Improving your cash flow can make a big difference in the quality of your financial decisions.
I discovered YNAB four years ago in the summer of 2006. While I paid all my bills on time, I was not controlling spending and ran up some credit card debt. One of the last purchases I made before discovering YNAB was a brand new riding lawn mower. I mow two acres of my four acre property. My older riding mower finally broke down, was not worth the repairs needed, and had to be replaced. I simply had to have a good riding mower.
At that time, I had no savings, no rainy day funds, and no emergency fund. My options were fairly limited. I could only see one – credit. Armed with nothing but a credit card, I marched myself over to the nearest store and bought a shiny, brand new riding lawnmower for about $1200.
I did not realize it at the time, but I could not afford this mower.
I spent the next year getting a much needed wake up call. I shifted my priorities, stopped the bleeding and learned to live on less than I earned. Since that time, I have paid off all my debt, built up an emergency fund and saved toward a number of rainy day categories. But it wasn’t until recently that I realized the true power of having cash on hand.
Remember that new lawn mower I bought four years ago? That turned out to be a real lemon. It died tragically in the back field last September. Despite good maintenance and care, the engine seized. Way past warranty, I had to buy another mower.
But thanks to YNAB, things were different this time for two significant reasons.
1. I knew exactly what I could afford.
While I wasn’t planning on purchasing a mower, I was able to review my entire financial situation, decide how much I could afford and move some funds around. I knew this time that I could set an amount I could truly afford and then spend with no worries.
2. Having cash on hand afforded me better options.
The truth is, despite the fact that things are MUCH better financially, my priorities are different. I didn’t want to spend $1200 on a new mower. But that’s okay. With the help of my trusted mechanic, I spent a few weeks researching second hand mowers and just purchased a nice second hand mower that will do the job quite well! Because I had cash, I could not only shop on the second hand market, (NOTE: private sellers and yard sales typically don’t take credit cards), but I could negotiate! I was able to get my mower for less than the asking price, and for less than half of what I paid for four years ago.
Budgeting improved my cash flow situation considerably. Better cash flow improved my spending decisions. Better spending decisions improved my budget.
All of this has improved my peace of mind.
It’s a beautiful day here in the state of Maine. I think I’ll go mow the lawn.
Erin – YNAB Coach