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What's the secret sauce to budgeting? YNAB's Four Rules help build habits, reach goals, and just generally be a financial wizard. Magic! | YNAB
5 Dec 2016

The Rules Are The Magic

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by Todd Curtis

YNAB the app? It doesn’t work because it’s pretty (although, it is) or because it has amazing tech wrapped deep inside (but it does). It works because it is built around these Rules, because they work together.

Easily my favorite thing to do at YNAB is to talk to customers about their successes. They say things like…

“I can finally answer my internal question of “can I afford this!”  Moving forward, I feel way more confident and secure in my financial life…”

“I am now able to drop down to working a 4 day week and will still be able to put aside a little bit of money towards my saving goals each month.”

“YNAB is really helping me become more aware of the reality of my spending habits and more mindful of where my money is going.”

“I used to never truly enjoy that spontaneous cup of coffee, that trip to the cinema etc. because I didn’t know if it was actually alright to spend those money. I’m finally feeling okay about buying stuff – because now I know that I have budgeted for it!”

“YNAB has given us the freedom to leave the juggling behind and work with what we have, creating a feeling of wonderful abundance.”

Here’s the thing: None of these people are talking about the software. And I love it.

Software + Magic = Secret Sauce

Sure, we make software—and we’re making it better every day. But our gushing customers are talking about themselves. They’re talking about feeling empowered, confident, and not feeling stressed. They’re talking about being in total control of their finances.

They’re doing this with their own determination, their own aspirations—and YNAB’s Four Rules.

You see, the Rules are the magic.

The Rules help you be proactive and purposeful. The Rules help you uncover —and re-shape—spending habits you didn’t realize existed. The Rules help you turn spending from a guilt-ridden activity to an expression of your priorities; how to build security and flexibility in your financial life and, yes, be in total control.

Yes, four simple rules can help you do all of that.

Rule One: Give Every Dollar A Job

Have you ever reached the end of the month and wondered where all your money has gone? Of course you have—and it feels terrible. Giving every dollar a job puts an end to this dilemma.

Rule One works by making sure your money is reserved for what’s most important to you, and by making sure you budget only with money you actually have.

Without Rule One, you spend your money on—whatever. Whatever seems most important in the moment. Whatever your neighbor or your friend is doing. Whatever is right in front of you.

With Rule One, your priorities are concrete. Questions of should-I-or-shouldn’t-I already have answers, and you can spend with confidence because you budgeted for it or if you didn’t, those dollars are better spend on something more important.

Rule Two: Embrace Your True Expenses

Life can feel like it’s full of financial emergencies and surprises. Embracing your True Expenses is a complete game-changer—you’ll actually be able to expect the unexpected.

Rule Two works because you’ll break down larger, less frequent expenses down into monthly, manageable amounts. Without Rule Two, annual insurance bills or winter heating costs suck the life out of your budget when they happen—you feel like you can’t get ahead. If only you could have a normal month—except there is no normal month. Or an “emergency” always seems to come along like a repair bill or a medical emergency.

With Rule Two, you’ll still get those bills. Your car will still break down, and you’ll still need to go to the doctor eventually.

But it feels completely different. You just pay them. There’s no stress. There’s practically no emergencies, as least not financial ones. With Rule Two, you’re ready.

Rule Three: Roll With The Punches

You’ve tried to budget. It looked so pretty on paper, or a bunch of envelopes. But it didn’t take long before it felt completely unrealistic, because life changes constantly, but you were told your budget shouldn’t.

Wrong.

Rule Three works by making sure you have a budget for the real world. Without Rule Three, every bump in the road is a source of frustration and reason to quit budgeting. With Rule Three, when plans change, you change your budget. It’s just that simple. It’s like a re-do on Rule One, and that’s the way life works.

Life changes, your priorities change, and your budget can and should change, too. And you should not feel bad about it.

Of course, the bottom line doesn’t change—you’re still working with the money you actually have. You feel confident and adaptable all at once.

Rule Four: Age Your Money

We all wait for our paychecks. But do you feel sometimes like you desperately need it? Like you’ve got six or seven things backed up just waiting for that check? Not with Rule Four.

Rule Four works by taking the money you’re earning right now and budgeting it for future expenses. Without Rule Four, you’re never getting ahead and are always waiting for more money.

With Rule Four, you don’t even need your check when it arrives—if you still get a physical paycheck, you could wait to cash it. For weeks. You budget for future expenses instead of scrambling for today’s. This starts out with next week’s expenses, but with the help of the other three Rules, quickly becomes budgeting for next month’s expenses—and beyond.

The Rules Work And Will Feel Magical

These Rules work no matter how much money you have or don’t have.

They work whether you’re budgeting for yourself or a family, whether you’re paid like clockwork or juggle freelance projects that make your income unpredictable. They work for getting out of debt or achieving a goal like a paying cash for your wedding. The rules are the magic.

YNAB the app? It doesn’t work because it’s pretty (although, it is) or because it has amazing tech wrapped deep inside (and it does). It works because it is built around these Rules, because they work together.

And because they work together with you, building habits, reaching goals, and just generally being a financial wizard. Magic!

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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