Six Months on YNAB

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By 4inthefamily
August 19, 2008

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Well, we are coming up on six months of using YNAB [You Need A Budget software] and I would like to report our progress as we've transitioned to the YNAB philosophy and grown to love the software. For the record, we use the Pro version. I have no experience with the Excel version.

The first rule in the methodology is "Stop Living Paycheck to Paycheck". We had a good amount in savings before we started using YNAB in March and so I transferred enough into our checking account at the beginning of March to reflect our February income and have entered most income as primary since then. I love that I have the whole month's money in our checking account at the beginning of the month and I have most of my bills scheduled to paid on the first day of the month. I am sure I am losing some nominal amount of interest by paying everything early and leaving a larger amount than strictly necessary in my checking account, but the peace of mind and ease it has brought when dealing with our money is worth it.

The second rule is to "Give every dollar a job". At the beginning of the month, we see how much money is available for the month (based on last month's income minus any overages I might have had) and then DH and I spend about 5 minutes putting together a budget for the month. Most categories stay the same month to month, but there are always a few things that we change around. Most importantly, we give every dollar a job, whether it be paying for groceries or funding our Roth. Sometimes, we do have a category that goes over but, since we have a month's worth of salary as a buffer, I am never worried about the money not being there. It just means that we have made a decision that we will have to spend a little less the next month in some way.

The third rule is "Prepare for Rain". My understanding of this rule is that we need to prepare for the larger, less frequent expenses. I am happy to say that I registered all three of our vehicles this month with money that had been budgeted over six months in YNAB. We are also on schedule to pay our HOA annual fee in full in January. There are several things that we only pay once a year and they used to always throw me. Now they are all in the budget. All of those annual life insurance premiums and the once a year payment for the lawn service are all accounted for. We've even got a fund going for our vacation next year and for Christmas this year - just in case our usual Christmas bonus doesn't materialize for some reason.

The fourth rule is "Roll with the Punches". We were really put to the test in July on this particular area. We had just taken a lovely vacation to the Alleghenies in New York and drained our vacation budget. Less than 5 minutes after we got home, the phone was ringing and I learned that my sister had very suddenly and tragically passed away that morning. My first thought was not to look in YNAB and try to see how we could come up with the money to attend the funeral. I just got online and bought last minute tickets, reserved a hotel room for a week and booked a rental car. When we got through the funeral and made it back home, I decided that I needed to deal with the financial repercussions. After all, just because something bad had happened, it didn't mean that the money didn't have to come from somewhere. August is a three paycheck month for DH. So, instead of using that third paycheck to help fund our Roth as we had originally planned, it was entered as secondary income and was just barely enough to cover our (very expensive) last minute travel. We will not be able to max out our Roths in 2008 now, but that is sometimes how life goes.

Through the last six months, my family has really embraced this software. I download my bank and credit card transactions once a week and make sure that everything is categorized and reconciled with Quicken. It takes about 5 minutes. I will admit that towards the end of the month if a category is looking like it might be tight, we will revisit YNAB more often and either make adjustments to accommodate needed spending or decide not to spend.

I'll try and update again around a year.