The first time I set up a budget was way back in 2006 when YNAB was just a spreadsheet for Excel. I’d just added up my credit card debt and I knew I’d need to budget my way out. I set up my categories and entered my income and started working my way down the screen. $60 for the electric bill, $945 for the mortgage and so on.
Then I got down to the grocery category. I stared at it for a long time. How much should I budget for groceries? I had no idea. What did I spend on groceries last month? Again, no idea. I remember feeling like I should know this. It was pretty discouraging. So I did the only thing I could think of.
I guessed. Yup, I just guessed. I figured I was about to learn a lot about my spending and I should just be flexible. I remember making lots of guesses in those early days.
I suppose I could have logged into my bank online and searched through past transactions, but I didn’t think of that. And honestly, even now, it doesn’t sound very appealing.
There’s something very freeing about guessing. You know you’re guessing so you don’t have to be right. There’s much less pressure when you remove the need to perfect. Perfection is overrated anyway. We learn more by reflecting and adapting to information.
We often think perfection in budgeting means setting a budget and sticking to it. But every month would have to be “normal” for that to work. When was the last time you had a normal month? There is no such thing! Thanks to Rule Three, perfection is defined by sticking to the process of budgeting. You evaluate the budget as the month unfolds and make sure that things are still lined up with your priorities. Ahhh, that’s perfection.
If you’re just starting and you’re in the same situation I was, you’ll be guessing a lot. Then, with the help of Rule Three, you’ll be adjusting a lot when you’re guesses aren’t right. But this is a really, really good thing. You’ll gain crystal clear awareness of what’s going on financially. That will lead to better decisions about money.
You’re also going to get lots of practice refining the budget. You’ll be massaging things here, tweaking things there, and constantly reevaluating your priorities. They’ll start to become obvious and will jump right out at you. When you can align your spending with what matters, money management becomes a much more positive and rewarding experience.
Over time something magical will happen. Your guesses will get a lot more accurate. This is partly because you’ll be more aware of your spending habits, but also because you’ll have some data to look back at. For me, I budgeted too little for groceries when I first started. I was constantly adjusting that category. After about 6 months, I was able to see what my average grocery spending had been and I was able to use that as a guideline moving forward.
But don’t worry if that doesn’t happen right away. Enjoy the journey. Enjoy the guessing. When you make an adjustment say, “Hooray! I saw a problem and I fixed it! Go me!”.
My guess is all this guessing will eventually put you in pretty good financial shape.
I’ve had this sneaking suspicion, as of late, that we’re becoming—how do I say this— soft in our thinking, which directly affects our actions.
YNAB, as a brand/company, doesn’t talk too much about things beyond the Four Rules. We teach you:
- Rule One: Prioritize your spending/saving, and recognize the reality of finite resources. You don’t hear us say much about how or what to prioritize.
- Rule Two: Look ahead for larger, less-frequent expenses, and break them into monthly amounts. Build those monthly amounts into Rule One’s priorities. Again, we don’t take a stance on what larger, less-frequent expenses you should have.
- Rule Three: Adjust your budget as the need arises. We don’t want you to quit. We don’t want you to define successful budgeting as the ability to guess what will happen in the future. Rule Three is just a way of saying, “Hey, if Rule One and Two are feeling a bit brittle under these new circumstances, it’s okay to change things.” We do not teach you what “needs” would merit changing your budget under…yep…Rule One.
- Rule Four: We teach you to learn to live on last month’s income (called a buffer). It’s just a really nice place to be. You can get out of the paycheck to paycheck cycle, pay your bills as they come due, and just sleep a little easier at night. We do not tell you that reaching this buffer is mission-critical. We don’t yell and scream about the fact that you don’t yet have your buffer. We let you decide how to prioritize your buffer based on, you guessed it, Rule One.
Rule One’s kind of a Big Deal, no? Lo and behold, your priorities end up being the important part in the whole methodology. We’re saying something like:
Prioritize (r1), now prioritize taking the future into account (r2), now prioritize again when you get new (better) information (r3), now make the whole prioritization process easier by prioritizing a month ahead (r4).
We’re silent on your actual priorities. As “YNAB the Fancy Company” we’re silent.
But I’m going to share my own personal opinion on your priorities. Imagine that you and I know each other very well, you know I care about you, and want the absolute best for you.
This post, where I discuss your priorities, is particularly difficult for me, because I don’t presently share in your struggles. Honestly, I’ve struggled to find what I can write about these days, because I haven’t had serious, or even moderate financial strain since the end of 2009. I feel a little bit like the skinny guy with the lightning-fast metabolism whose chowing down on his third donut while telling you to eat celery, cucumbers, and carrots. (Since I’m assuming we know each other very well, you would know that I find celery, cucumbers, and carrots to be the most useless vegetables of all time.)
At the same time, my current lack of financial strain is a result of 20 years of priorities that we’ll now discuss.
In all of this, I’ve been blessed with tremendous health (a priority of mine), an unbelievably supportive wife (the finding thereof was also a priority, but I think I got really lucky as well), and great parents. Let’s start with my dad.
In 1994, I was 14 years old and my dad gave me two books:
- Financial Peace
- The Richest Man in Babylon
When I was 18, my dad gave me The Millionaire Next Door.
Reading those books has framed my priorities for the past 20 years. By “framed” I should say something more like, “I treated them as absolute truths, and didn’t waiver from the instruction.”
Here’s where I write about things you may be doing wrong. In other words, here’s where I start questioning your priorities. Here’s the single biggest mistake I see in your priorities.
You treat debt as a given
You’re being weak here. You’re being manipulated by an environment that’s teaching you that debt is simply a part of life. You’re not questioning your core assumptions around your lifestyle, and because those assumptions aren’t questioned, debt is a given.
If you would flip that on its head, and treat debt like the most absurd proposition of all time, if you would get to a place where you don’t even entertain the idea of debt, your mind would take hold of that thought, and you would unleash your creativity, your resolve, and your force of will on that debt.
In early 2004, I was projecting what mine and Julie’s finances would be like once our first baby came into the picture. I was making great money as an internal audit intern ($14/hour) and had a bit over two years left of school for my Master’s of Accountancy. I was sitting on our Dr. Pepper Can Cooler (wedding present) at the Wal-Mart desk, trying all sorts of scenarios that would 1) allow me to finish school, 2) let Julie quit her job with the state ($11/hour) to stay home with Porter and 3) do it all without borrowing any money. All three were non-negotiable.
My projections were dismal, I was mad, and there didn’t seem to be a solution. I was projecting full-time school, and entertaining the idea of working 30 hours per week at my internship (we technically weren’t “allowed” to work in the accounting program, but I ignored that guideline). It was a road to burnout, but I was entertaining it because I wasn’t entertaining the idea of borrowing the money needed for tuition.
Julie and I got $5 each month for fun money. Our grocery budget was $100 per month. We barely drove the car (I would have sold it except it wouldn’t have made a dent in our shortfall). We skipped a honeymoon. We didn’t eat out. Despite our best frugal efforts, the projected monthly shortfall was about $350. Coincidentally, that was how much we paid in rent.
So I decided to start YNAB.
Had I entertained the idea of borrowing money to cover tuition (the loan would have been “super reasonable,” just about $7,000 for a graduate degree! <—sarcasm intended), I never would have felt the need to build a little business that could conceivably cover rent. Had I entertained the idea of debt, this business never would have been started. What a tragedy that would have been.
Stop treating debt as a given. It’s not. You’re just not willing to sacrifice really hard things in order to get there. You need to prioritize your debt and get obsessed about it.
You are underestimating your creative power. You’re underestimating your work ethic. You’re underestimating your force of will. Stop being content with just chipping away at your debt. Get rid of it. You shouldn’t have it. It’s plenty hard reaching your financial goals presently without having to also be funding your lifestyle from the past.
You don’t question your assumptions.
Your house is obscenely large. Because of that obscenely large home, you pay through the nose to heat and cool the thing so you can enjoy your debt-fueled lifestyle at a comfortable 78 degrees. Your vehicles are insanely expensive. Your restaurant budget is killing your health and your finances. Your grocery shopping approach is aimless. Your “guilty pleasures” are used to avoid confronting tougher emotional issues. Your closet is full of clothes you don’t even know you have. Your garage is full of stuff you can’t even recall. Your holiday spending is a reflection of what you think others think.
Downsize. Sell your home, taking any equity out of it that’s there and get something smaller, cheaper, and more reasonable. You’ll make new friends. Good friends you’ve had, you’ll keep them. Rent for a while. Rent a small apartment. Enjoy the journey. Stick your kids in a school that’s just “so so” and then spend time with them at night to fill in any gaps you’re worried about. Consider an apartment.
Consider an apartment and dirt-cheap rent.
Think about renting an apartment for a while.
Protect the idea from your assumptions that are attacking it right now. Defend your idea. Reframe.
Sell your car(s).
If you’re upside down in your car, you should sell it right now. Borrowing money for an asset that goes down in value is simply insane. INSANE. It’s the ultimate poor man’s move. It’s sickening.
Because this is Jesse, and not YNAB, I’ll be a bit prescriptive: If you have any debt at all, and your cars are worth more than $3,000, you should trade down to something more reasonable. That is exactly what I would do.
Sell a lot of other stuff.
It’s not a good investment, to borrow money to buy a bunch of stuff, and then have to sell it for pennies on the dollar so you don’t have to keep paying for it, but it’s still a good move for you.
You’re stuck with your situation until you decide to do something about it. Go through your garage and get rid of half your stuff. Then get rid of another half. Since you’re moving anyway, this will help that process along. Now we’re making progress, and being efficient to boot.
If you have seasonal gear (skiing, mountain biking, hiking, camping, boating, etc.) it needs to go. Buy that stuff later from someone else who’s trying to get out of debt. Share your story of doing the same thing, and how it transformed your thinking forever, and how it’s hard now, but they will be so happy they did it.
De-clutter to gain visibility.
You should be able to list every item of clothing you own. You don’t need all of those shoes, sweaters, and skirts. Minimize. Sell your excess clothing or just give it away. Pull all of the clothing from every corner of your room and pile it all on your fancy bed.
Grab a laundry basket and fill it with the clothes you want to keep.
Shoot for selling, or giving away 80 percent of your clothing.
De-clutter in every single room of your house. Start from one end of your massive house and move to the other. Get rid of stuff. Sell the kitchen gadgets you barely use. Sell the kids’ toys they’ve forgotten about. Sell everything.
De-cluttering will give you visibility into your consumption, because you’ll now notice every new item that you mistakenly purchase.
Stop eating out.
You lost the privilege when you went into debt. I know it’s convenient, but you don’t get to do convenient things because you used up all of your Convenience Points when you took on the debt that made your life so convenient. (It’s alluringly convenient to not have to pay cash for stuff, because you don’t have to work for it.)
Without even going into the absurdity that surrounds us, with eating-out establishments by the thousands surrounding all of us, without even going into how absurd it is that we pay disgusting prices to eat disgusting food…
We won’t talk about that. I’m just talking about your privilege. It’s been revoked. Eat a can of beans. Eat it right out of the can. Don’t even warm it up in the fancy microwave. Grab the can opener, open the can, grab a spoon, and eat that can of beans. Smile while you’re doing it. In that instant, you’re doing something that others would find absurd, bizarre, or disturbing, and in that moment, you’ll know you’re on the right track.
You will have the last laugh, you crazy, crazy person.
Cancel your vacations.
Obviously you don’t borrow money to go on vacation. But if you choose to go on vacation while you are still in debt, then you are borrowing money to go on vacation and no sane person would ever do that.
Do a stay-cation. A stay-cation is where you stay home and host a garage sale to get rid of all the stuff, right before you list your house for sale to move along with the downsizing process. After all, you can’t fit a ton of your stuff in that small apartment, so it needs to go anyway.
You do not go on vacation when you’re in debt. You don’t even do little “getaways” for the weekend to “recharge.” You don’t need to recharge. You need to work. You don’t get the luxury. You gave up that luxury when you took on debt.
Do you see what happened here? Your past self really sold you a bill of goods. Your past self stuck you with a massive bill for things you aren’t even enjoying anymore. You’ve been conned by the greatest shyster you’ve ever come across, and that shyster is you!
Here you are, not even able to enjoy a simple vacation because that con artist took you for all of your future disposable income that could have been used for a vacation.
The only way to get back at yourself, for conning yourself the way you did, is to pay off the debt. For your current and future self.
One of the reasons you can’t take a vacation is because you don’t have any free time. Your free time should be spent doing odd jobs to earn extra money, working overtime at your job, holding your third garage sale, becoming an ebay expert, eliminating every expense possible, and optimizing the expenses that, despite your herculean efforts, can’t be eliminated. Yeah… that doesn’t leave much time for vacations.
Use Facebook for something useful, and let your network know that you’re looking to earn extra money. Let them know that you can help them with any job they can conceive. Show up early, stay late, deliver above and beyond expectations and you’ll probably find yourself with a business bursting at the seams from referrals within a few months.
I’m a family guy (heaven knows, I have five kids) and I would miss my kids terribly if I were gone all of the time, working a second and third job.
The “work more” idea is a sprint. It’s not a life sentence. I’m actually quite a balanced guy. But I’m balanced because I’m not in debt.
Not for you. There’s nothing balanced about your situation. Everything is out of balance. You’re on a teeter-totter where your embarrassing load of debt has you leaning hard left, and the only way you can “be balanced” is to go way, way, way to the right. So far to the right that you’re about to fall off. So far to the right that your friends think you’ve gone crazy. Then you take a breath, and take another big step. To the right.
Eat basic foods. Eat less.
Cut your portion sizes. Eat basic food. Don’t eat anything fancy (like dairy or meat). Your grocery bill will drop. Your pant size will drop and, since you won’t be buying clothes any time soon, you may look a little silly with your pants cinched around your waist. That’s okay though. You’re fine to look silly to a bunch of people that are behaving completely irrationally.
You still aren’t questioning your basic assumptions
The majority of you have read the above and come up with all sorts of excuses. Some of you are just shaking your head.
“Jesse’s gone off his rocker.”
“I always thought Jesse was pretty level-headed. What happened?”
“I don’t like Jesse. He sounds really bossy, presumptuous, and mean.”
Maybe I’m not as level-headed as you thought (I’m not). I’m sure I’m being presumptuous, since I can’t individually work with each one of you. I do take issue to the “mean” comment. You know I really like you, and I want the best for you. Remember, we already went over that.
Your most basic assumption that you need to obliterate from your mind is that debt is an option.
Debt is not an option.
The fact that you have always behaved this way does not make it right. It’s tragic. It means you’ve missed out on an amazing ride of figuring out what really matters to you, and where your priorities really lie. You’ve never had to sacrifice to have those true priorities surface. Don’t keep missing out.
Debt has kept you down and out, a slave to interest (of course), but also a slave to middle-of-the-road thinking and suppressed creativity. The process you will undergo to obliterate every single shred of debt from your life will change you forever. You will be stronger, your thinking will be clearer, your perspective will be sharpened, and your resolve will be immovable.
This is my prescription for your priorities: Pay off your debt. Your debt is a crisis. You don’t have any other priorities. This is a sprint. Start running.
I am rooting for you.
Hey YNAB community! Jeremy here, and I’m kicking myself for not remembering to share this early in the summer, but it’s better late than never.
Years ago, I lived 1.6 miles away from where I worked. I rode my bike regularly, but realized the huge benefits of skipping the car altogether while in town. Less ga$, less repair$, fewer oil change$, and rippling calf muscles, to name a few. It was around the time An Inconvenient Truth came out on DVD, so I certainly wasn’t the only one thinking this way.
I figured out what was stopping me from becoming a full-on pedal pusher:
- Sun/heat/pitting out on the way to work (I live in central Washington State).
- Snow/cold/getting frostbite on the way to work (I live in central Washington State).
- I don’t feel like pedaling sometimes.
- It takes too long to get places. If I’m running late, I grab the car keys.
A friend of mine got a little scooter he drove around town. It was a cool, Vespa-looking type and got a bajillion miles per gallon. His gleaming white helmet reminded me of Wallace from A Close Shave. I was seriously tempted that direction until I priced the scooters out at $1,200 not including tabs, licensing, maintenance, etc.
I was randomly scanning eBay one day (I don’t recommend this) and finally found what I was looking for: an electric bike conversion kit. (That’s a non-affiliate link and the particular one I bought is no longer around. I can’t vouch for any of the kits listed because I haven’t used them.)
Since I already had a cheap Schwinn mountain bike, I got a front tire electric motor kit for $300 and was ready to rock. The main reason I got the front tire version (as opposed to the rear tire) was to easily shed the 40 lbs of weight it adds. I don’t always want it on, so being able to disconnect the wires and swap out the front tire is a huge plus. It took me about an hour to install and I was on the road.
It uses a thumb throttle, so I control how much power I’m using at all times. I’d love to tell you I don’t use it all the time for the sake of personal fitness, but keeping up with 20-25 mph traffic is too dang fun.
It broke through all the reasons I didn’t bike and paid for itself in three months from fuel I didn’t buy. In the summer, I pedal less and go fast enough to get a breeze going. In the winter, I pedal enough to get my body warmed. With both tires being powered, I cut through snow much easier too. Plus, my calves are rockin’.
The iPad app is here.
It’s a free companion to the desktop app.
How to get the new app on your iPhone or iPad
Do nothing. That’s the future we live in now, people. For many of you, the autoupdate feature of your phone means you already received the latest version. You’ll know if it’s the latest when you pull it up on your iPad.
If the autoupdate hasn’t kicked in (or you’ve turned it off), from any iOS device that has YNAB installed, go to the App Store and tap the Updates tab at the bottom. You should see YNAB available there, ready to rock.
What’s new for the iPad App
It’s a “universal” app, meaning it’s the same install for your iPhone and your iPad. Same app, different UI and features for iPhone or iPad. The iPhone received a lot of nice little fixes, but since we’ve all been waiting for the iPad features, let’s spend the rest of this fine blog post talking about those.
You can budget
I just budgeted the entire month of August on the iPad app. It’s super-fast, super-slick, and super-nerdy for you to like it so much, but you will.
Budget in landscape:
“But wait, won’t that just mean I have to tap a ton?”
No. You use those opposable thumbs, tap on a Budgeted cell for one of your categories and marvel as this fancy—let’s call it your Budget Drawer—pops up. Make heavy use of the NEXT button on the bottom-right.
Type in the amount, next, new amount, next…you get the idea.
Use the Quick taps on the left
My favorite is to utilize the quick taps on the left of the Budget Drawer, so you aren’t typing anything. You’re presented with contextual information right at the moment of decision: “Let’s budget $500 for groceries again!”
“The fancy iPad app says here that our Average spent is $650…”
“Nah. This time we’re extra serious!”
So no, the iPad app won’t force you to address reality, but it will at least present you with relevant information, which you can use to your advantage (or not).
But do you see how powerful those opposable thumbs can be? You cycle through “budgeted last month” or “average spent for the last three months” with your left thumb, and the big fat NEXT button for your right thumb.
Bam. Bam. Bam. Tap. Tap. Smile. Tap. Bam. Smile. Smile. Tap.
Of course you can do this. But it’ll look really familiar, because it’ll be just like the workflow on your phone:
Travel back in time
Swipe right to move back a month. Swipe left to move forward again. With the added screen real estate of the iPad, this made a lot more sense.
See how weird this screenshot looks? That was me using my hands in a very contorted way to swipe halfway between months AND take a screenshot:
We’re just getting started…
Bounce around between multiple budgets
I run my rental properties through a separate budget in YNAB (here’s a podcast episode all about it, and I run YNAB (the business) through YNAB. To switch quickly between budgets, just tap the top-left little hamburger icon, get to the sidebar, tap the back arrow and you’re at our very cool Budget Picker screen that gives you thumbnail views of your budgets:
Quickly adjust budget amounts
What if I have some pesky overspending and I want to follow Rule Three and roll with the punches?
Tap the overspent balance amount and select which category should “fill up” the overspending:
Move money from one category to another
Or, if you’re sitting with what I call “vertical green,” where all of your categories are green and pretty, and you want to move some surplus to another category, just tap on the balance amount and you’ll be able to select the amount to move, and the destination category:
If you try and take too much…we make YNAB yell at you in red:
YNAB on your iPad does everything your phone does, but with a bigger screen AND all of the new features above. It has the Geosmart payees, the smart defaults, and the familiar, intuitive workflow you’ve grown to love.
Speaking of Love…
This took extraordinary effort from the iOS team, and I feel like they’ve really delivered a highly-polished product that is an absolute delight to use. Many of YNAB’s team members report that they prefer the iPad as their primary budgeting device.
Why is this a free app? Because 1) you already bought the desktop app, which the iPad app requires and 2) we love you.
AND because you’re going to help us spread the word about YNAB by leaving an awesome review on the App Store.
AND, I’d be remiss if I didn’t thank you already for all of the friends and family you’ve shared YNAB with up to this point. We are truly grateful for your business and confidence.
P.S. What about Android? We updated the UI to be much more Android-esque, and made many improvements. It’s in beta as I write this, and early beta feedback has been very, very positive. Android friends, you will like it. We have plenty more in store for Android.
My husband and I try to be pretty intentional about goal-setting and whatnot, so back in June we got to thinking about how we could cut expenses across the board and have a cheaper lifestyle overall. We were pretty much primed and ready for it because we were coming off of a pretty expensive year. We had an exchange student living with us, and we didn’t want her to have a totally un-American experience of frugality. Hehe.
But after looking at our budget, we were definitely ready for some drastic changes. We were ready to move from consumption to production. Don’t get me wrong, though, the pampered American existence can be pretty nice, but it’s also not the ultimate goal for which one should strive. Contentment and satisfaction in life can actually be found in working hard for things.
So back in June we began making a list of things that we could do to become more intentional about this goal of moving from a lifestyle that works against us to one that actually works for us. We opened up our trusty online task manager – Checkvist, and we started listing it all out.
- Move from consumption to production with food
- Go a month without Costco and co-op
- Create a schedule of different shopping methods
- Move from consumption to production with transportation
- Create an area for Michael to work at home
- Sell second car
- Move from consumption to production with energy
- Get an energy audit
- Create an action plan
- Move from consumption to production with fitness
- Revisit gym membership
- Work out with yoga at home
- Move from consumption to production with clothing
- Find our baseline lifestyle
We’ve already worked at these a ton, and some have even been completed (like yard work), which is why there are not too many sub-tasks underneath the main tasks, but there’s a lot more to do! Over the next few months I’d like to share with you about each of the main tasks and tell you what’s working for us and what’s not working, why we’re doing what we’re doing, and if we’d do anything differently. So think of this as your introduction to a new series I’ll be starting. I’m looking forward to sharing what I’m learning!
I love Rule Three. In fact, I’ve decided that it’s my favorite rule. I love that it removes the shame associated with overspending. You’re no longer punished for not being able to predict the future with 100% accuracy. I love that it gives you a way to answer the question, “Where’s the money going to come from?”. I love that it keeps you nimble and flexible.
The truth is it’s more important to stick to the process of budgeting – the give and take of priorities – than it is to stick to one set of numbers that made sense a week ago, but that doesn’t make sense today. When information changes, we change and adapt. Lee, one of our teachers, always says, “I never understood why people would tell me I couldn’t change the budget. I’m the one who typed those numbers in there in the first place.” Exactly.
Rule Three is a beautiful thing.
However, when I teach this concept in the “Getting Started with YNAB” course, inevitably a few people express concern that you could be too flexible, and then you could lose sight of goals and what you’re trying to accomplish. The concern is, if you’re changing things whenever you want, why budget in the first place? It’s a great question.
But Rule Three doesn’t mean changing everything. It’s about evaluating your priorities and adjusting as needed, if needed. During class as I’m walking through the software demonstration, we get to a point where I overspend on a gift. Here’s what the budget looks like at that point:
I ask the class to tell me where they’d take the money from. Then I pause and wait while attendees look over the screen.
Then the responses start coming in. There are usually several votes for clothing, some for restaurants, maybe one or two for car repairs.
Of course, it’s a little bit of a trick question, isn’t it? This screen just shows you a budget, it doesn’t show you the life and person behind the budget.
What if the cupboards are full and there’s 2 days left in the month? In that case taking the money from groceries might be ok. The same could be true for fuel.
Maybe this person is driving a newer car and just had a bunch of work done. So taking $17.50 out of car repairs would be fine. It really depends, and that’s always a worthwhile discussion. But here’s the interesting thing, and the big point I want to make.
No one has ever suggested taking the money from the car payment category. Not once. The responses are always thoughtful and responsible. I’ve always believed that people will make the right decisions for their lives, when they have the right information. But the key is having the right information. The budget gives you that. You can look everything over and decide what to do. You’ll know where you can shuffle funds from, and you’ll know what you shouldn’t touch.
I have certain categories in my budget that I’m more likely to shuffle from. I have some that I wouldn’t touch unless I absolutely had to. Everyone draws those lines in different places.
It’s important to the trust the budget when making decisions, but it’s equally important to trust yourself to make those decisions. Look things over, think about what’s going on financially, and you’ll make a good decision.
I love hearing YNAB success stories, so I recently put out a call out to the YNAB forum community asking for people to share theirs.
I received a whopping 40 responses. (You can read the thread here if you have a forum login and feel like being inspired.) Rather than share one or two in their entirety — which is all I’d have room for here — I decided to focus on what kept cropping up in one response after another: the ideas of control and awareness.
- “What YNAB has allowed us to do is see where we were and see where we can go. … YNAB has been amazing in helping ease the anxiety of being controlled by money. We can make decisions and know the exact impact it has on our finances.”
- YNAB “showed us the areas we could cut … without too much pain, just by being smarter. It made me aware of my finances and saved me fees. … We’re not wasting money on things that aren’t priorities now that we can see it add up. … I don’t stress about money anymore.”
- “Basically, YNAB created order where none previously existed. And with that organization came clarity.”
- “What was the biggest change? My mindset. I am determined to live within my budget. I check my categories before I spend a dime. Every purchase is now done with knowledge and consideration.”
- “Since using [YNAB], I am more aware of what I spend and have definitely cut back on frivolous coffees and so on, but I can still allocate a portion of money to eating out or buying a pair of shoes and not feel guilty.”
- “Knowing where our money is going and giving every dollar a job has completely changed our outlook.”
- “We’ve made some sacrifices, scaled back on some things, but what’s made the biggest difference is being able to use a ‘fine-tooth comb’ to look at all of our expenses and make informed decisions.”
- “Overall I feel a lot more in control as we have a broad view and an intimate view of how things are going. The control is the key thing for me to stay motivated and less anxious.”
- “YNAB speaks the truth in ways that my spreadsheets and Quicken never did for me.”
- YNAB “gave me clear sight as to what I was paying for and hence whether or not I really wanted to pay for it. … I feel like a driver and not a passenger in my financial life.”
- “My stress is much lower because for the first time I feel like I’m in control of my finances, not the other way around.”
- “I’m pretty good at the head-in-the-sand thing. … With YNAB, I traded in the stress of not knowing for the stress of knowing, and I much prefer the latter!”
Another recurring theme throughout the success stories thread had to do with YNAB and relationships (always a popular topic!). I’
ll share some of those quotes in my next post.
I was barely bigger than a Boise spud when our family began visiting my grandparent’s small farm in Idaho. With all that the wide open spaces and roaming cattle had to offer a little girl from the suburbs, nothing thrilled me more than getting a tap on the shoulder from Grandpa as he gestured towards a shiny, wire-covered coop out back.
“C’mon! Let’s go count the chickens.”
I’d squeal and grab his hand, pulling him as fast as my pint-sized strength would allow. He would unlock the gate and a sea of clucking, white puffballs would surround my feet. The joke was that I could never actually count all of the chickens. They seemed to multiply before my very eyes! I would chase them and laugh and dance in the rainfall of feathers…
…until the summer my Grandpa added a new rooster to the hen house.
Like clockwork, I ran to the fence doorway, ready to commiserate with my farmyard friends, but as soon as Grandpa opened the coop, Big Red had me in his sights. He jumped on my back and scratched with his claws. I can still feel his wings flapping furiously against my face. He sunk his talons into my fluorescent orange hoodie (apparently an infuriating color to roosters). It felt like forever until my Grandpa finally freed me from his grasp. I ran screaming from the pen with some pretty nasty gashes down my back, and a brand new—very real—fear of birds.
I swore off every winged creature that day and never looked back. But for all my talk of leaving the birds behind, I realized that I was still metaphorically playing that childhood game by relying on one of the oldest clichés on the planet: Counting my chickens before they hatched.
In the recent past, I was an expert at liquidating money before it even hit our bank account. Future bonuses, side jobs or tax returns were long spent before they even reached my hot, little hand. They were my golden parachute anytime I overextended the budget. I’d smile sheepishly each time my husband would be going over our accounts and point out an extravagant receipt,
“It’s okay! We’ll just use (fill in the blank) to cover it.”
But there are only so many “fill in the blanks” to go around before you find yourself in the Hen House of Debt, struggling to keep track of the slippery chickens you were so sure you could count on.
When the Christmas budget was bursting at the seams, I’d earmark incoming monetary Christmas gifts to cover it- until I remembered that the Christmas money we knew we’d be receiving was already slotted to cover the new rug we purchased to match our freshly painted living room. From there, I’d look even further to a bonus coming four months down the road. It would easily clean up the Christmas mess, but would leave us with next to nothing for summer vacation. Maybe we could use the following quarterly bonus for that? But wait—weren’t we using that money as savings for next Christmas…?
Round and round we went.
Luckily we escaped our “fowl” habits (I had to!) with only a few scratches. Our scuffle with the consequences of relying on money we didn’t yet have has instilled a healthy fear in us that rivals the impact of Big Red’s talons.
As we nurse our wounds from mistakes of the past, YNAB is helping us stay accountable to our current financial status. While there is freedom in how we disperse our money within the categories, we are pulled back into reality every time the numbers don’t add up. (You’ve all seen the bright red, “over budget” warning up in the corner of your YNAB spreadsheet, right? Terrifying!)
It’s not easy patching up what remains of our careless choices and poor planning, but the alternative is far worse. So we wait and save and plan for a future where all the chickens are properly hatched……and at least 500 feet away from me.
Tell me, my fine, feathered YNAB friends: Are you “playing chicken” with your budget? Do you find yourself scrambling to escape the Hen House of Debt? Have you scuffled with spending money you didn’t yet have? How did YNAB free you from the financial albatross around your neck? (Ten bonus points if you use a bird pun!)
Mostly because I’m only at step two of his seven-step path to getting a grip on my money, while everyone around me seems to be sitting fat and pretty at number seven. I know, I know, it’s an illusion. But still.
Okay, let’s back up. I (Alex) don’t really even know this Dave Ramsey fellow. I only heard about him because I’ve read every comment that my village mates leave on my YNAB posts, so this evening I took a little trip across Google to find out the score. I didn’t go too far into the website, because, of course, YNAB is the budget to beat all budgets, and I really only wanted to know what else this fellow has to offer besides budgeting advice.
I stumbled upon his seven-steps page, and realized with fresh horror that I am hopelessly far behind in the race to financial independence. I have my $1000 for emergencies (if you count the money I’ve saved this past year for travelling abroad with my sons, or the $2000 I’ve saved for my “retirement”, haha, let’s just have a moment to giggle about that one). I haven’t got any debt, but that’s only through the grace of a banking system that lets debt-riddled people throw up their hands, press RESET on the Great Green Debt Machine, and start over at GO.
At any rate, I’ve got the first two steps covered. As for having saved three to six months in expenses? For someone who has to choose between a package of paper towels or another squeeze at the gas pump, that seems as preposterous as me as strapping on my mukluks and flying to the moon. I’ll never get there.
Which means I’ll never get to the fourth step, either: investing 15% of my income for growth. And as far as step five goes, while I am currently saving for Thing Two’s university costs (Thing One, as an amputee, gets his first degree paid for by the War Amps, blessed be), step six makes me want to laugh and cry at the same time. Pay off my house early? Dude, I don’t even have a house. I live in a one-bedroom apartment in which I squash silverfish the size of gummy worms on a thrice-daily basis.
Sometimes it all just sucks.
But then. Then. Then . . . I take a deep breath, and I look back to where I was a year ago. Two years ago. Three, four and five years ago. And I realize that – thanks entirely, and only, to YNAB – I’m on my way somewhere. I have a travel fund. I have a retirement fund. I have a fund – many, actually – to cover expenses that I know are going to pop up when I least expect them. I have no clue where I’m going to end up, and unless I sell a hella good novel or scratch the right winning ticket, it sure as heck won’t in my own home, but I’ll be in a better place.
And damn it, I’ll have great eyelashes.
So I have what you call “the travel bug”. I love it. I don’t see it as extravagant or indulgent because it’s a huge value of mine since it has changed me so much by adding such value to my life and the life of my family. But let me tell ya…I’m not staying at fancy resorts, either.
We’ve been doing the Airbnb* thing, and I have to tell you…it’s changing me.
Airbnb is a website that allows you find people that are renting out all sorts of spaces – extra rooms, entire homes, and unique accommodations from glamping to castles. You can then safely book through Airbnb, allowing you also to vet the owners.
The other side to Airbnb is that you can list your own space on there, which is what we’ve done. So when we book our house out for a week, we go on a vacation to a place that is cheaper than our house. See what we did there? Simple math. ;)
This, however, is not for everyone. If you want to stay somewhere that is totally predictable and simple and not have to interact with others, then this is not for you. On the other hand, if you want to live like a local, meet interesting people, and have unique experiences, then try it!
But the mind game that it’s playing on me is phenomenal in a good way. I’m learning things like contentment and relying on my skills and wits and not my stuff while staying at places that are cheaper than my house.
And a funny thing happened yesterday. The sweet girl that’s staying at my house with her family was kind enough to friend me on Instagram to help with trust and whatnot. So yesterday I saw two pictures. The first was of everyone in my pool. And the second was of her and her 5 year old nephew laying on my couch. I’ll be honest. It was weird. That was MY stuff. MY couch. MY throw pillow. MY pool. MY water.
It made me want to never rent my house out again. Then the interesting awakening happened. It’s just stuff.
I’m fortunate enough to have a house to rent out for a decent rate. I’m fortunate enough to have a good decorating eye so that my house looks pretty good, if I do say so. And my husband is so fortunate to have a flexible job so that we can spend a week on an organic gogi berry farm in New Mexico for a week. It’s just stuff.
Why do we have such a hard time sharing? Why is acquisition more important to us than community and generosity? (You could argue that true generosity doesn’t charge, but I digress.)
So why am I sharing all of this on a budgeting blog? I think it’s all linked, truly. Budgeting becomes so much easier when you don’t have an attachment to stuff. Your options are wide open when you’re not a slave to things. Contentment and goals are achievable.
Whether you’re just starting out and facing the harsh reality of needing to cut some categories in order for everything to balance, or you’ve been YNABing for five years like me and want to find greater contentment and make long-term goals, it’s much easier when you’re not attached to stuff.
Welcome back, Grasshoppa! I, Jeremy, have awaited your return. If you missed it, last time we covered some credit score basics and provided a path to getting a free copy of your credit report.
If you are now or will ever be a mortgage shopper, the following will serve you well. I have seen many a mortgage application die at the hands of the cunning FICO, so let us not delay.
[*POOF!* I disappear from my seated lotus position in a bluish cloud of smoke and reappear beside a living, breathing credit report. “Gah!” you gasp.]
Be not afraid, Grasshoppa! By learning the furious five parts of its anatomy we can uncover corresponding attacks. The percentage shown is the weight each part carries in your total score.
Part 1 – Payment History (35%). Late payments hurt. A lot. For seven years. (!) Lenders will check your credit before approval and sometimes again before closing. If you have missed any payments during that time, FICO could deal a fatal wound to your mortgage application and slay your homeownership dreams on the spot.
- Myth 1 (thanks to a helpful comment by MrMcLargeHuge): “An unblemished credit report is suspicious. Lenders want to see some kind of mistake in your credit history.”
- Combat tactic: Noble lenders look for healthy borrowers while predators look for weaknesses. Colorful ad slogans like “Bad credit? No problem!” should warn you like the bright bands of the deadly coral snake.
- Myth 2: “Never pay off your balance completely.”
- Combat tactic: Know which credit lines you have open (by seeing your report) and make sure to keep them paid. If you can only pay the minimum, do it. DO pay your balance off each month; however, DO NOT necessarily close the account. We’ll cover that later.
Part 2 – How Much You Owe (30%). If you have a car loan, student loans, and three credit cards maxed out, this indicates a risk that you will be unable to repay your obligations should something unexpected happen (illness, loss of job, an “amazing” shoe sale, etc). Even if you are keeping up on your payments, FICO will ding you for maxing out.
Also, if you have more credit lines available than you could ever hope to repay, it negatively affects your score.
- Myth 1: “As long as you pay them off every month, you can max out your credit cards.”
- Combat tactic: Keep your balances at or below 25% (some even say 10%). For example, if you have a $1,000 credit limit, only spend $250 before it’s paid off.
- Myth 2: “If I have a lot of credit available to me, it shows lenders I can handle the responsibility.”
- Combat tactic: If you earn $4,000/month, it will make FICO nervous if you can dive into $20,000 of credit card debt at 22% interest rate in a moment’s notice. Limit your credit cards to three.
Which three? Ahhh, you show wisdom for one so good looking, Grasshoppa. Don’t go creating credit card confetti with your katana just yet. Next time we meet, we will explore the three remaining parts of credit score anatomy and bring the whole creature into view.
*You have, no doubt, heard many myths and developed your own tactics. I cordially invite your questions and comments. When you do, we all get stronger.
Recently, my fellow YNAB blogger Alex wrote a great post about how her budget allows her to afford certain indulgences. She’s right: Even if you’re living on a shoestring, you can consciously plan for the special things that bring a little sunshine into your life, without letting them drain your bank account.
But the budget isn’t just for people who want to keep their luxury spending from getting out of hand; it can also liberate those of us who tend to avoid ever spending money on ourselves, even for necessities. (Surely I’m not the only one?)
For example: I’ve been hiking with our new dog a lot this summer. And because I am a cheapskate, I’ve been doing it wearing my only suitable outdoor shoes, a pair of 3- or 4-year-old sneakers that a couple of years ago went from being my primary indoor workout shoes to my beat-up yard work shoes. These were already nearly useless for hiking when I started in May. As of last week, my toes were poking through the mesh and the smooth-worn soles were flapping with every step. (I tripped a lot.)
But, thanks to the budget, I had been saving up for a pair of actual hiking shoes. They cost $100 ($100!) — knocked down to $80 with a coupon code. That’s pretty cheap as far as light trail shoes go, but for me it might as well be a million dollars.
Before the budget, I never would have been able to justify to myself the cost of these shoes. If I had bought them, I would have felt a guilty pang in my stomach every time I put them on. I shouldn’t have indulged myself in something I could have lived without, I would have told myself, because the money could have been better spent elsewhere.
YNAB has changed that kind of thinking for me.
Now that I have a dedicated clothing/shoe category, I can plan for more expensive purchases — even for things I don’t strictly need. I always believed I didn’t deserve Nice Things, because they cost money. I felt kind of noble going without Nice Things because that proved that I was careful with money (though somehow I was always broke).
Now, thanks to the budget, I am able to spend more on myself — plus I have more money for everything else. Go figure.
I’ll probably never get over my innate tightwad tendencies. Heck, before YNAB it took me six months to pull the $7 trigger on a new manual can opener (well, I already had one that kind of worked even though it hurt my hand, and who needs two can openers?).
But my point is this: While most people tend to think of a budget as a way to control their spending, I use mine to help me be less frugal.
When I head out on my morning hike in a few minutes, I’ll be wearing my new Merrells. And thanks to YNAB, I’ll be smiling all the way.
Few things make an engaged couple happier than having a store clerk hand you a registration laser gun followed by the permissive, “Have at it”. I (Christy) think my squeals were audible. I know I blew imaginary smoke that (wasn’t) flowing from my laser pointer after I scanned each item and I definitely swirled the scanner gun around and shoved it in my imaginary holster while annoying my husband to death with exaggerated cowgirl speak: “Well, how-do little darlin’! I reckon I’ll take that, there cheese grater.” (You’re asking yourself how my husband made it to the altar knowing he was marrying such a nerd, aren’t you?)
My adventures with the registration scanner aside, I was thrilled to death to have my pick from the rows upon rows of kitchenware. The colorful measuring cups and brightly patterned dishes, garlic presses and salad spinners, all seemed to whisper the promise of a warm, bustling kitchen in the center of a happy home.
As our years together progressed, I became more and more confident as a home cook and my meals expanded both in difficulty and ingredients. I remember how proud I was when I tackled my first Thanksgiving dinner—including three pies made from scratch! I enjoyed spending time in the kitchen and creating moments where our family could come together over a yummy feast.
Fast forward to last year: My husband’s job was at its most demanding. We were lucky to see him for a few hours on Sunday after church. The little time he did have off was spent on operating tables or doctor’s offices. Our house was in a constant state of disarray—our kitchen being the biggest disaster area—due to a damaging flood. We were adjusting to a new baby and all of the joy (and extreme sleep deprivation) that went along with her. (Oh, but that new baby smell- it’s magic, I tell you!)
My bountiful, inviting dinner table had gone from home cooked meals and meaningful conversations to three different dinner times and leftover scraps from takeout boxes. Our weekend, eat out splurges had now become an everyday survival tool for me. The idea of getting a meal on the table was overwhelming…..little did I know that I was completely overwhelming our budget as well.
Slowly our life began to heal from the “Year of Disasters”, but old, convenient habits die hard. At least five days a week we were eating from plastic “to-go” containers. Take out was my new crutch, and what’s worse, I was crippling our bank account.
When we sat down to input our spending into YNAB, I was slapped with the reality that we were spending well over $600 a month (and that’s being conservative!) on restaurant eating. It was a hard truth to stomach (pun intended) and I knew it was time to get cooking!
I was nervous that after a full year and a half of avoiding our kitchen, I might’ve needed a refresher course in slicing and dicing, but the comforts of simmering pots and delicious smells filling the house quickly awakened my joy of cooking. I took a cue from YNAB and became much more organized with my meal planning and shopping trips. I’m no longer staring into the fridge at 5 o’clock hoping a three course meal will appear on the second shelf. Our daily meals are set in advance, keeping dinner time anxiety free.
In the past 6 weeks we’ve eaten out three times…..THREE!! Our eat-out category has been flush and we’ve saved over $500 a month! I admit that I dreaded making this change. I was sure I would miss the ease of someone else handling our meals and freeing me up for other duties, but I was surprisingly mistaken. So many aspects of our life were improved when we committed to making this change: Our physical health, our financial health, our time together as a family. The benefits keep rolling in.
Of course everyone has days that require sending out a “bat signal” and surrendering to the chaos of the day with a pizza run or an escape to your favorite restaurant. I’ll always be grateful to have that option in my back pocket. But more than that, I’m proud of the progress we’ve made by rediscovering our kitchen and recommitting to a full fridge and a happy bank account.
Has YNAB helped you break some unhealthy habits? Have you had a recent victory in your budgeting? Let’s celebrate!! Share them with me and your fellow YNABers! Crunching those numbers can be stressful at times so let’s take a moment to focus on the amazing progress we’ve made! I’ll whip up something tasty for us while you’re writing…
I had told you about how we just got back from Europe, and Sarah in the comments had asked: “How did you track your expenses while on vacation?”
So my husband and I got to talking about it, and, using much of what he commented back to Sarah with, we came up with this post.
While it’s a challenge, keeping to a budget on vacation requires a LOT of preparation and foresight. We’ve now gone to Europe three times on a YNAB budget, and at this very moment I’m sitting in a cabin in Taos on another vacation. (I plan on telling you next how I manage my travel addiction.) So hopefully this will help in Europe or wherever your heart takes you next.
1. Before you purchase anything, know your conversion rate!
It’s not board game money, as much as you feel like it is. It’s real money; trust me. If you don’t want to do the math, then get an app for your phone that can do it for you.
2. Pay for as much as you can while you’re still home.
If you plan on traveling by train or bus once you’re there, then buy the tickets as early as they’ll let you. Many of the companies mail you the ticket, and others simply email them. But trust me, don’t wait until the last minute. Also, pay for any shows or tours that you plan on going to in advance. This helps a ton.
3. Check the admission prices on the websites of everything else you plan on attending and public transportation passes, and budget for all of those.
I made the mistake once of just estimating what I thought the museum admission prices would be, and it ended up being about 2-3 times more. If you spend a couple of days at home on your itinerary, you won’t regret it. You don’t even have to nail down the itinerary day by day, just list the things that you definitely want to do, and then plan then play it by ear, planning around the events that are set in stone. Also, do a search on the public transportation of the cities that you’re going to so that you can maximize on the passes that you’ll surely want to buy.
4. Give yourself a budget for gifts and souvenirs, and get cash out for those.
Once you have your cash, then use an envelope system for this. Keep you cash safe in a money belt or traveler’s wallet. This will also keep you from making regrettable impulse buys.
5. Give yourself a per diem for food and use cash.
Again, you’ll want to use the envelope system for this, keeping the cash safe in a traveler’s wallet or money belt. Also, be sure to do an internet search for what is customary tipping procedure. You may end up saving a little dough that way.
6. Make sure you and whomever you’re traveling with all have a chip in your credit/debit card.
If you don’t already have one, get this sent to you a few months in advance of your trip. Many vendors, especially in Eastern Europe, don’t take a credit card with a swipe. This prevented me from renting a bike one day because each of us needed our own card to register, so it was a major bummer. See http://en.wikipedia.org/wiki/EMV - the US will be doing this very soon. (Tip: Call your credit card company and bank before you leave to let them know you’ll be overseas.)
7. Give yourself (if possible) a few hundred dollars of buffer so that mistakes or minor emergencies aren’t a big deal. You’re on vacation, and it’s awesome, and you don’t know when you’ll get to come back, and that this doesn’t happen every day, so you don’t want to be stressing out about money! A buffer will ease the stress as long as you don’t rely on it too heavily.
8. Download your transactions every night.
Any credit card/debit transactions will show up almost immediately as converted into dollars, so if you’re doing a best guess conversion during the day, at night you can look at your pending transactions and you’ll see those transactions in dollars. Make sure you use a credit card that doesn’t charge you a huge conversion fee (we use the Barclay Travel card because of its rewards and for this reason too).
9. Use Yelp or Trip Advisor to find places to eat out of the tourist areas to save money.
If you do this beforehand, it’s great. But if you don’t, you might consider getting data on your phone to make things easier (you can buy a prepaid SIM card while you’re there that’s pretty reasonable), but we managed to find enough places with free Wi-Fi to get the information we needed (the Trip Advisor app was my favorite). A lot of times you can end up going a few blocks outside of the normal tourist trap and get something more authentic and much cheaper. So I’d recommend looking at your itinerary now and finding options for where you’re going to be. I think the most expensive aspect of our trip was the panic-and-eat-out-at-a-tourist-trap scenario.
And as far as the nuts-and-bolts of your categories and whatnot, that’s up to you. We just had one category with a simple list of the budget in the notes. Some of you will probably want a master category with sub-categories for each thing (food, souvenirs, etc.), and that’s fine, too. My personal taste is to keep it a little simpler.
I hope this helps! Happy travels!
Alex here. I admit it. I’m a fool for fakery.
Specifically, I’m a fool for having hundreds of synthetic polyester fibres painstakingly glued to my face every four weeks.
Fake lashes. Lots of ‘em. And they cost me a pretty penny, which I always find is an interesting exercise in explanation whenever someone asks me how much they cost.
See, people who know me understand I live and die by My Budget. I turn people down for drinks because It’s Not In The Budget. I decline going out for lunch because I’ve Already Spent This Month’s Restaurant Budget. Yet I turn around and drop a hundred bucks a month on something that seems so frivolous.
But there it is. I love the time saved by no longer having to put on makeup. I love not worrying about my mascara smudging when I’m slinging tires at the gym. I love how they give me an instant eye-lift in a world that makes women feel crummy if we’re not Botoxing and threading and Juvederming and trying to look like we’re twenty-eight instead of however old we really are.
We all have our luxuries. And in my (tightly-budgeted, single-parenting, self-employed) world, I have two: wine and eyelashes. (When I first threw my hat into the ring to get this blogging gig with YNAB, I confessed to Mark that I spend the equivalent of a plane trip to Guatemala every year…on wine. But that’s for another post. (And sometimes I share it with others.) And besides, that’s nothing compared to the return trip to Singapore I’m hucking away on eyelashes.)
I save for my children’s education. I save for their braces. I pay hundreds for life, critical illness and disability insurance. I save for Thing One’s trumpet lessons, for Thing Two’s gymnastics lessons, for their annual passes to the museum, the pool and Miniature World. As for me? My monthly clothing budget is $30 (oh yeah, baby, it’s Alex what’s keeping Value Village #yyj in business). My electricity budget is $20. My iTunes Store budget is $5. So I’m not a reckless spender. What YNABer is?
But – and I’m sure others who have oddball luxuries that they seem to spend ridiculous amounts of money on will agree – this apparent inconsistency in meting out money to the various fiscal arenas of life is sometimes difficult to explain to people who aren’t acquainted with a) YNAB, or b) budgeting in general. And it still raises eyebrows, even when I explain that it’s a measured choice. That I can afford the lashes because I have cut away the other frivolities, like Starbucks coffee, and new shoes, and movies out, and pedicures, and things at Costco that aren’t really necessary but which are such a good price they just have to be purchased.
I explain it anyway.
So now it’s your go: What expenses do you find tricky to justify to those people who challenge your budget allocations?
[Wooden flute plays while I balance atop my bamboo cane.]
The terms “FICO” and “credit score” are essentially the same creature and those terms are interchanged by bankers, since FICO is the company many use to get your credit report. Despite your or my feelings about it, your FICO…is. Though shrouded in mystery, since it can work either for or against you, it is wise to study its ways. Let us begin…
If it is a mortgage you seek, you must face your FICO since banks employ it heavily in guiding their lending decisions. If married, you will not face it alone (though you may wish you could if your spouse has been tiger-style with their borrowing, yet sloth-style in paying back.)
FICO has no feelings about your borrowing history. FICO does not hear sincere reasons, nor poor excuses. It peers unbiasedly through you and gives you a score ranging from 300 to 850, with higher being better. Like middle-aged man’s abs, building your score up is long and difficult, while sagging is quick and easy.
FICO sees only darkness. FICO will not mention the time you ate only wild beetles, drank dew droplets, and lived without electricity to pay off your 30 year mortgage in seven grueling months. FICO will, however, point out the time you spent forty days meditating on Youtube cat videos and were late on paying your Target card…five years ago.
Let not your anger control you, Grasshoppa. Neither be seized by worry if you are now trying to remember every little thing you may have ever done wrong. The best course of action is to bring your FICO into the light. Journey to www.AnnualCreditReport.com where you can request your credit report once per year without charge.
[There are many sites (even some banks/credit cards) which offer this service for a fee. Unless you want to monitor your credit score more than annually, this is letting your money take the way of the cherry blossom in the wind.]
Like waxing car and painting fence, checking your score is more than going through the motions since they are not always accurate. Be not intimidated! FICO will back down when confronted with good evidence of payment sent on time. Even a sincere call to the company reporting a genuine late payment may suffice. “Hello, friendly cell phone carrier person. I see I had a late payment last year. I was unconscious due to a nunchaku-induced head injury, but I paid as soon as I woke up and was never late otherwise. What might I do to clear that up?” It might do the trick, if it is the honest truth.
Many an unwary mortgage shoppa has been bitten in the backside by FICO and thus denied in their quest. When next we meet, I will teach of the anatomy of the FICO, and how to avoid those attacks. I will offer you further techniques, but they will be more valuable to you once you have seen your credit report with your own eyes.
That will be all for now, enlightened one. Now go and find what it is you seek.
For over two years, I (Jessiebird) had been begging my 28-year-old stepson to try YNAB. He had grudgingly downloaded the trial, but insisted that he couldn’t use it unless he entered all his future expenses. This had thrown off his budget numbers and left him convinced that YNAB wouldn’t work for him.
He had still not come around to YNAB at Christmas this past year. I knew this because he mentioned having to check his bank balance to make sure he had enough money to buy a few more gifts. (I may have given him my standard lecture about how YNAB teaches you to make spending decisions based on category balances, not account balances. But if I did, he wasn’t listening.)
A couple of months ago, out of the blue, he did say something about wanting to give YNAB another try. Worried I might scare him off, I kept my normal gushing tightly controlled and merely said I thought he’d really find YNAB useful and that I could help him if he got stuck. But he hadn’t brought up YNAB since, so I assumed he had changed his mind.
He was in town this week for a brief visit. And last night, while we were all watching a movie, he pulled out his laptop and said, “Sorry, but I have got to get caught up on YNAB.”
I almost dropped my popcorn.
I tried to appear casual, but I had to hug my knees to keep myself from turning cartwheels around the living room. I quivered in silent excitement as I watched him stare at the screen while murmuring number-type stuff.
After about 5 minutes, he gave a little cheer, and I knew exactly what the sound meant. “Balanced to the penny, first try,” he said with a grin. It was a beautiful YNAB moment.
He spent another 5 minutes or so examining the budget and tapping the keyboard now and then. “I overspent a little on this trip,” he said. “I kind of figured I was going to, but it’s not a problem. I have a couple other categories I can take the money from.”
Hear that? He speaks YNAB.
He joins my younger stepson and his wife, who started using YNAB when they got married last year and who have had great success so far, as well as my 14-year-old daughter who, as I wrote in an earlier post, is a young but avid YNAB user.
I’ve often felt bad that my husband and I didn’t set the best example of how to handle money when the kids were growing up. We can’t change the past, but I’m thrilled that we’ve been able to do the next best thing: get all three of our children using YNAB so they can avoid the money-management mistakes we made.
At last, our whole family uses YNAB. Maybe that is worth a cartwheel or two.
Okay YNAB friends. Christy here, and I’m about to get deep. Are you ready for this? Turn on your favorite slow jam and pour yourself something dangerous. (Dr.Pepper on the rocks? Oh no you didn’t.)
My recent journey with YNAB has led me down a path of self-reflection. I’ve had to own up to some hard truths about the way I’d been abusing money. This process has forced me to grieve my detached, over-extended spending habits of the past. As I look back on the events that brought me here, I was shocked at how closely they resembled the stages of grief. Like clockwork, I hit every step—and it wasn’t always pretty!
We all have that “fight or flight” instinct that sends an urgent message to our brains in times of trouble, letting us know we need to react—and fast. Right then we choose our response and either we are putting up our dukes and karate chopping our way out of a difficult situation, or we’re hiding behind the couch cushions in the fetal position with our fingers in our ears. When it came to finances, I made myself a very comfortable cushion fort of denial.
When my better half would try to engage me in conversations about our budgetary goals, I would smile and nod and give him my best, “Team Hiniker! Yes! We’ve got this!” but I never fully engaged because I never connected to the situation. My head remained firmly planted in the sand while I left my husband to deal with the reality.
When it became clear that I could no longer hide from the stack of bills brought on by the previous year’s events, my bitter side got the best of me. We had been through one of the most trying times of our lives and I was downright mad that “Life” slapped us with a hefty price tag to match.
It became hard to watch the success of others and not feel the sting of jealousy. I envied those who seemed to “have it easy” and found myself trapped in the hamster wheel of comparison. The anger and resentment I felt for our situation stole my joy and overshadowed the countless blessings we were fortunate enough to receive daily.
This little fella has been my companion for years. As a girl with very few vices (“Don’t drink, don’t smoke—what do you do?”) I found comfort in “treating myself” when the emotions of what I was going through were too hard to face. It was a habit that developed during our 10 year infertility battle. (“If I can’t have a baby, then I should get this sweater.”) Needless to say, the more loss we experienced, the more I shopped away my sadness.
This unhealthy bartering system seeped into other aspects of my life and gave me permission to purchase a false sense of entitlement. When walls were crumbling down around us (literally and figuratively) I deserved some compensation. That was the deal I had made with Life.
Eventually the magnitude of the situation caught up with me. I rode the Ferris wheel of grief and was dropped off on a big black cloud of gloom. I went from blaming the government (Obamacare! State adoption laws!) to landing squarely on….me.
I threw myself a pretty lavish pity party complete with isolation, crying jags, an entire lemon meringue pie and binge watching 90210 reruns. (Another vice, I know. Don’t judge.) The “sads” lasted longer than I’d like to admit, but looking back it was a necessary step. The cloud always comes before the silver lining…
What is it they say in the Serenity Prayer?
“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”
There were many things we couldn’t change about our current situation and I had spent far too many precious moments dwelling on them. My husband and I sat at the kitchen table early one morning having a hushed conversation about our finances. It wasn’t unlike the dozens we’d had before except for one thing: I listened, I processed and I made the choice to change.
Enter YNAB. I knew I couldn’t do it alone. Just like most addictions require a regimented program to keep them on track and accountable, I needed the structure of a system that would be forgiving of my past failures and mentor me as I created healthy new habits. I quickly learned that nothing would heal our monetary grief faster than actively streamlining and sticking to a budget. Actions speak louder than worries. YNAB taught me that.
Have you or a loved one experienced one or more stages of budget grief? How did YNAB help you overcome your emotional and financial woes? Are you still trapped in the grief cycle? (Don’t worry; I’ve got a pie and a DVR full of 90’s reruns with your name on it.)
As I said, we were in Europe for two weeks and got back on Thursday. And as Christy put it so well, vacation budgeting can be quite a challenge. I (Annie) am working on frugal vacationing (a post soon to come), and I’m pretty decent at it compared to what I did in the past. But it’s just so hard to track, especially when you’re using three different currencies!
I made a budget before I left, tried to plan out my itinerary as well as I could (I really stink at it because it kills my soul), and tried to make wise purchases while I was out. At one point during the second week, however, I think I had a screw-it moment. My budget suffered the same fate as my diet which was thrown out the window during the first day or two.
I found myself making purchases that I wouldn’t have made in the first week. At that point I just figured that I was already screwed, so I might as well just have fun and worry about it when I got home. Now don’t get me wrong, I wasn’t making extravagant purchases of crystal and gold, but it was more like extra little gifts for my kids, a second glass of wine, or a sweet treat with my espresso. (Don’t worry; I’m still cheap.)
So my husband was like, “How are we with the budget?” And I’m like, “Uh…you’re the one that wanted to go out to eat tonight. And I don’t really know. I’m kind of scared to check.”
So we have a little convo about how I suck at planning itineraries, but then he says, “Reality is never something to be afraid of; that’s something YNAB taught me.” Of course. He was absolutely right.
Later that night he downloaded our transactions and saw where we were at. My prediction was that we were $1,000 over what we budgeted for. But in reality, at that point we were projected to end our vacation at about $250 over what we budgeted for. Now don’t judge me…but that’s not too bad. We’ve had vacations where we’ve gone about 4 times more than that over. Plus, this time we had a little padding left in our overall budget for just such an occasion, so we were fine.
He was right, though – knowing reality was much better than being left in the dark. Being in the dark is scary and stressful, and it just leads to more irrational behavior. But knowing that I overspent by $250 was manageable, and it led me to more rational behavior.
Three weeks ago, I (Alex) marched into Future Shop and purchased a spanky new MacBook Air. I’d been saving in YNAB for a year, treating my wheezy old dog of a MacBook Pro like gold (fan under her bottom, lots of rest time, full shutdown every night) so she’d last me until I made the switch. Hundred dollars here, fifty dollars there, until the magical day finally arrived (June 1) and the numbers in my MacBook Air category rolled over – ding!ding!ding! – to signal I’d reached my goal. Time to go shopping.
And shop I did. I knew exactly what I wanted: the smallest, least expensive version of an Air. I don’t download anything other than things to read. I don’t watch movies. I just need somewhere to store my Word docs and PDFs and all the things that go along with the writing life. Lucky for the budget, these things take up an insignificant amount of computing space, so I can get away with buying the cheapest model. Which, when it comes to Mac, is never cheap. Then again, it’s also not cheaply made: I’ve gotten two solid years of 12h+ daily use use from my Pro – and it was a 2009 model, purchased used in 2012. I anticipate my Air will give me the same longevity.
Here’s where I stumbled on an unanticipated hiccup with my plan. My littles are Minecrafters. They had been sharing an iPad for months, passing it back and forth between turns, and looking forward to the day when Mumma could buy her new computer…because then they’d get the old one to play Minecraft on, and they wouldn’t have to play the Pocket Edition anymore. Imagine my chagrin when I realized my poor old Pro couldn’t handle the graphics, memory and processing requirements to make Minecraft actually work. Instead of running around building zoos, mining redstone and outsmarting Endermen, my boys were jerking along in a slow, staggering smudge of green and brown, at risk of punched to death by faster-moving zombies.
I couldn’t watch it happen.
So now, thanks to YNAB, the kids are playing Minecraft on a fancy new computer that’s small enough and light enough to be carried between your fourth and fifth toes, barefoot on Jupiter.
And I’m still dogging it on my old Pro.