Tell me if this sounds familiar: This was just a weird month. We had some things come up that kept us from being able to get ahead, but we'll be able to catch up next month when things are back to normal.
Reality Check Your Budget
I'm here to tell you (with proof!) there is no such thing as a normal month, and you should prepare your budget for that fact. Take a look at that chart above- those data points are not conveniently fabricated for the sake of this post, rather those are the real monthly spending results for our family over the past two years. Which of those represents the fabled "normal month", and how often did it occur?
Looking at the chart again, each color making up the individual bars are a different group of spending categories. Some are present every month with only a little variability, while others are more occasional or seemingly unpredictable in their impact, and others are things we elected to do. But there's always something going on. The nature of this means without a budget built for this, you're not going to get very far and even risk digging yourself into a hole.
Don't Bank On What Hasn't Happened Yet to Fix What Already Has
You don't want to plan your needs arounds receiving a bonus that might not be for the amount you anticipated or might not even come around at all.
You don't want catching up to be dependent on a hypothetical tax refund.
You don't want to assume everything will go perfectly next month, and the month after that.
You don't want to perpetuate a cycle of debt to make up for what was foreseeable.
You do want to only work with what you have at this moment.
You do want to create some predictability and consistency where you're able so you can absorb those bumps and spikes when they happen.
How can you do that?
Your Life's True Expenses Shouldn't Be an Emergency
Enter YNAB and the idea of different types of True Expenses (Rule 2 of 4 in their method). Your budget is not just the same bills you pay every month for the same amount. Those are the easy things to plan around because they're known. Think about the things that seemingly are "always popping up" or that would make your financial life harder for you if they happened. Use YNAB to make those into categories - virtual envelopes - where you stash some money every month for if and when the big expense eventually happens. Your spending will still be lumpy, but your preparation for it will be smooth. And consistent contributions are easier to plan around because now they are known. What happens now?
If you're tallying everything up at this point, it may alarm you to see how much regular living expenses + preparing for these one-offs actually requires each month. Maybe that is an opportunity to re-evaluate your situation, obligations, and spending decisions. If 100% of your regular income is eaten up by regular expenses, you have no room for these other things that always end up happening. Determine what changes need to be made to accommodate those things prior to them happening, so you are able to set money aside for them. Using YNAB for this helps because it keeps you grounded in reality, allocating only the money you have at present.
What's an Emergency Fund for, then? What it shouldn't be for are things that are already going to happen and can be planned for. Or things that will most likely happen at some point. When you start examining things in this way, you find that many occasions and expenses can have funds set aside a little each month to build up for when they happen, rendering them no longer a financial fire drill. Make the emergencies explicit so you know what that money can be used for and not used for. This will help you from dipping into it unnecessarily and slowly eating away at it.
Surprises Will Always Happen, Make Them Not a Big Deal
Make your budget robust and resilient so it can soften the blow of emergencies, and make others a non-factor. Don't rely on debt to fill the gaps. It takes time to accomplish and build things up, but when you do it you'll sleep better at night and not have to hope for a normal month. Because we already know there is no such thing as a normal month.
You Need a Budget, and I'm a Budget Coach!
If you want to get yourself in a place where you don't flinch when a surprise expense happens, where you have a better sense of control over your finances, and you're ready to try something new, I can help. YNAB has been a revelation for how we approach our money, and being a Certified YNAB Coach I want to share that others. Schedule a free chat for us to talk about what you want and how I can get you there.