I remember it vividly. Like it was yesterday. I was a teenager with my own checking account, which was awesome. What wasn’t awesome is that my dad had to drive me to the bank, because I had overdrawn the account. Like, a lot. He sent me to the desk by myself to tell the manager that I hadn’t reconciled my account, I spent more money than I had, I was irresponsible and it wouldn’t happen again. Talk about a humiliating, but valuable life lesson.
I became very good at reconciling my accounts and paying all of my bills after that ordeal and I carried that mindset (or habit, maybe) into adulthood.
While I’ve always been good at keeping track of my money, I’ve never been good at budgeting it. I would try, but it always seemed tedious, cumbersome and unrealistic. We would be going along fine and then something would come up, a necessary expense, that wasn’t in the budget! It felt like the entire budget would have to go out of the window.
And it would.
Some of you may remember from the story of my business, that this whole thing started because we needed the money. A student loan, that had been deferred as long as it could be deferred, had finally come due and we were already living on a no-eating-out, no-cable-tv, no-new-clothes-ever, nail-bitingly-tight-each-month existence. We had to have more income, so Mustard Seed Interiors was born.
My goal was to make enough to make the monthly student loan payments, which would get that monkey off our back in 20 years. That’s not a very tantalizing goal.
But, I plugged away and my business started to grow and bring in a lot more than I ever anticipated. We were able to put small amounts towards the loan and eventually, we were throwing huge chunks at it, watching the balance dwindle until we wrote the last check and celebrated. It took three years.
We could now do the things we hadn’t been able to for years! We could eat out, take family vacations, fix up our house, buy things we needed or wanted with little angst.
And we did.
We didn’t go nuts and we weren’t overly frivolous, but each month, we would scratch our heads and wonder where all of our money went!
We were making more and we didn’t have the loan payment, so why did it still feel like we weren’t getting anywhere?
We finally got serious about our money. We paid off my nice, new-ish van and sold it for a smaller, less expensive car. We cut up the credit card and committed to working on a cash only basis. We built up an emergency fund and started saving for large purchases and upcoming fixed and unforeseen expenses.
We were finally getting ahead, but there was one thing we still couldn’t get a handle on – the budget. We tried five different money-tracking/budgeting software tools and we still failed at it each month. And that momentum that we built up with each financial success stalled. I was practically in tears over the most recent budgeting tool, feeling like a total idiot, because I couldn’t wrap my brain around the way it worked.
I wasn’t getting tripped up on the technical stuff or even the discipline of tracking the money. I kept getting tripped up on how the budget related to the actual dollars in our bank account. Every software tool I used either did budgeting or expense tracking, but not both. So, budgeting became this overly complicated task to make sure that the theoretical dollars in our budget actually matched up with the real dollars in our account.
So, when I was asked by one of my clients if I would be interested in testing out a budgeting tool that claims to be the best, I was curious. That budgeting tool is YNAB, which stands for You Need A Budget.
Why, yes I do. How ever did you know?
And if it doesn’t make me feel like crying, we’re already ahead.
I approached it with some skepticism, though. I honestly expected that I would come across the same issues and would then have to tell them that they would not want me reviewing their budgeting tool, because it wasn’t any better than the other ones I tried.
Well, happily, I didn’t come across the same issues and I have become a huge YNAB fan in the process.
Let me explain how it works.
1.) You set a budget, which is really tricky for me as a business owner, because my income fluctuates. YNAB encourages you to budget based on priority, so you always have a roof over your head, food in your belly and basic medical care. From there, you can prioritize your true expenses, debt payments, savings and fun money.
(This is one of their sample budgets, as an FYI.)
2.) Sync your bank accounts securely with YNAB, so it matches up your balance with your budget. This also helps you keep track of what has cleared and what hasn’t and how your actual money relates to your budget, which ensures your budget is fully funded.
3.) Track your expenses and income. Enter each transaction when you spend money and chose which budget line item it’s subtracted from (outflow) or added to (inflow). This is the feature I love, love, love. And I could write that word many more times. This, to me, is what makes it the best. When I enter a transaction, not only does it subtract the money from my account balance, but it also subtracts it from the budget line item. At the click of a button on my phone, iPad or laptop, I can see my actual account balance and the amount I have in each budget category.
4.) Set goals. You can also set goals for each budget line item. So, for example, Jeff is working towards his masters degree and we have to pay his tuition each semester. Since we know that expense is coming, we know how much we have to set aside each month to be able to make the payment in cash, in full, and early, so we get a discount. I can set a goal for the amount we need by the date we need it and YNAB shows me a little pie chart letting me know how close we are to the goal. It’s a small thing, but those visuals really keep you going.
Those are the first steps I took just to get things set up and functional. YNAB gives you “stay on track” tasks to complete and has an easy-to-digest handbook, video tutorials and even free live classes to help you on your financial journey.
They also have loads of information and encouragement to get you to a healthy, stress-free place financially. To keep it straightforward, YNAB boils their plan down to four simple rules…
Rule 1 – Give every dollar a job. This is what prevents you from wondering where in the heck all of your money goes each month.
Rule 2 – Embrace your true expenses. This is about thinking ahead, so you can save up for expenses that you know are coming (like tuition payments or a new car).
Rule 3 – Roll with the punches. This keeps you from abandoning your budget when unexpected expenses come up.
Rule 4 – Age your money. This is what moves you beyond living paycheck to paycheck.
I’ve become pretty passionate about finances and living debt-free over the past couple of years and budgeting was the final hurdle I needed to jump over. YNAB is the tool I needed to do that.
I told them that even if this blog post flops, they have gotten at least one loyal customer out of it.
And it really is FREE. They think it’s lame when companies make you give your credit card information for a free trial (and I agree), so they don’t do that. (After the free trial, it’s $5/month or $50/year.)
I know this post is a departure from our usual chats about decorating stuff, but I hope it’s been an encouragement! Ultimately, inspiring and encouraging my readers is what this blog is about.
Disclosure: This is a paid sponsored post. All opinions and words are my own and I was excited to introduce my readers to this awesome software. I really do believe it’s the best out there! I do not make any bonuses or commission off people signing up through this post.