In honor of the Four Rules Deep Dive happening on our podcast over the next few weeks, we’re reposting some of our favorite Rules blog posts. This one was originally published in December 2016. The video, however, is new!
Today I just want to talk about Rule One, our first—and arguably most important—rule. The other three rules are just derivatives of Rule One (but don’t tell them, we don’t want to hurt any feelings).
Rule One: Give Every Dollar A Job
Not most of the dollars, not some of the dollars, not almost all of the dollars, but every dollar a job. The idea behind this rule is really just to decide what is most important to you. What are your priorities?
Until you can answer that question, you can’t line up your money with your priorities—and that overlap is where you’ll find contentment.
The big win when you start using YNAB is that contentment comes from the fact that your money is actually doing what you want it to do, instead of whatever it wants.
The first rule (and as luck would have it, the first step to budgeting) is articulating what you want your money to do and then put your money to work, doing those things.
Zero-Based Budgeting Is Budgeting With Real Money
If you give money to Job A, you will have less to give Job B. Your money is finite. So, immediately, you’ll have to weigh which job is most important to you.
If you give more money to one category, you have to give less to another. That is zero-based budgeting. And it works, because it forces you to clarify your priorities.
Scarcity Brings Clarity
You will feel a little twinge of scarcity and that is OK. Because that is real. You don’t have an endless stream of dollars. You don’t have a money tree. You have, what you have. And when it is gone, it is gone.
When you give every dollar a job, you recognize you have X budgeted for restaurants, and X for retirement, and X for clothing, and X for the kids—that’s awareness and it’s powerful.
You might feel like you have just enough, or maybe even not quite enough, and your priorities start to become obvious. They really rise up, because you’re having to make harder decisions about exactly what you want your money to do.
Protect Your Priorities
Rule One will help you clarify your priorities, impose scarcity, and make better decisions with your money.
Your money will start to do what you need it to do. You will be able to step away from the financial edge. You will be far less stressed. You will feel like your money is something you can master, instead of serving like a slave.
Rule One. It’s a game changer.
Your Next Step
Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?