Seriously though, once you have these Four Rules implemented and running virtually on auto-pilot, you’re going to feel invincible when it comes to your money. You’ll be spending less time doing money things, thinking money things, and worrying about money things. Yet your money will be doing things you never thought possible. It’ll be working harder for you. It will finally be productive. It’ll be the employee you always wished you had.

But don’t think you’re infallible. Don’t think it can’t happen to you.

I’ll share with you what happened to me and my wife just recently. Now, keep in mind, I am especially prone to thinking we’re invincible when it comes to money. And it’s not because we make a lot (working with a part-time income while going to graduate school full-time does not equate to lots of money, quite the opposite actually). The reason I have felt so invincible in the past is because I trust the YNAB System to the core. I trust the Four Rules. I know that if we’re recording what we’re making, recording what we’re spending, and having our budget meeting each month, we’ll be fine.

But that’s not quite right. Sometimes, you start to get a bit too comfortable with the rules. That’s exactly what happened to us.

During my second to last semester of graduate school I cut back on the hours I worked at my job. I thought we could get by with me working about 20 hours per week. This happened mainly because I was kind of getting burned out – was extremely busy with school, and the website – and wanted to spend a bit more time with the family. So, we decided we could get by on me working 20 hours.

In October we overdrafted a bit in our budget. I figured we’d make it up in November. In November we overdrafted. With December coming though, I knew I’d be making more money because I could work full-time during the winter break. So I thought we’d make it up. Of course, Rule One of YNAB states that you live on last month’s income – so that December extra money wouldn’t even come until January.

Well, December was more expensive than we had originally anticipated – and we overspent. Three consecutive months of overspending meant we had very little to work with come January. Well, January wasn’t looking so hot. We actually used a cash infusion from our emergency fund to help pay for our health insurance premium (I had been putting off throwing that money into a Rainy Day fund for the few month’s prior because we were just trying to catch up on the ‘now’ expenses). So that health insurance premium hit us big time (we had to pre-pay an entire semester’s worth of insurance).

Health insurance is not a valid emergency fund expense.

So I started working at least 30 hours at my job – trucking through my last semester in graduate school. February was interesting because we started the month with only about $1,000 of available money (all of these past overdrafts come back to haunt you if you don’t make up the difference by either making more or spending less in succeeding months). I don’t want to divulge too much personal information, but our rent amounted to more than half of that $1,000.

So what happened? Why didn’t we cut back our spending in the face of obvious looming problems ahead? We grew complacent with the budget.

As I mentioned above, I’m the author of the system for crying out loud. My wife understands it just as well as I do. What I’m saying here is this: we know how YNAB works better than anyone! We’ve seen how the principles force us to be conservative, assign dollars their jobs, and save for rainy days. The rules really work.

And we knew that Rule #4 really works. We knew it so well in fact that we started virtually “borrowing against it” in a sense. Not literally borrowing money, but what we were doing was virtually the same thing. A non-YNAB credit card user unfamiliar with YNAB would use the following logic when charging a purchase and, thus overspending: “I’ll spend less next month and be able to pay this off.” We were doing virtually the same thing! “Well, we’ll just buy it now because we need it now. YNAB will suck it out of next month’s available money, so we’ll just spend less and make up for it.”

Amazing isn’t it? Rule #4 is so powerful, so graceful in how it guides you toward fiscal conservatism, that you can forget who truly controls the spending: You do…and you have to.

If you pick your favorite rule of YNAB, and only hold on to that one, without addressing the Four Rules as a whole, you’ll start to go under. Which rule did we tend to ignore? Do you see the writing on the wall?

Rule #2 became second rate. We didn’t pay it nearly the attention it truly deserves. Rule #2 of YNAB is the zero-based budget. You give every dollar a job. What that does is create spending limits in each of your categories. We were not paying enough attention to those limits! If the limit is there, then you stick to it no matter what. If you’re out of milk for the month, you either take from another category in that month or you don’t buy the milk! You should not begin to rely on Rule #4 in such a way that you overspend in the month -make no adjustments for it – and expect to simply make it up in the next month. A pattern of such behavior will lead you to exactly where we ended up – needing to use our emergency fund money to pay for a non-emergency. Bleh.

Consider this a fair warning from the biggest YNAB fan of them all! You must abide by each rule of YNAB. Do not grow too comfortable with Rule #4’s power to smooth out the bumps. I guess sometimes those bumps make for good reminders. We used YNAB for three years before I finally came to this realization: Regardless of how powerful the rules are, it is still up to you to exercise the discipline necessary to stick to every single rule. Don’t play favorites!

I’m certain as you begin to implement the Rules of Cash Flow, you too will grow very comfortable with how the whole thing works. It’s okay to become comfortable – just don’t become complacent.

I’m especially excited for the final day tomorrow. I’ll share with you quite a bit of our story – I hope you’ll pardon the personal side of it and see it for what I truly intend it to be. See you tomorrow!