Why YNAB (You Need A Budget)

You Need A Budget

Do you live paycheck to paycheck?

Do you have trouble hitting your savings goals or getting out of debt?

Do you make money but have no idea where it goes?

Do you struggle to get your cash flow under control?

YNAB_logo

My family has suffered through all of these problems and more at various times, so if you are dealing with money stresses, I really, really feel you.  That is why I wanted to share this simple, yet life changing piece of software and philosophy we decided to try this summer.  It is called YNAB (You Need A Budget) and it’s pretty amazing.

 

The idea behind YNAB is based on 4 simple rules to help you deal with the above money problems:

  1. Give every dollar a job.
  2. Save for a rainy day.
  3. Roll with the punches.
  4. Live on last month’s income.

 

The software is basically a snazzy Excel file. No accounting skills necessary to operate it.  When you have money come in (i.e. a paycheck, birthday gift, etc.) you add it to the bank account as income.  Then you increase your budget items (i.e. rent, food, car, etc.) by the same amount of your income- no estimating, no guessing. When you spend money you record it as an expense in the bank account to whatever budget item you spent it on (i.e. you buy groceries and put the amount on the food line).  The key is to spend based off of the budget and NOT what’s in your bank account.

Of course in reality nothing is really just that simple.  The great thing about YNAB is all the support– the emails, the free classes, the forums.  I think the hardest part for me was the mental and emotional commitment to making it work.  But it’s well worth it.  Download the software– there is a free 34 day trial.  And if you decide YNAB changed your finances, your relationship, your stress levels, your business, and your life, buy the license with my coupon and we’ll each save $6: http://ynab.refr.cc/N9PSBXW

Wishing you financial freedom!

Evaluating Your Spending

shopping cart, receipts and money

After the last #FinanceFriday post, many of you contacted me about setting up Mint.com and Liveplan.com. Congrats on taking that huge first step! And if you didn’t set up either – go do it now!

After setting up one of these accounts you might hit the point of overwhelm and think, now what?!? My advice is first to hook up bank accounts in Mint or accounting system in LivePlan and start bringing in transactions. Both of these programs will turn all of that jumble of numbers and data into visual graphs that will make it easier for to understand and digest.

Now you are ready to evaluate your spending! Why should you do this? The reason is that, for most people, this is the aspect of their finances that they have the most control over. You might not be able to increase your income or change your debt levels over night, but you can very quickly change how you spend your money.

When you first look at where your money goes you might be surprised. Maybe you spend way more on eating out and entertainment than you through. Maybe your rent or your cell phone bill is too big of a portion of your income. Or maybe you have a big pile of cash stashed under your mattress.

Whatever you discover, it is important not to judge yourself harshly. This exercise isn’t a tallying of your financial sins. It’s an objective look at your cash flow. As you look at this information, think about whether your spending is in line with the life or business you want. Then you’ll be ready for the next step.

Need help with Mint or LivePlan? How about taxes? Set up a meeting with me here.