Amidst the launch craziness, we didn’t get to talk much about the fact that we renamed two of our rules.
So here we go—we renamed two of our rules. The idea was to better focus on the core principles behind them.
Rule One: Give Every Dollar a Job remains our rock. Rule One is all about dealing with the now. It’s about your priorities. (Although have you ever noticed that all the rules could really be broken down to priorities. It’s all about prioritizing.)
When you sit down to budget. Budget to zero. Don’t leave any dollars unaccounted for. Just ask yourself, “What does this money need to do before I get paid again?” And assign every dollar accordingly.
Then you move on to Rule Two: Embrace Your True Expenses. It used to be “Save for a Rainy Day” but we’ve renamed it because we wanted the concept of “true expenses” to be more clear.
We want you to look ahead to larger, less frequent expenses, break them up into monthly amounts, so when you have that $1,200 that you spend on Christmas (for easy math, not a recommendation or condemnation), then you would say, “OK, the holidays is a $100/month bill.” And really, it all flows back to Rule One, you are giving every dollar a job, just that some of the jobs will be done today, and some won’t be done until far into the future.
This interplay between Rule One and Rule Two is how YNABers get ahead. Your checking account balance will skyrocket because you are allocating for the future. Your cash flow—instead of being a rollercoaster—will normalize. It’s just prioritizing, but expenses that are further out in the future.
And then something will happen and you’ll need to adapt. That’s why we have Rule Three: Roll With the Punches. Your circumstances, the information and/or your priorities can and will change. And when they do—change your budget. We actually had to make this a rule, so you won’t feel guilty about changing your budget. This is important. Remember, budgeting is all about priorities. So, when your priorities change, change your budget. Done.
Finally, Rule Four: Age Your Money. We used to talk about “Living on Last Month’s Income” and while that is still the heart of the principle, we didn’t want people getting hung up on the mechanics of when they got paid or if they didn’t get paid every month or whatever unique set of circumstances you’re dealing with. The principle behind aging your money is simple: spend money that is older. Try and spend money that is at least 30-days old.
As you save money, your age of money naturally goes up. And when you’ve been saving up for something big, and you spend that money, it will go down. And that isn’t necessarily a bad thing. The goal would be that it never drops below 30 days, even when you spend a big amount at once. You’ll notice we didn’t prescribe a certain number, because everyone’s situation and comfort levels and priorities are different. It’s just a principle. Implement it to your specifications.
Priorities—your priorities—are at the heart of all four rules. It’s all about what you want and managing your money in such a way that you get there faster and with less stress.
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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?