“Over the past six years, we’ve moved from Los Angeles to Washington, D.C., to Minnesota to New York … that leaves residual financial heartburn if you’re not using a system,” said Eric. And, unfortunately, they hadn’t been.
In 2016—when they moved with their four kids to upstate New York—he and his wife, Melissa, had reached a tipping point. They were excited about Eric’s new position as an engineer for a biopharmaceutical company, but the up-front costs of the move magnified their financial weak spots. Eric said, “In a couple months, we paid over $10,000 in moving expenses, but had no idea how long the reimbursements would take. This made our credit card balances that much higher.”
It wasn’t just the moving expenses, either. Eric and Melissa were strapped by credit card debt, back taxes and overdue medical bills, not to mention the cost of running their household.
Not Budgeting Wasn’t Working
With all of the changes brought on by their move, by May 2016, Eric’s head was spinning. He said, “I felt we were drowning financially. We’d made the trek across the country, paid tens of thousands out, had paychecks, bonuses and reimbursements coming in … and we had absolutely no handle on what was coming and going. I’m the sole provider, and there was a huge weight on my shoulders.”
It was around that time that Eric and Melissa decided to make a list of their outstanding bills and anticipated living expenses for their new city. Eric said, “It felt like a hopeless task; every time I wrote up another spreadsheet, either things looked overwhelming or there were so many variables in play that it was impossible to figure things out. We were completely lost.”
And that’s when Melissa recalled a conversation she’d had with her sister. She said, “Andrea’s had good results using YNAB, why don’t we try that?”
A Spark of Hope
Eric set to work. He said, “I went to the YNAB website and pulled up the first intro video … I can hardly explain it, but in the hour, or two, it took to input our balances and connect our bank accounts, that crushing weight on my shoulders began to lift. There was a glimmer of hope.”
For the first time in a decade, Eric felt confident about managing the family finances—and after he’d given every one of their dollars a job, he was ecstatic. He said, “YNAB is revolutionary. Getting an accurate picture of our entire financial situation on [a single] webpage gave so much clarity to what had been a very messy equation.”
Budgeting Was Working
Simply by organizing their finances in YNAB, Eric and Melissa found some significant early wins. He said, “The first thing we realized was the insane amount of interest we had been racking up while riding a $40,000 credit card float. We had the cash to pay it off, but had been reserving it ‘just in case’. We wiped out those balances, immediately.”
And that clarity helped them as they scoped out the available real estate in their new city, too. Eric said, “We found a house in our price range that we liked, and we knew exactly what we could afford—and how much of a monthly mortgage payment we could take on—and that gave us power not only in deciding on a house, but also in negotiating a price. We gave the sellers a ‘final offer’ and had confidence that we would not be flexible on that price … the sellers decided to accept.”
They diligently budgeted all of Eric’s new paychecks, plus the inflow from the sale of their old house in Minnesota. And, within a month, Eric and Melissa had taken control of their finances and aged their money four days!
They Were on Their Way
By the time that Eric and Melissa had reached their YNAB-iversary, a year later, they’d paid off more than $25,000 in debt and increased their net worth by 168 percent. And there were other financial wins, including:
- Plunking down $1,600 in cash to prepay their winter heat/oil bill
- Paying cash for a new washing machine, when theirs broke
- Repairing the air-conditioning in Eric’s truck when it stopped working in the dead of August
They also realized that maybe it was time to get rid of their old, beater truck. Gas and maintenance categories don’t lie, and it was time to upgrade. Eric said, “We sold it on Craigslist and paid cash for a fuel-efficient car with half the miles and a much more reliable track record. It should save us approximately $4,000 per year compared to driving the truck.”
And, just three months after that, they’d socked away $30,000 in savings.
Talk About a Transformation
By the end of August 2016, Eric and Melissa had aged their money 51 days. Eric said, “I began to look forward to my payday, not because we’d have more money coming in, but because it was fun to sit down together, talk about priorities, and allocate those dollars.”
What a difference to just three months prior, when they’d been hoarding cash and afraid to pay off their credit cards! Eric said, “YNAB changed our view of money 100 percent. I no longer see money as a mysterious stranger who comes and goes. Now, I know that it’s a tool to be used, and it’s very predictable.”
By the time January 2017 rolled around, they were fully in their groove. Eric said, “I received a yearly bonus, and we were kind of debating what to do with those funds. In the past we would have found something to spend it on, but this time we allocated it to future months’ expenses. In February we were able to retire our first significant debt—the back state taxes. The day I called the tax office and made that payoff, I was on such a high.”
And, as of this writing, Eric and Melissa have crushed $89,600 in debt. And, since June 2016, their net worth has increased by 2,840 percent!
The True Cost of Happiness
When people think of budgeting, they often think it’ll be a hassle. Eric couldn’t disagree more. As a self-proclaimed “YNerd”, he said, “Once we got into the habit of budgeting, [it] became very, very easy. It was almost like our financial situation was on autopilot.”
He went on, “It’s amazing to see in our budget reports that only 2.7 percent of our overall spending has been from our ‘Fun Money’ category (this includes eating out). It’s crazy to me because I know how much fun we’ve had during the year, and I can’t believe we did it with such a small fraction of our income.”
If you’re feeling lost, Eric has this advice: “I know what it’s like to try to avoid thinking about money, and hope things will just magically get better. They won’t. And the stress you’re feeling, now, isn’t necessary. I guarantee just investing a few hours into setting up YNAB will dramatically change the way you feel about your financial situation, and diligently applying and following the system has the ability to change your life.”