Though it’s nice to be known for simple software that’s easy to use and gets the job done…it’s even nicer to be known for a money management methodology that works (by ‘works’ we mean clearing an extra thousand dollars per month without changing jobs, no longer living paycheck to paycheck, and making huge financial strides only after transitioning to one income…).
While you can use YNAB in almost any way you like, it’s built with the methodology as its foundation. You’ll see why once you get started.
So, let’s talk about these Rules.
Stop Living Paycheck to Paycheck
YNAB will require some work on your part–work that will pay big dividends in the future. The methodology and software will help you work toward living on last month’s income. What you earn this month, you’ll spend the next. Most people take between four and six months to save enough money to live on last month’s income. What really matters is that you work toward it (Rules Two, Three and Four will all help you get there).
Why Follow Rule One?
- You’ll finally have some breathing room. (Don’t underestimate this)
- Pay your bills when they arrive — no more wasting time by timing paychecks with bills!
- The “I can’t budget, I’m on a variable income” problem is eliminated.
We’re now living a month ahead, and I’m completely geeking out about it. Yesterday I paid all the bills we’d gotten so far for January. Today I got the water bill, and instead of putting it aside to wait for the next paycheck–I just went ahead and paid it right away. Next to my desk I’ve got a little box with 31 slots, for keeping bills in. That way I know when they’re due, so I can schedule which ones I have to pay now and which ones can wait until the next paycheck. Now NONE of them need to wait until the next paycheck. I’m going to give the box to Goodwill. source
Give Every Dollar a Job
Each month you’ll sit down (with your spouse if applicable) and allocate the funds you have Available to your spending/saving categories where they are needed. You’ll do this until there are no more available dollars. The process takes twenty minutes and will revolutionize the way you think about your money. Every dollar will be given a JOB (rent, car insurance, savings, caribbean vacation, etc.)
Why Follow Rule Two?
- Dollars are like teenagers, unless given some (strict) guidance, they’ll own you.
- Your awareness will increase immensely. Your spending will align with your values, and that brings contentment.
- Communication between spouses about money improves greatly.
Once I started using YNAB, within 10 days I am very clear about my financial goals. YNAB gives me a very clear picture about my spending and where I can save etc. source
Making more money doesn’t make you smarter or better with money. It doesn’t magically enable you to not need a budget. Though I lived that way for awhile. I could get away with it while single — but as a family man with a mortgage, a new car, a flooded basement, a new dog with surgical needs, etc. Well, that just wasn’t going to cut it. YNAB quickly, and easily, got me living to a managed budget this summer. source
Prepare for Rain
Everyone has rainy days. The car insurance is due, you need new tires, the tax man cometh… YNAB will help you anticipate those larger, less frequent expenses. Have an insurance premium due in six months for $600? Stick $100 into your Car Insurance category for each of those months and watch the balance grow until the bill is due.
Why Follow Rule Three?
- Even out the crazy ups and downs of your financial life.
- Gain a true picture of your discretionary income.
- Ease the stress of opening the mail. (The money will be sitting there waiting to be used to pay that bill!)
My car insurance bill came today. It comes once every 6 months. I have the money to pay it and it won’t hurt at all.
Thank you YNAB. source
Roll with the Punches
You will fail. Without a doubt. My wife and I overspend in our grocery category 80% of the time. It’s killing me! The key is to roll with the punches. YNAB will make small adjustments with that overspending, ensuring that you fix those mistakes before you go on to the next month. You’ll barely notice as YNAB makes its gentle corrections.
Why Follow Rule Four?
- It keeps you on your “Budgeting Feet” so to speak so you can stay in the fight.
- You start each month with a clean slate, which is a huge psychological boost.
Rule #4 forces/reminds me to take care of the over spending the following month before I spiral out of control. That is why I love using YNAB. By following the four rules you can’t lose. source
Today is the day you will begin doing things differently.
