A few weeks ago, I decided I should read Dave Ramseyās Total Money Makeover. I was tired of money slipping through the cracks, and didnāt want to continue along the same way, so Iāve read through about eight chapters so far.
Before we could consider step number one (build a $1,000 emergency fund), we needed to create a budget. Having money for bills and food is not enough, and there needs to be a plan.
While the templates provided in the book would work fine, Iād prefer spreadsheets to automate calculations. (I donāt like my hand writing as much.) I spent some time trying to create my own spreadsheets from scratch in Google Docs, but got frustrated after awhile because I didnāt know what the balance column stood for ā it seemed like something really important.
I remembered seeing YNAB (which stands for āYou Need A Budgetā) somewhere before, and I felt compelled to revisit the software ā anything to make budgeting less painful!
We spent a few hours watching the videos, then we excitedly purchased a license for our laptops and installed the YNAB app on our iPhones. (I later found out I couldāve saved $4.99 by using my Apple ID to install two copies. Oops. See āBuy the app for multiple installsā.)
The YNAB method consists of four rules:
- Give every dollar a job
- Save for a rainy day
- Roll with the punches
- Live on last monthās income
Finally! Zeroābased budgeting explained very well, and an awesome way to implement saving money without actually needing multiple accounts.
The second rule will involve us building the $1,000 emergency fund before moving onto attacking debt. Weāll focus on one thing at a time (as Dave Ramsey suggests).
When were setting amounts for our various categories (expenditures), the value of creating a budget finally made sense. Rather than relying on the dollar amount in our checking accounts and mentally calculating the numbers, we can see exactly where our money needed to go. While we had our calendars for bill reminders, having a budget means itās one less thing to think about.
Since we donāt have a buffer to live on last monthās income (yet!), weāll be entering our paychecks as we receive them and budgeting those dollars, rather than forecasting what weāll get for future paychecks. (Amy receives a paycheck weekly, while I receive a paycheck twice a month.) This will mean that weāll set our budget more often, directing us to use the money we actually have. Wow, thatās an awesome concept that should be taught to everyone.
Iāve considered using envelopes and putting cash into our separate categories, but itās convenient to pay with my debit card, so YNAB really helps keep our numbers accurate. My wife feels the same way.
Oh, I forgot to revisit the balance column. When you donāt spend some (or all) of the money youāve assigned to a category, it rolls over to next month. We donāt necessarily need to have two separate accounts as long as the money is allocated to the category or categories in our budget, so thatās how weāll be saving for things in the future without creating a separate savings account, which has a turnaround of two days per transfer. (My checking account is with Wells Fargo, while my savings account is with ING Direct.)
If you’re intrigued, here’s the summary of what we’ve done so far:
- Read The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey. One of my coworkers also suggested The Millionaire Next Door: The Surprising Secrets of Americaās Wealthy by Thomas J. Stanley and William D. Danko. I havenāt read the second one yet.
- Go through the YNAB website, watch as many of the videos and read all their support pages.
- Once youāre convinced, buy YNAB 4 for your computer (and smartphone, if you want to add transactions onātheāfly), set up a zero-based budget, and track your money.
Our first goal: the $1,000 emergency fund. Here we go!
With Amyās permission, Iām putting this out there in case you might be in a similar situation. If you decide you want to give this a shot right now, leave a comment and, if you’d like, link to your blog post about your story. Iād love to hear about it!
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