Our old budgeting system involved staying broke and feeling hopeless, but not anymore. I have never felt so empowered with my finances. Here’s what I did.
I say this without a shred of hyperbole: last fall two things happened that changed everything. One: I had another baby, and two: I fell seriously hard in love with budgeting.
And yeah, you bet your bottom dollar (money pun for the win) that I’m ranking those on the same level of impact in my life. Except that honestly? The budgeting might just be an even bigger deal. I mean – I had three babies before this one. Been there, done that. (Kidding! Sorta.)
Our Budgeting Story
Anyone who has known me a long time knows that I’m not the numbers person. Until last fall, budgeting and I were not pals. We weren’t even living on the same planet. Math and I? Not friends. No, no, nopety-nope, nuh-uh. It was a hard pass to all things math-ish, probably stemming from a traumatizing high school math experience. I don’t wanna talk about it. (Cue eye twitching.)
Chris (the honey of ‘red+honey’) had been “in charge” of our finances ever since we signed up for a joint chequing account when we were engaged in 2002.
And then things changed.
But first: some backstory. We got married at 19 and 20 years old, so basically two starry-eyed kids got hitched and started pretending to be grown-ups. A lot of people told us (straight to our faces, and behind our backs) that getting married so young was stupid and we’d inevitably divorce down the road. (Or some other variation of this lovely happy-engagement sentiment.)
While the road wasn’t without its bumps and bruises, we celebrated our 15th anniversary this year and our marriage is at its best ever. (So, so satisfying to prove so many people wrong just by being happy.)
However, getting together so young meant that there were lots of ways in which we had to grow up together. Learning to handle finances was one of them.
Of course, we both brought our family of origin’s baggage along, with our experiences being fairly opposite. And there was stress in the mix, too, as there often is with finances. We were both newlyweds and college students. (I did three more years to complete my B.A. degree.) As you can imagine: we weren’t exactly rolling in it.
Eventually I graduated and got a job (two, actually: a full-time office job, and a part-time evening/weekend job). Chris was working in a full-time salaried position as well. Our salaries were entry-level but we had few responsibilities, a cheap apartment, and suddenly we had money to spend without feeling much consequence at all.
We would eat out frequently, make “medium-sized” purchases without much thought, and even buy the occasional bigger item, like furniture, without planning ahead. If we didn’t have the cash in our bank account, we sometimes borrowed it through a line of credit, credit card, or interest-free store financing program. It was fine though, because we had few responsibilities and could pay it off without too much effort.
We didn’t go too crazy and rack up thousands of dollars in debt (that came later when we had less income than expenses) but we also didn’t start saving up for the future. (Helloooo, early-twenties Beth & Chris: mortgages and kids are expensive!)
Most young people are floundering a bit as they gain that real-world experience of handling finances, so I give our young newlywed-selves a bit of grace. However – if I could go back and tell myself any one thing at that age, it would be this: get YNAB!!
Yup, seriously, YNAB (aka You Need a Budget.) YNAB, the budgeting software. The beautiful, fabulous, life-changing budgeting software. That’s what I’d say if I suddenly acquired the ability to time travel. (Oh modern-day self, you are a nerdy delight.)
(Side note: can’t stop laughing that the words “budgeting” + “software” are what’s lighting me up right now. I mean of all the unlikely love stories, this is it.)
Eventually, we had a baby, then another, and soon after a third. During this time Chris was going through his pilot training and had reached the level of flight instructor. His training had cost us somewhere around 80K, but the job paid far below the poverty level.
We spent years in debt, being super broke, and feeling hopeless. Thankfully, YNAB helped us to break that cycle.
(And yes, as a side note: we’re making significantly more more money now, but the larger salaries wasn’t what did it. The credit honestly belongs to YNAB, and the actual income level mattered a lot less than I thought it would. We stayed stuck in that debt-laden, constantly feeling broke cycle for two YEARS after making more money. This entire story really does hinge on how YNAB changed everything for us, which I’ll explain more below.)
Technically, YNAB is a budgeting software. But really – it’s more than that. It’s a method, a mindset, and my BFF.
And in the last year, it has quite literally changed my life.
How We Found YNAB
We first signed up for YNAB back in January of 2017. I got the free trial, poked around a bit, and promptly lost interest. I didn’t take the time to really learn the method and the philosophy driving it, so I faded fast, just like every other budgeting tool and method we had tried in the past. (Mint, EveryDollar, cash budgeting, the envelope system, an Excel spreadsheet…)
Then I hit my breaking point.
A year ago, our chequing account was in overdraft yet again, and I felt the bills and unplanned expenses closing in from all sides with payday still a week away. This was a common scenario. I didn’t know which expenses were coming up. It felt like things were constantly requiring money, and it caused a perpetual state of low-grade panic.
Despite now being at a point in our lives where we’re earning quite a good combined income, our debt from years of being low-income or unemployed weighed heavily on our day-to-day, and to be honest – our financial strategy was mostly, well… not strategic. (Avoidance and denial were more like it.)
Every time I thought about finances, I started noticing the anxiety manifesting itself in me in physical symptoms – like a tight feeling in my chest, inability to get a deep breath, headaches and stomach aches, an extremely short fuse with my kids at the smallest annoyances, a twitch in my right eye, and a jittery feeling that I couldn’t shake.
Chris had done what he could, and had done well over the years at keeping us out of too much trouble. He kept track loosely (mentally), but he didn’t have a good system, nor was he actually tracking every transaction. He kept things going in survival mode, but his job can be quite stressful and demanding and he didn’t have the mental energy to invest beyond that.
We were constantly bouncing between payday and overdraft, often having overdue bills accidentally, and forever paying for random expenses without knowing if we could actually afford them now, or if we should wait… or if we should be making the purchase at all.
A month later, about a week after giving birth to our fourth child, I pulled open the YNAB website with the kind of newfound determination that can only come from being at rock bottom. (Plus the stubborn tenacity of a fired up redhead, ha!)
Thankfully, I suddenly had a bunch of time in a rocking chair (nursing a newborn in the fall of 2017) to study the Four Rules, scour the YNAB help documents (like – literally read them all word-for-word), and watch a bunch of YNAB seminar videos on YouTube. (There’s a fantastic one on budgeting while you’re broke that helped a ton.)
Suddenly, everything made sense.
I got super fired up, and have been faithfully tracking and keeping up with my budgeting ever since. At first I logged in nearly every day, but now I will typically log in and update things around twice weekly, and it works beautifully for me.
What I’m saying is – you’ll have to pry YNAB out of my cold, dead fingers before I give it up. It has changed my life, reduced my money anxiety to practically nothing, and allowed us to take control in a brand new way.
Oh, and we went from being in overdraft most of the time to paying off over $8K of debt so far in 2018 – without changing our income. We were also able to pay for several large expenses (a $1200 car repair bill, fixing our dirt/weed mess of a backyard for around $1500, and $800 on new tires for the van) this year without going further into debt.
The YNAB Philosophy
YNAB is built on four foundational rules. They’re simple but powerful, and they were a total lightbulb moment for me (when I finally took the time to understand them).
Most budgeting tools are tracking tools – to track how good you are (or aren’t) at staying “on budget”. YNAB is a whole different thing altogether. The tracking is only useful insofar as it helps you to be strategic, flexible, and in complete control on a daily basis.
I have never felt so empowered with my finances, and that’s an incomparably good feeling.
So, like I said – understanding the unique YNAB method is absolutely key. Here’s a breakdown of the four foundational rules, along with how they’ve impacted us in particular.
Rule #1: Give every dollar a job
This was a huge shift for us. And I’ll just note: this refers specifically to assigning jobs to dollars AFTER THEY ARRIVE IN YOUR BANK ACCOUNT, not assigning jobs to future, hypothetical dollars BEFORE they arrive. This is critical!
Yes, you may know that you’re getting a paycheque next Thursday… but if the money isn’t actually in your account yet, you can’t use it.
Our previous attempts at budgeting were more about writing all of our monthly expenses into a spreadsheet and making sure that the total wasn’t more than our monthly income. This is a totally different thing.
This was always disastrous because: a) we were forever missing/forgetting our True Expenses (see Rule #2), and b) the timing was always off with when bills would come out. We didn’t know when we could do a big grocery shopping, and when was best for buying somebody new shoes… we were always making educated guesses about when we could do these things based on what was in our account at any given moment, without having a 100% firm handle on what was coming up. Inevitably, we’d go get groceries and buy somebody new underwear, and before we knew it – oops – the car payment would come out and our account would be overdrawn.
Now, I wait until money arrives in our bank account, and I give each dollar a job in YNAB (which bills are coming up? Which true expenses are in the pipeline? Etc.)
Now, it’s as easy as taking a look at the budget in order to decide whether or not there’s money available for any particular need/want at any particular moment. And if there isn’t, and I want to spend anyway? Well, that’s what Rule #3 is for.
I learned that there’s no point in simply writing down your monthly expenses if you aren’t actively managing your dollars as they come in. Game changer.
Rule #2: Embrace your true expenses
True expenses are the things you spend money on that don’t come along each month on the same day like clockwork. It’s anything from haircuts and holiday spending to quarterly utility bills and car maintenance expenses.
Missing this concept left a huge, gaping hole in our previous budgeting attempts. We honestly tried to write everything down into the spreadsheet – every last utility, every need for clothing, and groceries, and haircuts.
But seriously – it’s really hard to catch and categorize absolutely everything that’s not a monthly bill until you’ve been carefully tracking your spending for a solid 12+ months.
We knew that there were expenses that would come up but that were not in the budget, like batteries, a new broom, birthday gifts for a friend, ten dollars on coffee because we have a random couple of hours kid-free, ziploc bags from the dollar store, underwear, a subscription that gets billed annually, and suddenly my kid has a pen pal and when-did-postage-stamps-get-so-freaking-expensive?!
I could go on.
However, despite knowing these sorts of things are always lurking around the corner, we still struggled to predict and plan for them. They always stressed me out.
And that, my friends, is exactly where Rule #2 comes in. Within YNAB, you create categories for both “actual” (fixed) expenses as well as “true” (irregular) expenses. Then, you can assign dollars to any category you want, letting it accumulate until you need it.
There are forever going to be these random purchases that will wreck your budget if you don’t get serious about tracking your actual spending and embracing YOUR true expenses. (Key word: your.)
I spent probably the first six months adjusting the categories in our budget and now, at nearly a year on, I finally feel like I have a very accurate representation of our spending. I have a category for anything our bank statement throws my way, and I think I’ve struggled to categorize less than five transactions over the last 8 months.
Because I finally have our true expenses nailed down, I find it very easy to assign jobs to the dollars as they arrive. I know that I try to keep around $40 or $50 in our “Household Items” category all of the time, so that it’s so problem when things come up like the BBQ needing a refill on propane, or buying a mini broom and dustpan from the dollar store to keep in the laundry room (to sweep up the rocks and dirt that shake out of kid laundry every day, because KIDS, man.)
I know to put a little bit in the “Chris Meals Out” fund so that when he inevitably has to grab lunch on the go during a weekday (his job is fast-paced and sometimes he’s running around the city for meetings), it’s no problem.
And so on.
Embracing your true expenses = never feeling caught off-guard. It’s absolutely critical for peace of mind.
Rule #3: Roll with the punches
While the first two rules were revolutionary, rule #3 is where the magic is, for me.
For my entire adult life, a budget was more or less a static thing. It was a thing that lived in a spreadsheet. It was a set list of boundaries that we attempted to stay within, inevitably failing miserably enough that we started ignoring it again… and then revisiting months later when we felt guilty enough about our spending to try again. Wash, rinse, repeat.
Rule three tells us that a budget is a LIVING THING. It’s not a static list of expenses contrasted with your paycheque (with the goal being that the latter’s bottom line is larger than the former’s) that lives in a spreadsheet, it’s a flexible, movable, adaptable thing that shifts this way and that, and lives to serve you. Instead of being something that lives distantly off in a spreadsheet somewhere, my budget is now a thing that I check in with several times a week, tweaking and shifting things around in all the time.
In YNAB, when you assign jobs to your dollars as they come in (as per Rule #1), the money sits in that category until it’s needed, and YNAB keeps track of it from month to month. We now know to ignore our bank account balance when asking if we can afford something – YNAB has the real answer, and Rule #2 helps to make sure that it’s an accurate one.
But what happens when you want to spend money on, say – a spontaneous date night – and there are zero dollars assigned to the “Date Night” category? Or when one of your little humans comes to you and declares that all of their socks have holes, but you just emptied out your clothing fund in order to buy shoes for someone?
You ROLL WITH THE PUNCHES. Ah, flexibility – it’s a glorious thing. Maybe I feel such a kinship with this particular rule because my number 1 strength (out of 34) on the Strengths Finder test is adaptability. I can adapt like a total boss, which makes this rule my personal favourite. 😉
The beautifully freeing thing about YNAB is that it’s just so easy to shift things around at will. You have $50 set aside in your “Family Eating Out” fund but no plans to eat out before the next payday… and your kid needs new hole-free socks? A couple of clicks, and boom – the money is now assigned to your clothing fund, and you’re good to go. Want to borrow $6 from your household toiletries fund to buy a fancy coffee on a bad day? DO IT. You’re the boss. You know both what you’re taking from, and what you’re giving to, and it’s all within your control.
I shift money around like an Italian mob boss every single time I update my budget, and it’s so, SO much better than trying to cram our lives into some immovable lines in a spreadsheet.
Rule #4: Age your money
The last rule in the method is to help you break the cycle of living paycheque to paycheque. Your goal here is to be using money that’s at least 30 days old. You do this by saving up a month’s worth of expenses to get ahead, instead of barely covering things as they come up.
This rule is something we’re still working on. We’re still paying off debt, so I have a hard time with letting money accumulate in my account just to age it. Instead, I like to throw every spare dollar I can at our debt payments because I’m super motivated to get rid of those as quickly as possible. As we get closer to our financial goals, I’m getting more and more excited about this next step.
The Life-Changing Power of a Budgeting System
Our old way of handling money was just to spend as little as possible 99% of the time until we exploded from the stress, gave our conscience the middle finger, and blew $5, $40, or even $100 on something frivolous or unnecessary. (And most importantly, unplanned and un-budgeted.)
Our old way involved staying broke, never getting ahead, frequently finding our account overdrawn, and feeling hopeless.
For years, there was a broken-record, repeating voice in our heads that chanted the message that spending is bad and blind self-sacrifice is good. The result wasn’t pretty: we felt guilty and/or stressed out ALL THE TIME.
All of that… now gone.
And replaced with feelings of complete confidence, peace, and excitement as we see real progress toward our goals.
If you’re in a similar place of stress and burnout when it comes to managing your money that I was, I implore you to check out YNAB. You can sign up for a free trial right here, and take the first step to changing your life like I did.
And hey – if you’re lucky enough to not be in that stressful place, but you know you could do better when it comes to managing your money, then give YNAB a try. Maybe you’re not flat broke, but you wish you could do better at reaching those financial goals that you’re dreaming about. YNAB enables you to take control no matter what season you’re in.
I really wanted to get down to the nitty-gritty and share details and tips for how I set up my YNAB account – what my categories are, exactly what I do every time I log in, import vs. manual, etc, but this post was already super long, so I’m writing a follow-up!
What questions do you have for me about budgeting? About YNAB itself? About our spending habits? Ask away – I’m a (more or less) open book. 🙂
Which budgeting system do you use? Do you find money stuff to be stressful?
Looking for more like this? Check out these posts:
- 7 Great Reasons to Hang-Dry Laundry All Year-Round
- 3 Possible Reasons You’re Failing at Sticking to a Grocery Budget
- Why We Said Goodbye to Our Television (But Still Have Screen Time)
- 5 Things to Buy at Thrift Stores (And 5 Things to Avoid)
- Why International Travel with Kids is Worth It (And How to Keep it Simple)
- How to Set a Beautiful Holiday Table on a Tight Budget
Full disclosure: I wasn’t paid to write this post – I’ve been dying to share all of this with you guys for months now. I did, however, spend months (wrong email address, then wrong person who was on leave, etc. etc.) tracking down the affiliate program and beg them to let me join. (True story.) As such, the links in this post are my affiliate links, and I’m obviously a YNAB groupie. 😉
Thank you for sharing your story with us! It was very interesting for me to read. It seems that I have the same budget planning problems as you. I think your advice will be useful to me =)
I like this is post, thanks!
Thanks for your article!! I haven’t been able to successfully use a digital budgeting tool because we put it all on a credit card versus our debit card (husband likes the rewards, we are debt free and pay it every month) so the bank account simply sees a large amount deducted for 1 payee and then nothing is categorized. We tend to “have enough” but I still feel like I question so many of my purchases because we aren’t budgeting, so a budget would give me “permission” to spend money. Does that make sense?
Yes, makes total sense! And for the record – YNAB is perfect for what you’re describing! It’s amazing at handling credit card transactions and putting them into your regular category tracking. It does it automatically. So, for example, when you’re going through your credit card transactions and categorizing and approving them in YNAB, you assign a category to that thing. Like “credit card purchase for groceries” gets assigned to your grocery category. Then, YNAB takes that $ amount from your “to be budgeted” amount of funds, and assigns it to your credit card payment category. It’s genius, really! 🙂
2 weeks will mark 3 years on YNAB, it isn’t hyperbole to say it truly changed our lives. I never imagined having this much control over our finances.
I have used Mint for years now. I still struggle with budgeting. Do you think using YNAB is all that different from Mint?
I think the difference is all in the method. I only used Mint briefly and it was years ago, so I can’t say for sure… but I think YNAB’s four rules are where the real magic are. They encourage a different way of thinking about your budget. Instead of just tracking/following your budget, you are shifting and moving your budget to work for you all month long. I would encourage you to try the free trial, and read through the four rules and get a good handle on those. There’s also a FB group you can join. 🙂
thank you for sharing. My husband and I have tried YNAB several times, but truly struggled with incorporating it due to always using a plan ahead type budget on paper.
Can you share how you mentally made that transition and what YouTube videos you found helpful?
Can you tell me what you mean by a “plan ahead type budget on paper”? (And I’m working on a follow up post with more info! But this video tutorial in particular helped me a ton: https://www.youtube.com/watch?v=tACY3ge6VdA)
How do you think this budgeting system would work for irregular incomes? We (and many of the ppl we work with) receive a paycheck 2x a week, but the amounts vary vastly.
It’s actually perfect for that!! Because you don’t need specific amounts to cover a specific monthly list of expenses (or biweekly), and you’re just budgeting the dollars as they come in, that’s all you need to do! Whatever amount comes in – you assign jobs to it (put it in categories) and then do the same next time you get paid. It doesn’t matter what the amount is. (And of course, your ideal – at minimum – is that whatever amount comes in will cover your expenses until your next pay comes.) Does that make sense?
Yes! I love YNAB! Although I still feel like I’m not using it to it’s full potential, we are still functioning paycheck to paycheck. Could be our expenses are just too high. Or maybe it’s time to do a refresh on the method.
I vote for both! The method is just SO smart. And it’s never a bad idea to do another little audit on your expenses! Every little bit counts.
You’ve motivated me to try YNAB again. It sounds super helpful. I think I let it go because I didn’t want to learn a new method! But if sounds worthwhile.
Looking forward to your follow up post!
Yay! Glad you’re feeling motivated. That’s like 95% of the battle, haha! 🙂