How could the way we budget be so impactful? Because YNAB is more than expense tracking, more than income forecasting, and more than a list of bills. A budget is more than all that, and embracing YNAB unlocked a whole new view of our money.
Budget Better To Live Better
We often view budgeting with frustration. They feel like buzzkills. Reality checks. Unfortunate truths. And because of this we invest as little of ourselves into them as possible because we want to get on with living our best life. It wasn't until we tried YNAB, learning and applying the principles behind it, that we realized a budget as YNAB would have you envision it can flip those ideas on their head and be the tool for helping you actually live your best life according to what's important to you. And so here's a reflection of how YNAB has positively impacted us and our approach to finances and budgeting.
1. YNAB removed the guesswork from how we could spend our money
Previously, even though we kept lists of bills to account for and had an idea of how far our paychecks could or should go, we still found ourselves mentally segmenting our account balances into our intentions or noting how much was "safe to spend" or that we needed to keep available. Or even just hoping our credit card balance wouldn't outpace our earnings for the month! After transitioning to using YNAB, assigning what we wanted to use each dollar for, and keeping the transaction categorizations updated, we were able to trust what our budget was telling us and began using the information there to make spending decisions. We no longer needed to check our account balances to know how much we could spend (other than ensuring money was in the right place), because our continuously updated budget showed us what we had currently allocated for a particular spending category.
2. YNAB connected our plans with our actions continuously
For us, budgeting prior to YNAB involved making a general plan once in a while to roughly guide how we'd spend our money each month, and it was up to us to see it through. The tough part about this was that the plan became obsolete the moment things didn't go as expected. By using YNAB, you make a plan but adjust, update, and adapt as things unfold. It's a continuous plan in action with your day-to-day choices being reflected in your budget category assignments and re-assignments. We didn't have to do a look-back at the end of the month or every few months; we could see at any given time how things were going.
Moving budgeting from a lagging report after things have already happened to a leading plan helped us make decisions faster and with more updated information. It minimized regrets and increased opportunities because the money hadn't been spent (or promised via credit) yet.
3. YNAB encouraged specific purposes for our savings
I covered this in its own post (because it was really that powerful), but too often we refer to "savings" without fully understanding what we're saving for. Even if we have an inkling of how we might use our savings (it's for an emergency! it's for a vacation! it's for anything I forgot about or spent too much on!), giving it specific categories really opened our eyes as to how many ways we were subconsciously splitting it up. With everything in front of us and accounted for, we could now shift from "we need to increase our savings" to "we need to fund these priorities".
Even though we might think of a budget as just pertaining to our checking account, it's important to realize that all of our money is meant to be spent and deserves to be thought about in terms of those purposes so we apply intentionality to every dollar. Some dollars are spent quickly on every day things, some are spent after years of being built up, and some we hope to never spend. What are those things? We don't have to be afraid of "accidentally" spending our savings when we designate purpose.
4. YNAB enlightened us to think beyond monthly bills and expenses
Identifying what YNAB calls your "true expenses" and preparing for them was a huge leap forward for us. Think about some of the ways your budget takes a hit any given month- car repairs, annual renewals, visits to the veterinarian, holiday gifts, etc. The difficulty these present for us is while we attempt to stabilize our expenses for the sake of predictability and consistency, these one-offs come in and wreck our carefully constructed plans for our money, causing us to use money we had wanted to save for something else or go into debt.
What if I told you that your budget includes more than your monthly obligations? What if you could anticipate and prepare for these "unpredictable" things by setting money aside for them in their own categories each month, thus making them part of your plan? By doing this, we realized we needed to adjust some of our spending in other areas to account for these things that might or would eventually happen. But we made what might've been a financial emergency a regular expense to plan for, and smoothed out the impact to our budget from one impossible month to several or many months. Click here to read more of what I've written on the subject.
5. YNAB inspired us to simplify our account structure
With YNAB's digital envelopes, we're freed up to consider the purpose of each dollar's location separate from each dollar's spending purpose. You might have multiple checking and savings accounts, funneling money between them depending on what the need is. Maybe an account where bills are auto-drafted from that you want to ensure has the right balance, and another account for everyday spending. Maybe multiple savings accounts and another account for personal spending. What happens is that we increase the complexity of our financial lives by needing to manage transfers and balances because we end up using the accounts for both where the money lives and what the money is for. We think we're clever because segmenting things up like that helps keep things straight and "harder" for us to spend too much.
But what if you didn't have to keep track of all these accounts and if the transfers would happen in time and where everything was coming from and going to? In YNAB, your categories do this for you so you don't have to maintain all these purpose-built accounts.
The simplification made things easier for us and allowed us to more easily see what could be moved to a High-Yield Savings Account, what needed to stay readily available for imminent spending in checking, and any other considerations we wanted to use to our advantage without worrying about if the "bills account" was funded. Because the bills category was funded. And we made discretionary purchases based on how much was in our discretionary category, not what was in the account. We didn't need our own personal accounts because we had our own personal categories. It all became the same pool of money, enabling us to have a clearer picture and a simpler operation.
6. YNAB showed us what we were giving up to get something else
We established earlier that the categories in our budget include more than just our monthly obligations. Our categories also represent our priorities. When we fund one thing before or instead of another, we are actively prioritizing; we are saying we value having money available for this particular purpose at this particular time more than something else. This was a great way for us to understand not only how far our money was going but also be able to see that if it was important for us to have money dedicated to something now, we needed to make a choice to fund something else (or multiple somethings) less.
A zero-based budget utilizes every dollar available at all times, and so there is a constant tension within the budget; there is no slack or extra money. Every dollar is allocated and accounted. We are free to change the purpose at any time, but it necessarily has to come from somewhere else. We also see this in action throughout the month: If we use up all of our dining out budget before the end of the month and want to continue dining out, we move money from another category to provide additional funding. This reallocation is a reprioritization. If we didn't like what the impact to our budget would be, we decided to find an alternative. Being able to understand the effects before they happen was a powerful realization for us.
7. YNAB moved us from living a month behind to a month ahead
We use our credit cards to pay for almost everything, for a variety of reasons. We used to pay our credit card statement balance on the due date with money we earned that month. If this is you too, you might be living a month behind. There's nothing wrong with paying your statement balance and doing so when it's due. You're avoiding interest, you're not parting with your money before you need to, everything is good. Except the part where you didn't have the money available when you made the purchase on your card. The part where you earn money the following month to pay for this month's purchases. That's what keeps us from being as in control of our money as much as we'd like, because what we earn today is beholden to things we've already spent on. Our account is drained at the end of the month and we use our credit card necessarily to float us the spending power. It's a cycle. This leaves us vulnerable! YNAB calls this the credit card float, and many people might be on this without realizing it. Here's another blog I wrote about this.
But the impact YNAB made for us was to start using the credit card like a debit card. Every purchase was backed by cash because our categories were funded with cash (as they only can be). This meant that as our credit card balance increased, so did what we had set aside for the payment on a 1:1 basis, thanks to how YNAB handles it. Only when we reached this point where we were no longer floating could we actually work on "getting ahead".
And how do you "Age Your Money" per YNAB Rule 4? We worked on allocating money for those future expenses as part of our regular budget. Sort of a mix of intentionally living below our means and preparing for true expenses. Before YNAB, we'd start the month hopeful of what would be left, but without that money being specifically allocated, it easily got spent instead. We kept ourselves dependent on the immediate next paycheck despite the opportunity to not be. If we gave ourselves $5,000 to spend for the month with the intent on saving whatever's left, we had then set ourselves up to spend all $5,000. Because we didn't prioritize getting ahead, it simply didn't happen. YNAB changed how we looked at our bills and expenses to value every dollar we were spending equally, and put it to use the way we really wanted.
8. YNAB instilled confidence in the midst of changing circumstances
If you've ever asked yourself or your spouse "can we (or why can't we) do this?" with regards to money and not be sure, you need a budget. With YNAB, we could see exactly how our budget would be impacted with sudden changes or desired shifts.
We wanted to help someone close to us; could we do so and how much? Pull up YNAB, determine where it would come from.
We wanted to make a job change for more flexibility; could we afford it? Pull up YNAB, look at the total of our category targets and if anything needed to be trimmed or what we'd need to accommodate.
We wanted to fund some self-care; could we still go on vacation? What if we wanted to make it a regular thing? Pull up YNAB and figure out what working it in would look like.
No longer did we need to wonder if things were feasible or figure out how to adjust later. We could know right then based on how we had planned and executed with money we already had where we would reprioritize.
9. YNAB enabled us to achieve things through intentionality
It all comes back to giving purpose to your money and prioritizing with what you have in front of you. Through seeing our wish farm and how we wanted to do all these things, we could make better decisions. Nothing slipped through the cracks. Every bill was reconsidered, and we tried not to assume anything as we challenged the necessity of how each dollar was spent against how we wanted it to be spent (e.g. "Can we get by with one car? Can we reduce or eliminate the loan payment?"). Instead of looking to achieve goals through whatever was left, we put the goal at the forefront and looked to make everything after that fit through practical changes.
If you're feeling financially aimless at the moment or like you're treading water, consider what you're wanting to achieve on a short, medium, and long term basis and what's needed to get there. Then you can plan the actions to take for getting you on the path.
You Need a Budget, and I'm a Budget Coach!
We've been using YNAB for years now and it's been a total life-changing approach to our money and decision-making. Sometimes you need another perspective to help you along, and that's why I'm here as a certified YNAB coach; to help you discover how budgeting with YNAB can be this impactful for you through adoption and application of its principles and software. Schedule a free chat with me today to see how using me as your YNAB budget coach can help you realize these benefits!