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1 Jan 2016

New Year’s Resolutions Don’t Work. Until Now

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by Jesse Mecham

What better time to talk about goals than on New Year’s Day, where you’re still bleary-eyed, but managed to find your way to a blog all about budgeting…

As you may well know, the new YNAB launched just two days ago. It’s jam-packed with features that will help you budget better than ever. One of those features for that better-than-ever experience is Goals.

Goals: Because Math is for School, not Real Life.

There are three different types of goals you can set in the new YNAB. Select a category, and you’ll see the goal section in the category inspector on the right.

“I want to save $3,000 for a vacation in 10 months.”

You’ll set a target date, and a target balance for your vacation category. YNAB will figure out (with highly complex math!) that you should fund $300 each month into your vacation category. Okay, you could have done that in your head.

But what if you wanted to save $3,000 in nine months? Little tougher to do that in your head now, isn’t it Einstein?!

Or, better yet, what if you only fund $150 your first month, so you actually need to save $2,850 over the next nine months. Do that math!

YNAB will do that math for you. If you’re underfunded on a goal for the month, the category balance will be orange. It’s not screaming at you when it’s orange, but it is kind of, you know, trying to get your attention so you can perhaps fund it appropriately.

“I want my emergency fund category to be $12,000.”

You’ll set a target balance. There’s no time limit, so you’ll fund it as you can. You’ll see your goal progress in the category inspector, and you’ll feel good as it climbs toward that glorious 100% of funding.

Great uses for a target balance without a target date include an emergency fund, car repairs, or medical deductibles.

I’m sure you’ll find other uses for it as well!

“I want to fund my grocery category with $1,200 each month.”

True story.

We eat well, and we feed many.

Setting up funding goals for specific categories is akin to laying a budgeting framework on top of YNAB. It’ll let you set a “let’s start from this point each month” position, where you can then make tweaks as needed.

I opt to have all of my fixed-amount bills in one category, creatively named “Fixed.” I know I need to fund that with $520 each month in order to cover property taxes, life insurance premiums, the cellphone, HOA, car registrations, car insurance, homeowner’s insurance and… I think that’s it.

Another great use of the fund-this-much-each-month goal: variable expenses such as your gas and electricity. Gas is high in the winter (heating) and low in the summer. Electricity is high in the summer (a/c) and low in the winter. You can set an average that will pad your category during the inexpensive months, and draw from that padding during the expensive months.

Goals + Quick Budgeting

When you use Goals as a starting framework for your budget session, it really speeds things along. How does it speed things along? You click a button in the Quick Budget area that basically funds everything according to your goals (and scheduled transactions, though scheduled transactions deserves its own post). This “click a button and then make adjustments” functionality is killer.

Remember, it’s important that you’re aware so you can make great decisions about your money priorities. It’s not important that you do a lot of tedious things. Tedium is not the same as awareness. Not even close.

So when it comes to setting up your starting framework with Goals, you’re acknowledging that a lot of your budget doesn’t need to be actively managed on a frequent basis. A semi-annual “good hard look” goes a long way. I do ours annually and have found that to be quite effective.

What’s important in that budget meeting is that you’re making decisions about the stuff that isn’t to spec. It’s the times where something has popped up and you need to make a decision. It’s where your priorities (rubber) meet reality (the road).

So, use Goals to 1) budget faster and 2) know how you’re doing at a glance.

Here’s to batting a 1.000 on those New Year’s resolutions with the new YNAB.

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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