spend more!)

Let me know in the comments section how you’re going to user your budget like a laser–pinpointing behaviors you’d like to change and measuring for results.

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.

Aim small, miss small.

First, I’d like to thank you for all the things you’ve helped me with financially. Thanks to you I paid off the credit card debt and the car, saved for a number of renovations on the house, have more money in the bank, and am debt free (except the mortgage). You’ve certainly been a very dependable friend, and I really appreciate that.

So I want to apologize for ignoring you for the past 2 weeks. I realize that you can’t do this without me and I shouldn’t have abandoned you like that. I want you to know I accept full responsibility for all of this.

I guess I just thought you could fix anything! I mean, it had only been 2 weeks, I didn’t really think it would be that hard to catch things up. It usually only takes me 5 to 10 minutes, but of course, that’s when I update twice a week. I didn’t realize the clean up would take me 2 hours.

Perhaps I didn’t realize that the awareness you offer is meaningless if I don’t pay attention too. Of course – I should know better than this. Our relationship is a two way street and I definitely need to do my part.

I think part of it is that I didn’t realize how transactions would accumulate over that time span, and how that would create more work for me, since I couldn’t remember what anything was for.

A $60 withdrawal on May 25th? What was that for? $49.23 at Wal-mart? Was that all for food? No wait…I was picking up cat food. No wait…that was on the 21st. Wasn’t that a Thursday? But I seem to remember picking up the cat food at Market Basket… Which purchase was for the cat food? What was the other one for? Ugh. I can’t remember. What?!?! I’m overspent on groceries? How did that happen? I thought there was plenty in that category. Oh, I thought I had money set aside for books, but I guess I didn’t. Shoot, now I’m overspent there as well. That purchase really could have waited.

Sigh. I realize now that even though I was busy during the last few weeks, it still would have been quicker to stay on top of things. It took far longer to sort this out than it would have to just find 5 minutes to update you twice a week.

I probably wouldn’t feel nearly as guilty if it wasn’t for the fact that you make it so easy to stay on top of things. If I only had taken advantage of importing transactions, or being more consistent about entering purchases into the iphone app, this never would have happened.

And finally, thanks for helping me clean this little mess up. Importing all those transactions saved me a ton of time and made things go much faster. You reconciled everything for me on the first try. Obviously, I couldn’t expect you to know how to categorize everything since I forgot what most of the purchases were for in the first place. But that’s not your fault. I need to do a better job of keeping you informed.

I appreciate your flexibility as well in letting me move some funds around to cover some things. It’s a little sad that I have less money for the vacation now, but I have no one to blame except myself. At least thanks to you, I had some funds that I could move around. What would I do without you?

I promise to do a better job from now on and I won’t abandon you like that again. Not only do you deserve better, but frankly, I just can’t afford to not do my part.

Thanks for making me aware of that. :)

Sincerely, your friend,

Erin

“I just want my bills to be taken care of. I don’t want to have to worry about taking care of this or that payment.”

News Flash: You can get a piece of that “financially set” pie by breaking out of the paycheck to paycheck cycle. Work toward setting aside portions of your paychecks until, at the beginning of some month in the not-so-distant future, you see you have enough set aside to live that entire month without touching any new paychecks.

You’ll be out of the paycheck to paycheck cycle.

The nice thing about living one month ahead? Bills are taken care of. Set up every bill you possibly can on autopay and then, for those bills that require manual payment, set one day a month to take care of all of them. Finished.

You aren’t earning more money. You didn’t win the Lotto. But you’ll have a new lease on life.

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

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

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).

You know you’re a YNABer when…

the first thing you do when you get a receipt is say to yourself “ok which category will those go in or better yet, is this a split transaction!”

I can’t wait til the next pay day just so I can go put February’s budget categories in! (And because I get giddy, like you, over entering receipts!)

you antagonize over buying girl scout cookies because you can’t figure out if you should categorize it as groceries or charity.

you get a kick out of coming in under budget on groceries because that means you can throw that money into the car replacement category, even though you expect your current car to last another 8 years.

you find yourself looking longingly at the chocolate bar in the store that costs only 50c and thinking ‘mmmm, chocolate….’, but then realising you don’t have 50c left in your ’snacks/eating out’ category, and you’d have to take it from another category, and you really don’t want to do that because then you might not have enough left in that category, and besides, you really don’t need the extra calories anyway. So….the chocolate bar stays on your shelf, your money stays in your wallet, and you still fit into your favourite pair of jeans!!

your 8 year old comes home from school and tells you they are doing a “Save, Spend & Give” project at school. She raised her hand and told the teacher “we do that and my Daddy does his budget, You Need a Budget, on the computer”!!!

your decision whether or not to purchase light bulbs at the grocery store isn’t JUST a matter of weighing convenience and price…the fact that it will create a Split also factors into it.

the UPS guy is concerned because I have cut waaaay back on getting deliveries from Amazon!

you forget when payday is.

someone mentions the word money and you can’t help yourself and have to mention YNAB and tell them all about it whether they really want to hear or not.

you use the word buffer in daily conversation.

your thoughts switch to ‘Yikes, the balances in my accounts are only ‘$[insert a figure in the hundreds or thousands]‘ instead of ‘Yikes, the balances in my accounts aren’t enough to buy me dinner’.

you go to the bank to make some changes to your portfolio and you end up upselling YNAB to the Financial Planner behind the desk

you don’t notice your account balance is rising because you’re focused on budgeting instead of dwelling in transactions.

you look at a large deposit and smile thinking; ‘I’m glad that those money already have a job.’

You know you are the spouse of a YNABer when you don’t understand why you don’t have enough money to buy a $1.90 cup of coffee when your account balance says you have $ hundreds/thousands!

you immediately recognize a $1.90 purchase is a McDonalds ice tea because you have entered the transaction over and over again!

you no longer have a constant horrible feeling in your stomach.

you don’t feel frustrated when you receive non-monthly bills.

you don’t feel bad about purchasing something that you really want.

you don’t buy something just because it’s on sale.

you constantly have to tell your spouse that we can buy this, but will need to subtract it from another planned expense.

you are a straight guy but still strangely love a guy named Jesse that you have met on the Internet

you no longer stress about how you’re going to pay the next bill. (The money is waiting in the bank.)

You can’t wait until the last week of the month to do next month’s budget.

you take out $40.00 for gas, spend $37.65 and your first thoughts are “hmm…how do categorize the remaining $2.35!

instead of cleaning the house during your baby’s nap, you obsessively read the YNAB forums!

you tell complete strangers about YNAB while standing in the ATM line at the bank.

the end of the month brings excitement as you know you will be working on a new budget!

I’m pleased to announce the first installment of Whiteboard Wednesday. Today we talk about On/Off Budget Accounts. Forgive the beanie. My hair is atrociously long (by my standard), but I can’t cut it until I reach a goal that I set in October.

Enjoy..

Leave a comment below telling me what you’d like to see in future Whiteboard Wednesday episodes :)