Budgeting with YNAB

The following is a guest post from Nate Williams, a CPA who works with You Need a Budget. For a special savings offer on You Need a Budget, see the end of this post.

As an 18 year old I had more discretionary income than I've ever had since.  I worked as a waiter at Red Robin and averaged $100 per night in tips plus $4.75 per hour - yes, selling burgers.  OK, so it wasn't exactly rolling in dough, but my expenses were low.  Life was good, and fun.

Unfortunately, I have nothing to show for that period of life other than the fact I can (and do) advise all my friends on the vast Red Robin menu whenever we go (personally I like the Banzai Burger).  After several months in the fast lane I went to see a financial planner acquaintance.  He was kind enough to spend 30 seconds with me and told me to pick the Templeton Growth Fund (TEPLX).  I didn't understand what it was, but a mutual fund sounded grown up, plus the stock market always goes up.  $50 a month was my contribution to my future self, well, for about a year anyways until I needed that money elsewhere.

More than a mutual fund, I needed goals - a purpose - and a budget to make it happen.  Years later I heard a fantastic definition for a budget: "budgeting is deciding beforehand how to spend your money, instead of wondering after the fact where it all went."  That's perfect.  I still look back and wonder where the money from those Red Robin days went.

A budget.  That's what I needed.  These days, budgeting has a broke connotation.  We hear things like, "how to feed your family on a budget;" or "decorating your house, on a budget."  "On a budget" has become synonymous with "____ with no money."  Because of this misrepresentation, many people feel that they don't need a budget, and definitely don't want one.  Well, you do need one, and you should want one.

Three years ago, my wife and I stumbled across You Need a Budget.  After using several other software programs, and many hand-crafted budgeting charts, we've found this to be the most effective money management system.

Here's how YNAB helps us:

• The software is designed to have you earn your money first (one month's worth to be exact).

• Following point one, we start each month with an exact dollar amount to budget and we decide beforehand what each dollar is going to do.

• We can easily prioritize our most important goals, paying for them first.  This aligns our spending with our values.

• Once we have decided where we will spend the money, YNAB allows us to easily track our progress (seamlessly imports data from our bank/credit cards).

• Last, and most importantly, we have tremendous peace of mind.  This peace of mind comes from knowing with certainty that we are progressing towards our goals and not over (or under) spending.

Unlike the careless (and progress-less) days of Red Robin, during the past three years using YNAB we know exactly how much we have spent on everything.  Additionally, we have made significant strides towards our financial goals, many of which we have accomplished.  I'm lucky that at some point in time I realized that I needed a budget.  And so do you.

FMF readers seem to love You Need a Budget so I asked the people there if they would offer a special deal to my readers and they agreed! Go to You Need a Budget and use the coupon code "freemoney" to save 15% off your purchase. But hurry -- the coupon is only good through October.

Comments

[Eugene Krabs]

... An 18 year old CPA? Must have meant when he was 18.

Great quote on budgeting though!

[Midg]

Never used YNAB but I've heard it is pretty good. I might just go a head and give it a try. Never cared much for budgets. Budgets always seemed like someone telling me what to do. I'm not very fond of being told what to do; so budgets and I never got along. I do keep a budget but I call it a spending plan instead. The spending plan is exactly the same as a budget but gives me a better sense of achievement. The spending plan is what I'm going to do to reach my goals instead of telling me what I can't do.

[Jesse]

Hey Midg, I suppose we should have puchased YouNeedASpendingPlan.com instead ;) You hit the nail on the head though -- it's about what you want to do with your money in order to reach your goals.

[Concojones]

Nice post. Well-written.

Personally I'm not a fan of budgeting software - I'm more of an on-the-back-of-an-envelope type. But ok, if it gets the job done... (and apparently it does)

[Crystal]

We have a budget/spending plan in Excel...left column for our goals for categories like food and savings and right column for what we actually did. Sometimes we go over in a couple of categories (misc expenses and food usually), but we always hit our savings goals. It helps to keep us on track, but we don't berrate ourselves if we go over somewhere...