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1 May 2006

Dave Ramsey Budget Principles Jive with YNAB

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by Jesse Mecham

I’m a fan of Dave Ramsey. He’s one of the few ‘gurus’ that actually puts a lot of emphasis on budgeting (though he could still do it more and it certainly wouldn’t hurt!). Dave Ramsey’s budget principles go hand-in-hand with the YNAB System’s principles – though YNAB goes a step further in a few areas.

Dave Ramsey is certainly intense when he goes on about the importance of a budget. A budget, to Dave Ramsey, is your master for the month. He states again and again that you are the boss of what goes on with the budget, but that once it is set, it is your master. You look to the budget for what you can and cannot do. This principle is key. A budget is a completely useless exercise if you only look at it at the start of each month and then pay it no heed throughout the other 30 days. It should serve as a reminder of what you can and cannot do. Hey, you said it first!

Dave Ramsey also stresses the importance of the budget being a mutual agreement between spouses. You cannot have an effective budget where one spouse doesn’t really think it has any validity. It needs to be binding on both parties. Both agree, and as Dave says, “spit shake” on what they will spend in each budgeting category for the month. If a revision needs to be made mid-month (which is quite normal, and totally okay) it must be unanimously agreed upon by both spouses. They key word here is unanimously.

Where does the YNAB Budget and Dave Ramsey’s advice differ? Only in a few places.

One is in the saving of one month’s expenses. Dave suggests a priority spending plan for those with variable income and I find it much easier (in the long run) to simply save one month’s expenses and spend last month’s primary income in the current month. I’ve found that living with a buffer gives quite a bit of piece of mind. Dave Ramsey agrees, in that he has people save a “Baby” emergency fund of $1,000 before they begin attacking their debt with “gazelle-like” intensity.

The second point of difference with YNAB’s Budget verses Dave Ramsey’s advice is with Rule #4. Dave doesn’t have an alternative, as Rule #4 (Paying yourself back for past mistakes) is very unique to the YNAB Budget. I think he’d buy into it though. It only helps you be more conservative in your approach to money. And if anyone is conservative with money, it has to be Mr. Ramsey.

Dave is also a big promoter of zero-based budgeting (Rule #2) and rainy day funds (Rule #3). Overall, Dave Ramsey’s budget ideals are very closely aligned with the principles that YNAB espouses (read: enforces). If you’re a Dave Ramsey fan looking for a budgeting solution, it just may be that your search has come to an end.

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)

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