Tag: YNAB

Three Years with YNAB

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This month marks my three-year anniversary of using You Need a Budget (or YNAB). What started as a way to kill time during the early days of the pandemic has honestly turned out to be one of the best changes I’ve ever made in my life.

I was skeptical about YNAB, a service I’d need to pay, for would help me with my finances. I tracked my finances with Mint for years without much improvement, so clearly the problem wasn’t me or my budget. It had to be my income, and paying for something was the exact opposite of increasing my income.

My finances admittedly could have been worse. I only had a few thousand dollars worth of credit card debt and a car loan, but I was usually one paycheck away from potentially not being able to pay my bills. The thought of losing my home was a constant stress in the back of my mind, and I avoided my finances because of it

I checked my bank accounts as if they were Schrödinger’s boxes. Was there money in them or wasn’t there?

I seemed to always be in a constant cycle of getting hit with “unexpected” expenses (that were actually quite predictable). I’d pay for them with a credit card because I wasn’t sure that I’d have enough money to pay for whatever I was buying and still have money left over for my other bills. When it came time to pay my credit card bill, I’d only pay a portion of my statement balance because, like with my other expenses, I wasn’t sure if I’d have enough money to pay for it and the next round of bills that was coming. I ended up in a revolving cycle of debt I couldn’t seem to get out of.

Mint would tell me the obvious: I was in debt and I’d overspent my budget categories. Like any rational person, I’d vow to do better next month and revise my plan to pay off my debt. Then I’d head over to Amazon to treat myself to that thing on my wishlist that was suddenly 20% off. 

My mindset was that if I buried my head in the sand, my financial problems didn’t exist. This cycle of defeat, denial, and impulse spending had been going on for nearly 10 years. To Mint’s credit, it tried to offer me suggestions, but those suggestions were about as effective as telling someone to break up with the person they know is bad for them. They didn’t work for me.

Within days of setting up my budget in YNAB, the problem was obvious. 

If Taylor Swift had released Anti-Hero in 2020, I’d have undoubtedly been saying, “It’s me. Hi. I’m the problem. It’s me.”

My problem wasn’t my income. My problem was that I was mentally trying to keep track of my spending in my head:

  • This puzzle is only $20. $20 isn’t a big deal. I have more than enough in the bank right now to cover $20 and groceries.
  • I know my car registration is due this month, but I’ll worry about that when I get paid again on Friday.
  • I can’t decide which craft beer I want, so I’ll just get both six packs today and won’t buy any next weekend.
  • I know I should get my HVAC system looked at, but I’m not sure if I have enough to pay for it, so I will just hold off.

I was making mental calculations like these constantly, and I was really bad at it:

  • Sure, that puzzle only cost $20, and I did have enough for groceries, but what about money for anything else?
  • Yes, I get paid again on Friday, and could use money from that paycheck for my registration, but what if something else comes up?
  • Let’s be real. I’m probably going to be just as indecisive and want to buy 2 different six packs next weekend. So then what?
  • I’m going to have to get the HVAC looked at eventually because the problem isn’t going away. I should look up how much it costs and start saving money for it now rather than putting it off indefinitely.

YNAB helped me get the mental spreadsheet out of my head and put it somewhere that I could actually see and use (and if you’ve been following my blog for any amount of time, you know how much a GTD-person like myself loves to get things out of their head).

I spent the first few weeks with my budget open constantly just looking at it. (Side note: If you have any desire to convince others in your house to use YNAB, don’t do this! My friends and family still assume YNAB is super complicated because I spent so much time in my budget.) Seeing my budget meant I no longer had to run the mental calculations in my head. My budget was showing me, “It’s okay. You’ve got this.”

My finances were no longer this mysterious box. Whenever I got money, I planned out exactly how I wanted to use it rather than spending as things happened and hoping for the best at the end of the month.

Thanks to the clarity I got with YNAB, I paid off my credit cards and my car loan in the first 8 months. To this day, I’m debt free other than my mortgage. (Mint suggested I could be debt free by 2024 by the way.) In the past three years, I’ve opened a Roth IRA and max it out each year. I’ve saved 6 months worth of expenses in the event that I lost my job. I also refinanced my mortgage to a 15-year mortgage, keeping my payment the same but cutting the amount of payments in half. Those are just some of the big things.

When I mention how I’ve improved my financial situation, people assume I must have went Dave Ramsey style, living on rice and beans and selling things like my life depended on it, but I didn’t. I spent money on things that mattered and saved on things that didn’t. I actually spent more freely and without guilt about buying things. Every purchase I made was part of my plan, and that plan was no longer focused on just that month or the days until my next paycheck but my future. 

  • I knew I could buy the puzzle because I had $20 in my Fun Money category.
  • I’d been setting aside a few dollars each month knowing my car registration was due this month. The money was there and waiting for me to pay for it.
  • I could choose to buy 2 six packs this weekend knowing I’d have less money available for next weekend unless I decided to pull money from elsewhere in my budget.
  • I researched HVAC companies in my area and have a contract with one, which is in my budget. They call me every spring and fall to arrange a time to come out and look over my system and perform any maintenance needed.

Three years ago, my only financial goal was to get out of debt some day. Quite honestly, it didn’t even seem achievable. YNAB helped me achieve it, but it also fundamentally changed how I think about my finances. My financial goal, now, is to become financially independent and possibly even retire early. I’m excited to see where my finances take me in the future, and once again, a big thank you to YNAB for changing my life.

Disclaimer: This post isn’t sponsored. I just really like YNAB, but if you’re interested in signing up and use my referral link, we’ll both get an extra month free if you choose to subscribe.

And if you’re interested in reading more about my YNAB journey, you can read through my earlier posts.

One Year with YNAB

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This last month marked my one year anniversary of using the app, You Need a Budget, or YNAB, and to say I’ve been dying to share my progress is an understatement.

I figured YNAB would be one of those things to pass the time while stuck at home during the pandemic. At the very least it’d be something to do during the couple weeks I’d be stuck at home. Little did I know, I’d still be here a year later, and little did I know much YNAB would change my finances during that time.

I want to start out by saying I’ve been incredibly lucky to not only keep my job during this past year, but also by being able to work from home this whole time. I truly feel for those who didn’t share my situation.

Regardless of what my situation had been, finding YNAB at the start of the pandemic couldn’t have been better timing. The world was facing the uncertainty of a pandemic, and I was almost $9000 in debt with basically nothing in the bank.

Creating a Plan

My first month of using YNAB was all about creating a plan. It turns out despite using Mint for all these years, I really had no clue what to do with my money. If there was more than $1000 in the bank, I figured it was safe to spend, so I did. Instead, I had a great idea of where my money went in the form of nagging “overspending” alerts, which weren’t all that helpful after I’d spent my money. YNAB flipped Mint’s budgeting model on its head and forced me to create a plan for every dollar (rule 1) before I spent it.

Paying Off Credit Cards

My second month of using YNAB ended up being one of those rare months full of unexpected money (why can’t they all be like that!) – a 3 paycheck month, tax refunds, and a stimulus check. In the past, I would have squandered this extra money on random things from Amazon, but armed with my plan, I put the extra money to work for me towards the goals I had set out.

My first goal was to pay off my credit cards, which I’d been unsuccessful at doing pretty much ever since I got the cards. Thankfully, I never wracked up tons of credit debt, but I always seemed to have some combination of around $2000-4000.

Thanks to the extra income in April, I was able to pay off all three of my credit cards. My initial goal was to pay off 1 card by the end of 2020. I’m also happy to say that thanks to the way YNAB forces you to treat credit cards as if they’re debit cards, I’ve continued to completely pay off my cards each month ever since. Getting paid to use a credit card is a lot better than paying interest.

Paying Off the Car

My second goal was paying off my car. Pre-YNAB this seemed like a goal I’d be able to tackle by December 2021 at the earliest, but I ended up doing it in August of 2020. This was actually an even bigger deal to me because I actually accomplished another goal, of becoming debt-free other than the mortgage by the time I celebrated my 30th birthday which I hadn’t even imagined being possible 2 months prior.

Feeling YNAB Broke

One of the reasons I was consistently over budget using Mint was that I wasn’t planning for what YNAB considers True Expenses (rule 2) – things like that yearly Amazon Prime subscription, a new set of tires, or the appliance that inevitably gives out at the worst time. Every month one or more of these true expenses would pop up, and because I hadn’t planned for them, I’d pull out the credit card to pay for them.

With YNAB, I started setting aside money for those true expenses. As each one came up, I added it to my budget and started saving a little for it each month. Eventually I was able to convert a number of my monthly bills to annual plans saving even more money.

As a result, my bank balances started to climb, which is also around the time I started feeling “YNAB Broke” as YNABers like to say. My bank account had more money in it than I’d ever had, but suddenly all those dollars already had jobs. I didn’t have $10,000 in the bank to spend on whatever I wanted. It was already earmarked for car insurance or Christmas gifts.

As time went on, I stopped noticing my bank balances altogether. Category balances are what I check, and since they rarely have more than a few hundred dollars in them, you feel broke even though you have more money.

Getting a Month Ahead

One of YNAB’s other tenants is to try and break the paycheck to paycheck cycle by getting a month ahead (or in other words, using last month’s income to pay this month’s bills). It’s rule 4 and they call it aging your money.

This was one of those things that seemed a bit overblown to me but turned out to be unexpectedly rewarding. Each month as my debts went down and more of my true expenses were accounted for, paychecks seemed to get me funded a little further down the budget until one day I realized the whole month was funded and I was still expecting another paycheck for the month. It seems simple, but starting the month knowing everything is accounted for has added so much peace of mind to my life.

Building My Emergency Fund

After getting a month ahead, I refocused my sights on my emergency fund. I had saved up $1000 (Dave Ramsey’s Baby Step 1), but my eventual goal is to have 6 months worth of expenses. I currently have around 2 months of expenses saved for this. Paired with being a month ahead and saving for true expenses, I consider this really a 3 month emergency fund, which brings us to today.

My Goals for 2021

Finally feeling secure in my finances for the first time in my life, I pushed pause on increasing my 3 month emergency fund to 6, and set my sights on the future.

I recently opened a Roth IRA with M1 Finance, and pressed paused on the emergency fund because I wanted to max out my Roth IRA for 2020 and knew I only had until April to do this. (The IRS has since extended the deadline to May.) As of this past March, I’ve reached my goal. Going forward, I’ve built monthly contributions of $500 into my budget so that so I won’t need to play catch up to max out my contributions for years going forward.

My other goals for the rest of the year, all of which I’m on track to complete, are as follows:

  • Finish saving for our wedding
  • Refinance our condo to a 15 year mortgage
  • Complete saving a full 6 months worth of expenses in case of an emergency

Looking Back

Prior to finding YNAB, I assumed I just didn’t make enough money and my financial situation doomed unless I got another job. I felt stuck with no way up. It turns out my income wasn’t the problem. It was my behavior.

In just one year, I went from living paycheck to paycheck and $9000 in debt to being debt free. The net worth graph from the past year says it all.

(Note: I’ve excluded my mortgage and retirement in the above graph because they really skew the graph making progress hard to see, but with all my accounts included, my net worth has gone up a total of 90.6%. Also worth noting the red debt you see after 8/20 are just my credit cards, which I pay in full each month, carrying over between months.)

My friends and family think I’m a bit YNAB-obsessed, and truthfully I am constantly singing its praises. I’ve definitely drank the Kool-aid, but honestly, if you’d shown me this graph a year ago and told me it would be mine today, I wouldn’t have believed you. Trying YNAB has truly been one of the best decisions I’ve made and if this is the progress I made in one year, I can’t wait to see what’s in store for the future.

And if you want to try YNAB for yourself, the links to it included on this page will get us both an extra free month if you choose to sign up after the 34 day free trial. Did I mention there’s no credit card required to sign up, so it’s totally risk free. They aren’t some sketchy company that will immediately sign you up at the end of the trial.

Onwards and upwards.

Understanding Life’s True Expenses

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When I started using You Need a Budget (YNAB), I kept hearing the term “true expenses.” Rule 2 of YNAB’s philosophy is actually “Embrace your true expenses.”

For non-YNABers, true expenses is a foreign concept. It’s not taught anywhere, but it’s single-handledly responsible for the biggest mindset shift I’ve had in months.

True expenses are those things you know are going to happen eventually. You might not know exactly when they’ll happen or maybe they happen every few months, every year, or every few years.

Amazon Prime is due next April. Your oil will need to be changed. Your cat will have an unexpected vet bill. Your windows will need to be replaced. The list goes on and on.

The point is they’re definitely going to happen someday, and if you know they’ll definitely happen you might as well start planning for them.

The problem is despite knowing these things will happen, they usually catch us off guard because we aren’t taught to plan for them. They throw a perfectly planned budget into chaos because suddenly you have to account for an extra $500 to cover that car repair. But let’s face it, there is no perfect month. There’s always something extra that happens above your normal month.

With YNAB, I quickly got into the habit of setting aside money monthly for those true expenses. Mom’s birthday’s in a month? No problem, I’ve been setting aside a few bucks every month and the money’s there waiting for me to buy her a gift.

True expenses not only help keep you from getting thrown off course when something out of the norm happens, they help you establish a baseline for what is actually the norm. I no longer think of my my yearly Disney+ subscription as a $70 email reminder that catches in me off guard. Instead it’s just another $6.36 that I set aside each month for expenses.

Seeing a clear breakdown of what your life actually costs per month including your true expenses is a real eye opening experience. Being able to see exactly how much my lifestyle costs allowed me to cut out subscriptions I no longer needed because I could see the true cost.

That being said, the lesson of true expenses doesn’t stop at budgeting. The real power is extending it to other areas of your life.

Working at a university, I understand that the start of the semester is a busy time, whereas other times are less busy. When I think of that in terms of “true expenses”, I can start to figure out if there are things I might be able do differently or spread out to other less busy times of the year so that I’m not quite as stressed during that first week or so.

And with that, it is the start of the semester for us, so I may be absent from the blog for the next few weeks, but I will be back with new content. I promise.

Thank you for all the kind words you all continue to send in, and if there’s something you want me to write about (Things, YNAB, productivity, tech, anything really), let me know!

Gaming My Impulse Spending

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A number of my budget categories in YNAB reflect variable spending. These are things like groceries, gas, household items, personal care, and dining out. These categories also reflect areas where, if not careful, my spending can run amok pretty easily.

To combat this (and to make budgeting easier), I’ve set “Needed for Spending” goals on each of my variable spending categories. YNAB categories are essentially virtual cash envelopes, so the beginning of the month, I start with a capped amount available to be spent. Unlike cash envelopes, however, once the money runs out of a category, I’m not out of money entirely. YNAB still encourages me to “roll with the punches” by moving money from other categories.

Most months, I’m pretty good at staying under the amounts I’ve set. However, some months, I find myself more inclined to fall into a shopping binge and do need to pull from other categories.

In general, I try to limit myself to only pulling from other variable spending categories. I’m okay with pulling some money from my personal care category to cover an impulse bottle of wine on a Friday night. I’m less okay with pulling money from car maintenance to cover one.

How YNAB’s need for spending goals work tends to raise a number of questions and concerns for users because they don’t always work like other goal types. In my opinion, YNAB’s thought process is right though.

In short, when you budget into future months, unlike other goal types, YNAB expects you to budget the full goal amount regardless of how much you have available in the current month. The amount you need to budget doesn’t get reduced. This is because YNAB can’t know whether or not you’ll spend what’s currently available before the month ends. For instance if you have $75 to spend on dining out towards the end of the month, there’s still a possibility you may still spend that money before the month ends. Budgeting $75 less could leave you shorthanded in the next month if you spend that $75 between now and the beginning of the next month.

Some people combat this rollover problem by putting all of next month’s funds into a “next month” category and waiting until the first of the month to budget. I, on the other hand, still prefer to budget as a get paid because, quite frankly, I find “YNABing” fun. The more budgeting I get to do, the better.

In my case, when the first of the month rolls around and my available amounts from the previous month roll over, my categories are usually overfunded, which is actually a pretty good problem to have. I treat the money from any overfunded categories as a sort of mini-payday that I can then rebudget into the future. With my spending being lower due to the pandemic, that mini-payday typically amounts to around $200-$400, which is a pretty sizeable chunk of change.

I find getting my mini payday at the start of the month good enough on its own, but as an added incentive to curtail my impulse spending throughout the month, I go one step further. I set aside 10% of that mini-payday for items in my wish farm. Because of this, throughout the month, I’m constantly thinking, the less I spend on eating out or impulse buys, the sooner I get to buy something on my wishlist.

Overall, it’s only a couple hundred dollars a month, and in reality, it’s not new money. Mentally, though, my mini-payday at the start of each month has really helped reframe whether Chick-Fil-A breakfast for the third day in a row is actually worth more than buying myself a new Mac. (I decided it wasn’t.)

How I Set Up My Budget in YNAB

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In my last post, I shared how YNAB has helped me get a better handle on my finances. Today, I want to share how I’ve organized it.

When you start using YNAB, they pre-populate your budget with a selection of recommended categories. I’ll be honest, I didn’t find them all that helpful. Having not read the book yet, I actually found them confusing because the category group names, like true expenses or quality of life goals, are terms people generally don’t use outside of the YNAB community. Additionally, not all the categories were relevant to me. For these reasons, I deleted them all and started over.

I structure my budget categories and groups in a few ways:

  • Category groups are listed from highest priority to lowest.
  • Category groups are also arranged based on where the money lives (i.e. checking vs. savings).
  • Within each category group, categories are named with and listed in order of their due date.
  • Each category has a goal.

Structuring my budget this way allows for two things:

  1. I can fund my goals from top to bottom as money comes in, always knowing my money is going to the next most important area.
  2. I can verify how much money needs to be in my checking account or should be in my savings account at all times.*
  3. I can use the quick budget feature to not only quickly budget my money when it arrives, but also quickly estimate how much money I need to set aside each month.

*Technically YNAB will tell you that your budget is only a plan for your money and where you keep your money is irrelevant in terms of the budget, but given I don’t want to overdraft my account or miss out on interest I could be earning, I don’t buy into that.

So what are my category groups?

  • Current Baby Step – This is where I put my top priority savings goal according to Dave Ramsey’s Baby Steps. Currently, I’m on Baby Step 2, paying off my car, so this is where car payment lives. Once I’m done paying off my car (hopefully by the end of the year), this group will include building up my 3-6 month emergency fund. I separated this out to call extra attention to my main financial goal. Whenever I’m done funding the upcoming month’s goals, I dump any extra money I may have leftover towards this goal.
  • Credit Card Payments – YNAB automatically creates this category. Because my cards are paid in full, I don’t actually need to budget any money for these categories. Anytime I make a purchase on a card with the money I’ve already budgeted for, YNAB automatically moves that money to these categories so that I’m able to pay off the credit card when the bill is due.
  • Monthly Bills – This is where my fixed monthly expenses live (e.g. my mortgage payment, my Spotify subscription, etc). Anything in this category group is something that costs exactly the same amount and is due on the same day of each month.
  • Variable Expenses – I think of these as my cash envelopes. These are categories like groceries, gas, or eating out where I may spend more or less each month, but I aim to spend less than a certain amount.
  • Upcoming Expenses – These are fixed, recurring expenses that occur less than monthly, but will be due in the next 30 days.

I want to take a break here to point out that the category groups up to this point represent my checking account. Moving forward, the following categories switch to my savings account. As mentioned previously, I use this separation of category groups to quickly see how much should be in my accounts at any time and help me to know exactly how much to transfer between accounts.

  • Subscriptions/Recurring Expenses – The previously mentioned Upcoming Expenses and this category work together. Again, these are expenses that do have a fixed amount but occur less regularly (like my yearly Amazon Prime subscription). For GTD fans, these two categories essentially work as a tickler file. Once I’ve paid a recurring expense in the Upcoming category, I move it back to the bottom of my Subscriptions/Recurring Expenses category and reset its goal for its next due date. In this way, everything is ordered by date, so I always know which subscriptions are coming up next, how much to pull out of savings to pay them, and I can begin saving for them again right away.
  • Sinking Funds – This is where I save for expenses that will happen eventually. I just don’t know when they’ll happen or how much they’ll cost (e.g. home maintenance, health, vet bills).
  • Long Term Savings Goals – This category is where I keep future savings goals like my 3-6 month emergency fund, our house downpayment fund, and my future Tesla fund. (A girl can dream…) Right now, I’m focusing on other priorities, but I look forward to the day when I can actually fund these. (For now, this category group is hidden from my budget since I’m not actively contributing to them.)
  • Wish Farm – I’ll just link to YNAB’s explanation of a Wish Farm as it’s easier to let them explain what exactly a Wish Farm is.
  • Wish List – This is exactly what it sounds like. Anytime I want something I put it here, and eventually, it may make its way to my Wish Farm to be funded. (I also keep this group hidden to keep my focus on my current goals).
  • Gift Cards – This category keeps track of the money I have on my Starbucks and Dunkin cards that I use for rewards points. I also keep track of my Amazon gift card balance, as well as Apple Cash. Whenever I make a purchase using these categories, I move the money to one of the appropriate categories above to accurately categorize the spending.

One of the rules of YNAB is to “roll with the punches,” so YNABers (people who use YNAB) are actually encouraged to adjust their budget as needed, and I adjusted my categories quite frequently during the first month or so. I’ve since settled into a groove with this category structure, so that’s how I structure my budget in YNAB (at least for now).

I hope everyone’s doing well during this time. Well at least as best as well all can. Stay safe everyone. Until next time.

Photo by Katie Harp on Unsplash

The Last Frontier of Organizing – Budgeting with YNAB

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In most areas of my life, I’d say I’ve always been fairly organized – maybe a little too organized if you ask some people. My budget, however, is one area that has lurked like a terrifying junk drawer in the back of my mind for as long as I can remember.

I want to start by saying that I realize I’ve been luckier than most to have gotten where I am without student loans. If it weren’t for that, I know I would be in a completely different situation financially, and I probably would have been forced to confront my financial situation sooner. I realize this is not the norm for a number of people, and I truly can’t imagine how difficult it must be to get by on a daily basis while also dealing with the amounts of debt I’ve seen some of my friends and family talk about.

With that out of the way, I will wholeheartedly admit, I’ve made a number of mistakes financially over the years by acting as if the money in my bank account was Schrodinger’s cat, and despite having a well-paying job, I still fell victim to credit debt, a car loan, a mortgage payment I could just barely afford, and impulse buys galore which ultimately resulted in me living paycheck to paycheck.

I’ve always had plans to pay off debt. I understood how debt payoff worked, but no matter what I tried (ahem… Mint…), I never became one of those success stories of paying off thousands of dollars worth of debt in 6 months.

This year, one of my goals was to really get serious about a budget. I decided to retry You Need A Budget, or YNAB as its users like to call it. I’m happy to say, this time finally clicked. Happy may actually be an understatement. If it weren’t for being in quarantine, I’d be singing its praises to everyone I meet. Until then, this post will have to do.

As a former Mint user, my #1 piece of advice for anyone trying YNAB has to be forget everything you know about managing your money with Mint or anything else.

If you’re looking for a place to start, I can’t recommend their videos and Nick True’s videos on YouTube enough. I have to credit them for retraining my brain for the YNAB way. (The book is also a good resource.)

I think of YNAB as a sort of “reverse” Mint. Instead of looking at your transactions to see how you’ve spent your money and trying to budget from there, YNAB asks you to look at the money you have right now and plan out exactly how you need to spend it down to the very last dollar – Give every money a job, as YNAB likes to call it.

The key to this is you’re not budgeting the money you expect to earn for the month, only the money you have available right now, which took quite some time to wrap my head around. Budgeting for all my expenses as I typically would have with Mint resulted in quickly being told I was over budget. I had to stop thinking in terms of hopeful money, and more in terms of what my actual money needed to do first and foremost until I got paid again.

By giving every dollar a job, suddenly things didn’t seem so grim. In fact, they looked surprisingly manageable. In fact, I could clearly see just how much money I had leftover after bills rather than mentally calculating whether I had enough for every purchase. I began to set that “extra” money aside for actual jobs (my car’s next oil change, my fiancé’s birthday, our wedding…). Suddenly opening my budget was less like opening a junk drawer and more like finding $100 in the couch cushions every time.

The YNAB website says that “On average, new budgeters save $600 by month two and more than $6,000 their first year.” I’ll be honest, I didn’t learn this until after I started seeing it mentioned on the YNAB subreddit. Had I seen it before I started, I probably would have dismissed it as a typical marketing ploy. I still want to, and yet in the first two months of using YNAB, I was able to find money to pay off not one, not two, but all THREE of my credit card balances in full (almost $4000). Of course, a big portion of that is due to a couple of windfalls (including tax refunds and a stimulus check) and not going out due to the current state of the world, but without YNAB, I’d have without a doubt blown that money on something stupid. Instead, I was able to use it to further my goals. (Oh, by the way, speaking of goals… Mint’s goal function had me thinking it’d be a struggle to pay off ONE card by next January…)

The other crazy thing is I paid off those card balances while still using those cards for bills and other expenses. This is IMO the real genius of YNAB. YNAB treats credit cards like debit cards, meaning you’re expected to budget for any spending (even credit card spending) with money you actually have. Once you spend in a budgeted category, YNAB automatically applies any that money to the card’s payment to cover your balance. This is what lets you account for paying off the existing balance AND any continued spending. As an example, say I planned to pay $400 towards my existing balance, and also charge $60 in groceries. As long as I’ve already budgeted $60 for groceries, YNAB will move that $60 of real money I had set aside for groceries to cover the additional charges on the card, increasing my total available for payment to $460. This was huge for me.

Debt repayment aside, YNAB has shown me the importance of setting up sinking funds for all my long term expenses, and yearly subscriptions, and other recurring expenses that I hadn’t included in my budgets before. Anytime I come across a subscription renewal or big-ticket item I will need down the road, I add it to the budget now. Not only has this forced me to come to terms with my subscriptions and recurring expenses, but I can also now budget for them little by little over the course of a year rather than having to come up with the money all at once.

I realize money’s a touchy subject, and budgeting is a little different in terms of topics I’d normally cover here. That being said, I’m curious if this is something you’d like to hear more about on the blog. Right now, I’m thinking it might be interesting to see how my categories stack up in YNAB, and how I typically budget a paycheck. Let me know if this is something you’re interested in or not in the comments below.

Also, if you’re interested in trying YNAB, you can score an extra month for free using this link.

Photo by Fabian Blank on Unsplash