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Working Out That Budget Muscle

By Images_of_MoneyΩ

Since 2011, we have been on a budget to handle our money and finances. We use the budget as a tool to tell our money where to go, rather than find out where it went. What I have learned in the year of budgeting is that it will not be a perfectly laid out plan from the get-go. So we are constantly tweaking and changing our monthly budget for our current situation.

My favorite things in life don’t cost any money. It’s really clear that the most precious resource we all have is time.

-Steve Jobs

Over the years, I have used different money management software such as Microsoft’s Quicken and Money. They were great at tracking your spending and all of your money accounts, but they lacked the budgeting portion. I found that all I was doing with it was documenting where my money went. I needed something to help me plan how I was going to spend my money.

This past November, I came across a budgeting software on different forums called You Need A Budget, or YNAB for short. This budgeting software did what I needed: Tell my money where to go. Their whole premise is to give every dollar a job so you know where your money is going. Also, YNAB’s budgeting software also helps you get away from living paycheck to paycheck by saving and budgeting to live of last month’s income.

Sample screenshot of YNAB budget

There are other budgeting software and methods out there that do the same thing as YNAB, such as Mvelopes and Dave Ramsey’s Envelope System, but I find the mobile integration and cloud syncing of YNAB make it very convenient to record my transactions instantly and on the go. If you want to see an awesome explanation of how to set up your own Envelope System, check out my friend’s blog here.

Back to YNAB, since including it into our budgeting, my wife and I have been able to save up and pay off over $30,000 in overall debt, while saving up for a down payment for our home! This was accomplished by knowing where our money was budgeted for and sticking to the budget. So anytime we had a little extra money from working overtime, or from money left over in the budget, we threw it toward our debt or stashed it for our down payment. We also incorporate YNAB with Dave Ramsey’s Baby Steps method to pay off debt and build wealth. We do not follow his 7 Baby Steps exactly, we tweak it a little to serve our own needs. We agree with his Snowball method of paying down debt, smallest amount to largest and adding each payment onto the next. One thing we did out of step was buy a home before paying off our debt. We wanted to take advantage of the current housing market and interest rates before it became too late and owning a home became out of reach.

YNAB’s Four Rule Method

You Need A Budget has a four rule method to help with your personal finances. It is there to help you pay down your debt and eventually stop living paycheck to paycheck. Here are the four rules:

  • Rule One: Give every dollar a job
  • Rule Two: Save for a rainy day
  • Rule Three: Roll with the punches
  • Rule Four: Live on last month’s income

These rules are fairly simple, and almost common-sense. But when you team these rules up with a budgeting software that has a very easy-to-use interface, it is very easy to start saving and eliminating debt.

Screenshot of YNAB

Screenshot of YNAB reports section

Just like exercising, budgeting is an ongoing process that you must constantly work on. Which ever budgeting method you use, you have to continually look at it and tweak it and not just set it on autopilot. Your life changes and your budget needs to be able to bend and mold to your current life’s situation.

Do you budget and if so, what method and software do you use?



{ 3 comments… add one }

  • Gary Cruz October 14, 2012, 8:54 pm

    Nice post. Did you learn how to save from your parents? Have you tried Mint?

    • Ron October 14, 2012, 8:59 pm

      I never learned how to save from my parents. Just the simple stuff: save your money for a rainy day. What I did learn was hard work and determination. But that was the extent of it. I am going to write a future post about immigrants and first-generation Americans and how they are taken advantage of by these credit companies and the financing of the “Great American Dream”.

    • Ron October 14, 2012, 9:02 pm

      Oh and by the way, I do use Mint to just have a look at my accounts at a glance. Their budgeting tool does not really hold you accountable as I would like it to. I like their reports though. More informative than YNAB because it shows how you compare with others in your area and the US.

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