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Budgeting is a journey, my friend, and this is the story of how my husband John and I finally figured out how to get a grip on our variable income.
Our YNAB story began in 2013. In the years since, we’ve learned all kinds of financial lessons and reevaluated our reevaluations of our priorities ten times over. (Priorities tend to shift as you settle into a budget!) But the biggest breakthrough of them all was an epiphany about managing our offbeat income structure.
See, over the years, John and I have supported ourselves and our four kids on dual variable incomes. He’s in sales, earning bi-monthly paychecks and a quarterly commission, and, for most of our marriage, I’ve been a freelancer with brief stints working for an employer.
Until recently, we considered John’s commission checks to be pure fun money (every budget should have some!)—and we’d spend them on vacation, home improvements and Christmas. You know, fun.
Of course, I was thrilled to be part of Team YNAB. One of the perks that they didn’t list in the benefits information was that I’d begin to see my family’s budget through the lens of YNAB support. And that’s when it clicked.
After analyzing our numbers, I realized that nearly 40 percent of our income was coming from John’s quarterly commission checks! We’d been having more fun than we realized, it turned out, and now our (sometimes painfully) lean months suddenly made more sense.
Before this revelation, I was operating from the rigid perspective that we needed to cover all of our monthly expenses with the income that we received during the month. That lead to friction and stress because it just wasn’t possible. Any time a true expense popped up, we were stuck, unless we happened to have some of that quarterly commission money in the bank—but, as you know, we spent most of the commission money on fun stuff.
Now, I’m going to share something with you that I never thought I would believe: it can (truly) feel more fun to have money set aside for an unexpected car repair, homeowners dues or even car registration, than it does to spend all those dollars on vacation. Hand on my heart. It’s the truth.
… and seeing that nearly half of our annual income arrives in those quarterly checks? Well, it completely changed the way that we view our budget.
Here are the two simple, and powerful, ways that we adjusted:
First, we decided it was time to take Rule Four, Age Your Money, to heart. This step of YNAB’s method—to save enough money so that you don’t need your paycheck right away—can feel less urgent (if not impossible!), especially when you’re living paycheck to paycheck … but that’s exactly what it cures! So we wholeheartedly dove in.
When our first commission check of 2018 came in, we skipped spring break. Instead, we chose to prioritize our financial stability, setting aside a month’s worth of cash in our “Buffer” category. And what a shift!
Suddenly, I didn’t have to wait until we received our mid-month paycheck to finish budgeting our groceries, gasoline or remaining bills. I had plenty of money to budget for a full month, all at once. Budgeting was easier and infinitely less stressful because I could pay every bill at the beginning of the month and be done with it!
There’s a reason they’re called priorities, right? So, we looked at our true expenses—the less frequent things that we need to budget for—and accepted that our monthly income wasn’t enough to cover them. Good thing we have those quarterly commission checks!
Now, instead of spending John’s commissions on fun, we allocate those dollars to our true expenses for the quarter. We did this by looking at our “Average Spent” data for each category and used that to guide us in deciding how much we should budget for the next three months. This includes things like car repairs, home repairs, gifts and, of course, homeowners fees and car registration!
But the tool that helped us the most in managing our variable income was a budget template. When we assessed how much cash we absolutely had to spend in order to survive each month, it was obvious that we needed to use our commission checks more wisely—our monthly pay just didn’t cut it. It took a little planning and some extra discipline to get into the groove, but we were rewarded richly for our efforts …
With our new, improved money management style, we’re so much better able to handle our day-to-day finances. But, even better, we’ve been able to prioritize longer-term savings goals and retirement (Yep, just two more examples of unexpectedly fun budget categories!).
Now that we’re in control of our money, we have the freedom to make a lot more choices in life. Breaking the paycheck-to-paycheck cycle was huge, but it’s so much bigger than you can possibly know until you experience it. And I hope you do.
Try YNAB, free, for 34 days, and see for yourself. And, if you have questions, I have to say, the support team is a pretty friendly bunch.
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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