The Key To Reducing Your Money Stress

Two words: Rule Four.


At YNAB, everything we do is designed to help you reduce your financial stress. Our software, our Four Rules, and especially, Rule Four.

The last couple weeks I’ve gone into more detail on Rule One: Give Every Dollar A Job, Rule Two: Embrace Your True Expenses, and Rule Three: Rolling With The Punches.

Rule Four: Age Your Money

Rule Four is where not-having-to-stress-about-money really kicks into high gear. The goal with Rule Four is to live on money that you earned last month. When a dollar lands in your pocket, a (hypothetical) timer starts ticking, and we want you to not have to spend that dollar for at least 30 days or until your dollar is 30 days old.

Most people—80% of people—live paycheck to paycheck. When they get money, they spend it immediately, or in many cases, they have already spent it!

They have bills waiting for money to arrive so they can pay their bills. There is a lot of hand-wringing, juggling, avoiding, ignoring, delaying, and stressing.  

If your money is at least 30 days old, when a bill comes you have money just sitting there waiting to pay that bill and you just pay it. Not even a hint of stress.

How Do You Age Your Money?

You budget your money. Just keep budgeting. As you follow the first three rules, you will start to have more and more money, just sitting there waiting to do all of the jobs. The more you budget, the more you save, naturally, the age of your money climbs.

We’ve noticed that if you are spending money that you earned at least 30 days ago, you will experience breathing room and margin that you haven’t felt before. That is a sign that you’ve stepped away from the financial edge.

You no longer have to do this song and dance, waiting for your paycheck to pay this bill or that bill. When the bill comes, you just pay it because you have that pile of money that’s been sitting there for 30 days. 

You don’t necessarily have to do anything different with Rule Four, there’s nothing special to be done. Just keep budgeting.

How Long Will It Take?

On average, it takes YNABers about four months to age their money to 30 days. You can get their faster by selling stuff you don’t want, working overtime, or cut back more dramatically in the short-term to sprint ahead and help you cross the finish line. The sprint is not forever, once you hit that 30-day mark, your stress plummets and it is just a matter of maintenance.

Less Stress, More Time, More Freedom

Rule Four is starting to sound a lot like early retirement! I suppose it is, retiring from living trapped in the paycheck to paycheck cycle.

Everything about Rule 4 is wonderful—less stress, more time, and freedom. When you’re no longer having to time your bills to your paychecks, when you’re no longer worried about having enough to buy you time to make a decision or handle the unexpected without charging up a card or having a panic attack.

Aging your money buys you time, and often, that is all you need to make better decisions, take advantage of opportunities, and handle whatever life serves up. It is the best feeling and you will never look back. 

Just follow the first three rules and you’ll notice you have more cash in your checking account than you ever thought possible. You will be less stressed, and suddenly have options that you’d never considered before. Age your money. It’s everything.

 

If you can’t wait until next week for more whiteboard wisdom, subscribe to our YouTube channel. If you have a question or an idea you’d like us to address in a future Whiteboard Wednesday episode—we’d love to hear from you: [email protected]