YNAB You Need A Budget

[jesse]

I'd love to hear some feedback from people that are using YNAB in conjunction with Dave Ramsey's Baby Steps? I know domino is doing it -- is there anyone else?

What kind of success have you had with the baby steps as a result of YNAB?
How has YNAB helped you follow the baby steps?

Your feedback would be very appreciated!

[TUDrewser]

You might say we're now using a modified version of DR...though our debt is all in one big ball and therefore debt snowballing doesn't make sense for us. We also don't use cash for everything as he suggests, but I don't disagree with his point. I'm sure we spend more by using CC's, but YNAB is helping with the spending now too. Now our restraint comes from our budget balance rather than the "hurt" from spending cash. We also are working toward having an emergency $1000 in place before paying off debt, but now I think we're going to have the $1k plus our buffer before we start chunking toward debt.

From what I've ready, I think there are a lot of people doing modified DR with YNAB, adjusting it to make them work together. I read DR's books about 5 or 6 years ago and just recently got back into keeping up with his website and ideas. I'm getting fired up again with the baby steps

[pksublime]

I'm doing DR and YNAB!

What I do is have both a buffer and a baby emergency fund. I'm building my full fledged emergency fund up to 3 months of income, so that that along with the month ahead from YNAB should easily stretch to about 6 months of expenses.

The rest of the DR steps have no impact on the YNAB way.

[mbowling]

I've been a Dave Ramsey listener since 2001. Over the past few years I've been following Dave's philosphy rather than literally working the baby steps. The financial lifestyle that Dave taught me is to pay cash (or debit card) for everything, don't use credit cards, have an emergency fund for unexpected expenses (car repair, home maintenance) and 3 to 6 months expenses for unexpected life events (the tornado hits home, prolonged sickness, job loss). I've been living by these simple rules for years.

YNAB is a great supplement for working Dave's philosphy.
The buffer holds part of my emergency fund (baby step 1).
Funding my savings account category each month is part of my 3 to 6 months of living expenses (baby step 3).

What I find most intriguing is the question itself. Dave Ramsey + YNAB. When I first started using YNAB I thought to myself that if Jesse could come up with enough funds to advertise on Dave's show that sales of YNAB would skyrocket. I hope there is some kind of partnership or relationship in the works. Dave Ramsey + YNAB is a perfect fit!

[Mudie]

Dave Ramsey + YNAB is a perfect fit!

Except for the fact that the YNAB way of budgeting is not even close to DRs way which is the old school map-out-the-month-in-front-of-you guessing at what you might bring in for money (read: crystal ball) approach. That combined with Daves reputation for not wavering in his ways or plans makes it unlikely that he'd abandon years of his way just to promote the YNAB way of the buffer etc.

I agree though, YNAB fits with the overall DR plan very nicely. In fact, I found Dave years before YNAB but just could not get the budget down so henceforth the DR plan was stalled for years. Now it's alive and well thanks to YNAB

Steve

[Sairey724Gamp]

Hmmm...

I dunno. I have more than 5 different versions of "Baby Steps" gleaned from various sources (including Dave Ramsey), which I have collected since the early 80's, so I really don't think he was first. Except for inflated numbers as the years have passed, there's not a lot of difference between them.

In other words, I have known the goals for more than 20 years, but using YNAB is the first time I have ever made significant progress in actually approaching any of those goals!

I see YNAB in a class by itself as a tool for reaching whatever financial goal you choose to work toward. One of the first steps (THE first step?) in getting control of your finances is living on a budget (money map, monthly allocation plan, spending plan... whatever you want to call it), and YNAB makes that possible.

Sairey

[mbowling]

My comment of a "perfect fit" is more of a sales and marketing comment than a methodology fit. There are millions of Dave Ramsey listeners who would be very excited to learn of YNAB. Dave's listeners and YNAB users are like-minded people. Both are seeking more control and understanding of their financial situation. Some kind of relationship between the Dave Ramsey show and YNAB would be a big step forward in establishing the YNAB brand.

[Kristen]

I hadn't even heard of Dave until after I started YNAB. Users on the forums talked about him though, so I checked 2 of his books out of the library and read them. There is much wisdom in what he says. I had a buffer in place when I started YNAB so I didn't worry about the $1,000 mini Efund, but I took his words about getting intense about debt to heart and snowballed my debt away in under 7 months. Now I'm working on a fully funded emergency fund, and then I will move to the next applicable step. Dave has great advice and YNAB is what makes it possible for me to follow it.

[gatherer]

I'm on the Dave ramsey program .. and I use YNAB now for budgetting ...

Dave Ramsey has 7 steps:

1) baby emergency fund
2) pay off debt except the house
3) fully funded emergency fund
4) 15% to retirement
5) fund college for the kids
6) pay off house
7) freedom

YNAB has 4 rules:

1) live on last month's income
2) give every dollar a job
3) Prepare for Rain
4) Roll with the punches

Now here is Gatherer's super duper combination of the 2:

1) live on last months income ( this gives you the baby emergency fund in most cases and gives you time to think about the emergency)
2) give every dollar a job (if you don't then you can't do the rest of it effectively)
3) pay down debt except the house
4) Prepare for rain (either through sinking funds for those once every few months expenses or the fully funded emergency fund) and roll with the punches (Only on this step should you let overages in your categories happen, before this you should re-visit the budget for every overage)
5) 15% to retirement (because you will want to retire)
6) Help out the kids for college (if you have them)
7) create accounts for large multi-year expenses (see dave Ramsey's Drive free video on his site) this woudl be for stuff like car replacement, major home repairs (since home repairs are required over time and not really an emergency if you plan to fund them)
pay off the mortgage soon. (paying this off will free up a bunch of the money for other stuff, like that european Vacation or something)
9) retire wealthy (this is here to remind people not to spend retirement savings or cash them out for wants.)

Anyways thats my 9 steps I plan to follow.. I'm on step 3.

[domino]

I'd love to hear some feedback from people that are using YNAB in conjunction with Dave Ramsey's Baby Steps? I know domino is doing it -- is there anyone else?

What kind of success have you had with the baby steps as a result of YNAB?
How has YNAB helped you follow the baby steps?

Your feedback would be very appreciated!

In respect to the question of did YNAB help me follow the baby steps, I'd say very much so. What particularly helped me out with Baby Step #2 was to allow "intense focus" on getting the budget down to the bare minimum to free up cash for debt reduction, not quite "beans and rice" but a far less liberal than with using YNAB pre DR. It wasn't until I got on the DR bandwagon full bore last Nov save for continuing Rule #1 that our debt reduction efforts really took off. I cleared out my savings less the $1k baby EF and put it right towards debt. Through focus an several blessings (wife being called back to work early, a EOY bonus from my job, and selling a "recreational" car) we were able to pay off about $32k in debt in 5 months. Compare this to about $6K in debt reduction for the 6 months prior by piddling around with it.

As far as YNAB being compatible with DR's Baby Step program, getting on a written budget a pre-baby step requirement (as well as getting current with your bills). YNAB could nicely with both of these goals although YNAB is weak on paycheck-to-paycheck cash flow budgeting. Dave actually spends quite a bit of time in his FPU class explaining budgeting but 100% cash flow orientated. The buffer makes budgeting easier but there's little easy with DR's plan at least at the beginning. You'll have to bear in mind a couple of things: A lot of his converts probably have a difficult time pulling together the $1k BEF nevermind a month's expenses; and I think DR would frown on the idea of Rule #1 until past Baby Step #2, paying off debt, because the whole idea of is to get through them as fast as you can so you can yell "I'M DEBT FREE!" at the finish line. It isn't until you reach Baby Step #3 that things tend to loosen up a bit. I think this is where the idea of Rule #1 would fit without much argument.

Am I implementing both YNAB and DR strictly buy the rules? No. I can't stand YNAB's Rule #4 so I always juggle at the end of the month, which by definition faults me with Rule #2 and often puts me in errs with Rule #3 intentions. Heck, I don't even do Rule #1 by the book as I bend it to make it work with my other priorities. With DR I enjoyed completing Baby Step #2 for a whole three weeks before I borrowed $3k to buy a replacement "recreational" car in a fit of remorse from selling the other one so now I'm paying that off concurrently ($2k left) with Baby Step #3 (about half way there). It's all kinda messy but it all kinda works. I think both can bend just enough to accommodate each other without getting too sideways with their overall intentions.

[LoneStar]

Yes, I use them together in a modified way. I first heard about Dave here on the boards. Then two months after starting YNAB, I went for some free counseling sessions from Dave Ramsey certified trainers at a nearby church. (My church will have a DR FPU after our certified trainer who is active duty military returns from Iraq next month.) Together these two philosophies have helped me become debt free and more disciplined with my money, a better steward of God's monetary blessing in my life. I've also more than doubled my tithing, which gives me great joy!

What particularly helped me out with Baby Step #2 was to allow "intense focus" on getting the budget down to the bare minimum to free up cash for debt reduction, not quite "beans and rice" but a far less liberal than with using YNAB pre DR.

Since I already had a Baby Emergency Fund (The DR counselor actually recommended $2,500 instead of $1,000), the counselor helped me become "gazelle intense" on clearing out my debt. He was the first one to suggest cashing in a $16,000 money market fund to pay off my debts, except my house, in one fell swoop. I have to admit that took prayer, thought, and dealing with my fear as that fund was my security blanket.Today, I don't regret doing using it in that way one bit. Being a recently retired teacher but not yet receiving spousal social security, I live on a pretty tight budget. Therefore, I do use his idea of cash envelopes for about 5 categories. It took some getting use to, but I've found it has curbed my spending drastically as I can instantly see how much I have left to spend in those categories. Talk about a visual reality check! Cash envelopes also help reduce the number of entries in my register and on my bank statements. Since my free sessions, I continue using YNAB for my budget planning following the guidelines that I established with the help of my counselor and YNAB's Rule 1 & 2. (Here's where I think the YNAB classes would be of great benefit in fulfilling this function.)

Once my debt was gone, I attacked my Buffer. It took me from Sept. to Dec. to fully fund my buffer and life has been much easier since then.

Now I am working on DR's step #3 which dovetails rather nicely with YNAB Rule #3 (Prepare for Rain) by building up my emergency fund to at least $10,000 and establishing some sinking funds for house repair, appliance and automobile replacement.

This summer I plan roll over my 403 b accounts to target IRAs and begin splitting the available money between savings and the IRAs. So, all in all, I think it's possible to blend the two programs. That probably doesn't make me a DR purist, but it works for me.

[Mudie]

My comment of a "perfect fit" is more of a sales and marketing comment than a methodology fit. There are millions of Dave Ramsey listeners who would be very excited to learn of YNAB. Dave's listeners and YNAB users are like-minded people. Both are seeking more control and understanding of their financial situation. Some kind of relationship between the Dave Ramsey show and YNAB would be a big step forward in establishing the YNAB brand.

You're right Mike, understood.

I agree that the millions of Dave fans would be thrilled to learn YNAB. As I mentioned above YNAB was the key to me getting past "Hey, this Dave Ramsey stuff makes sense!" stage and onto actually getting something done about it.

Without the foundation of a budget then all of the rest of DR's plan will never see the light of day so indeed, YNAB for the masses would be a good thing.

Steve

[Natalie]

What kind of success have you had with the baby steps as a result of YNAB?
How has YNAB helped you follow the baby steps?

The budget (therefore YNAB, in our case) is the foundation that is absolutely necessary for any other financial advice to even have a chance of working.

Oddly enough, I just finished reading DR's Total Money Makeover yesterday. He has some very good points, I like his idea of having a baby emergency fund in place first, so that as you're getting rid of debt, you don't have to incur more debt when Murphy rolls in...as he always does.

I also really like Mary Hunt's Debt Proof Living With her, I particularly like the idea of having a Freedom Account so that you can budget monthly, for the irregular expenses that come up - auto/home maintenance and repair, car tags etc. - this makes the "irregular" expenses, now "regular." For example, in our case, it's a lot easier to find and budget $25/month for car tags than it is to find $300 in August.

The bottom line is YNAB makes implementing all of these other ideas possible. The budget has to be in place before anything else will work.

If Dave Ramsey has "the baby steps," then Jesse has "the crawling phase" and, we all know...you have to crawl before you can walk.

[Sairey724Gamp]

I really like Gatherer's "super duper combination of the 2" (YNAB & DR), except that I would begin minimum payments for Step 7 items (large multi-year expenses) in Step 4 (Rainy Day Funds). If I don't start saving now for a car replacement, it will use the Emergency Fund. And in my budget, some of those things will come before kids' college.
Sairey

[gatherer]

thanks for the feedback on my steps/rule combination..

so if I was to change this based on the feedback...

Now here is Gatherer's super duper combination of the 2:

1. live on last months income - this gives you the baby emergency fund in most cases and gives you time to think about the emergency
2. give every dollar a job - if you don't then you can't do the rest of it effectively
3. pay down debt except the house - because debt is not a pet
4. Prepare for rain and roll with the punches - make sinking funds for annual and Bi annual expenses - fill up the emergency fund - create sinking fund accounts for things like car replacement, major home repairs, etc... - this step and the next step should be done concurrently - also this step could have lots of sub steps created.
5. 15% to retirement - because you will want to retire)
6. Help out the kids for college - if you have them and if you don't help some other kid go to college :p
7. build sinking fund accounts into the super-fund accounts... - these are accounts where if you need a car you take the interest you've earned off this money and go get one. these are accounts where you don't drain them to 0 like the sinking fund accounts. replace sinking fund accounts with this type of account - can use a snowball method to get this happening ...
8. pay off the mortgage soon. (paying this off will free up a bunch of the money for other stuff, like that european Vacation or something)
9. retire wealthy (this is here to remind people not to spend retirement savings or cash them out for wants.)

so the first few steps happen one after another while the last half happen more or less at the same time... you will always be funding retirement and college once you get there... step 4 and 7 happen one after another.... step 8 can happen during the same time you are working on step 7 depending on how intense you want to be towards getting step 7 up and running.