What If You Can't Live on Last Month's Income (yet)?


“Live on last month’s income.”

If I had to choose one sentence to describe the YNAB way of personal budgeting, that would be it. Living on last month’s income, I’m told, is budgeting nirvana.

But what if you’re not there yet? Is YNAB only for people who already have a month’s expenses in the bank?

Absolutely not. In fact, Jesse (and the YNAB team) recently re-ordered the Four Rules, moving “Live on last month’s income” from Rule One to Rule Four. Not because it became less important; simply because most YNABers will spend months or years living Rule One – Three in preparation for living Rule Four.

In other words, most of us in the YNAB community live check to check (for the time moment). Being a check-to-checker doesn’t make us second-class citizens around here. It just means our relative cash tightness requires us to get a little creative with our YNABing.

For example, as check-to-checkers we’re constantly timing bills, right? We have to stay keenly aware of our bank account balances to avoid overdrawing our bank accounts.

Some new YNABers tell us they can’t buy into Rule One (which encourages you to only budget dollars already in your possession) because they need to have their entire month’s expenses in the budget ahead of time to make sure they don’t miss any bills.

Budgeting money you haven’t received yet causes serious problems for check-to-checkers – mostly because it turns your budget into a physical manifestation of the classic “what bills do I have coming up and how much do I have in my checking account” game (one of my all-time favorites).

Good news: you don’t have to budget into the future in order to time your bills. Use your categories to set up a simple bill-timing schedule. Check it out:

Pretty simple, right?

1. Set up a master category for each of your paychecks.

2. Include the bill’s regular amount and date due in the subcategory name.

3. As checks come in, budget according to the schedule.

Diligently following Rule 1 sets you up to follow Rules 2 and 3, which will eventually carry us all to Rule 4 – ultimate budgeting bliss.