When it comes to our money, we should strive for continual awareness and intentionality to ensure our decisions align with our priorities. Decide to take the wheel, check your fuel level, and adapt to what lies ahead on the road. Don't just be along for the ride.
Keeping everything straight in your head is impossible; instead check your budget often so you know what's available and if you need to make a change. It's not until we reckon with every transaction against our spending plan that we truly see how all of our actions led to where we are today.
Everyone highlights the major expenses that make up their budget obligations, but what things are we somehow not even conscious of adding up over time and being a drag on our larger goals despite being the ones to make the purchase? We need to be aware of and honest about what we're doing with our money and ensuring we've provided those categories their own space in our spending plan. Know what you have and what you want it to do before you do it. Through this, we can begin to feel more in control and confident of our current situation, where we want to go, and our path forward.
Cognitive Dissonance With Your Money
We've probably all felt it at one point or another, some more often. I want this thing...I don't have the money for it...But I'm doing it anyway. We understand in some sense the responsibility we have to our obligations, known upcoming expenses, preparations, and goals. Yet, we brush them aside for this other thing we want to do. "I'll deal with it later" or "It'll be fine" as we swipe our credit card. Maybe it's the payday blowout, or the rationalization that we're already over-budget anyway, so it doesn't matter. We bury our heads in the sand to enjoy our latest decision. Why do we do this? What if we stop this avoidance, give ourselves some grace, and figure out something more sustainable?
Consider and Acknowledge Your Priorities
Your budget needs to reflect what's important to you, not just what's important. It's your money, and you're the one doling it out; don't hide from yourself. Try looking at what you can do instead of what you can't- make a budget category, and allocate some money specifically to it. If you want to do more, figure out what other category to pull from. A zero-based budget creates this inherent tension because you're planning the purpose for every dollar you have, so if you want to increase your allocation in a category it necessarily means another category will be decreased. It helps clarify your decision-making, and shows your prioritization in action.
YNAB amplifies this by only dealing with money you currently possess; no getting around this tough choice by allocating expected-yet-unobtained dollars. So look at what's feasible with what you have available and decide if you'd like to stay within that, add more from somewhere else, or wait and build it up.
Tracking Expenses Is Only Part of Budgeting
Watching the transactions roll in and categorizing them without any additional action is being a bystander to our financial lives. With YNAB, we can utilize Targets to establish what we think we'll need for each category of spending/saving and create the framework of a plan, a template. Then, we actually allocate the money we have to those categories to fulfill our plan. THEN, we spend against those funded categories in execution of our plan.
Picking out the right size cup = making a category target (how much will I need for this?).
Filling the cup with water = assigning our money to the category.
Drinking the water = spending the money in the category.
Don't Set It and Forget It
I'll set everything on autopay, but your budget will benefit from frequent check-ins. Making the plan is a step in the right direction, but if we only come back to assess it once at the end of the month, we've robbed ourself of the ability to adapt to evolving circumstances along the way. Commit to being more involved in your budget so you can make better decisions.
Find the Money Before Spending It
Understanding if we have money available in the category prior to making the purchase or where we'll shift it from is a powerful part of budgeting that YNAB makes visible. This is where you exert command and control over your money, your choices, and your path forward. Begin adhering to the idea that we are limited to what we have at any given time and you'll start seeing things in a new light.
Break the Cycle of Using Future Income for Today's Purchases
Are you floating your purchases on credit until you get the cash at a later date? You are hamstringing your budget flexibility. Money you do not have yet has already been promised, earmarked. What happens if you don't get that money? What happens if you need to do something else? You have limited choices because you are already in debt even if it doesn't feel like it. It will be painful to do, but breaking the cycle you've gotten yourself into of using next month's paychecks to pay this month's credit card bill will put you more in control and reduce your risk of falling further into debt. Treating your credit card as simply a method of payment instead of an extension of purchasing power will ensure you live within your means and enable you to more confidently build a budget because you already have the money in your account.
Make Surprises Less Surprising and Save Monthly for Annual Expenses
A singular Savings category doesn't help identify for what the money will be used- add specific categories so you understand everything you'll need. No more will you feel apprehensive about "spending your savings" because you now know exactly what it's for. Recognize that even if you aren't sure when your car will need new brakes and tires, it will need them eventually. Plan for it with a category that you assign money to each month.
True Expenses are things beyond our regular monthly bills and purchases, lurking throughout the year to catch us ill-prepared. Identify them so you can start setting money aside each month and make them "regular" so when they hit, you're already covered! By spreading out their anticipated cost a little each month, it's easier to see how they fit into your overall plan and just how much your life really costs. YNAB makes this possible!
You Need a Budget, and I'm a Budget Coach!
If you're ready to commit to making a change that will increase your confidence, clarity, and control over your finances, I can help. YNAB has been a revelation for how our family approaches our money, and being a Certified YNAB Coach I want to share that with others. Schedule a free chat for us to talk about what you want and how I can get you there.