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How to Budget Smarter

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Interior of a Dutch Shop Selling Gold and Silver by an Unknown Dutch MasterAbout a year ago, I posted Why a Family Budget Is “Woman’s Work.” It was one of my most popular posts. I still believe that a woman is in a unique position to manage her family’s finances. (I do make most of the family purchases, after all.) But I’ve recently discovered a better way to take care of our family’s resources.

When I wrote the original post, Mint was the best personal finance software I could find. I budgeted every month. Mint automatically imported my purchases.

With Mint, I always knew where my money was going. But it wasn’t always going where I wanted it to. Mint left me with a lot of difficult questions.

  • My husband and I live comfortably. So why did I have to live in fear that I won’t be able to cover the next credit card payment?
  • Why did I feel so guilty every time I went a little over budget?
  • Why was I struggling to save?
  • And why was I surprised by recurring annual expenses—every single time?

I knew that budgeting was important. I thought—and still believe—that it’s a woman’s job. But it turns out that having a budget, even one I generally stuck to, isn’t all I needed to give my family’s finances under control. A budget is only as good as the philosophy behind it. That’s why we started using YNAB.

What Is YNAB

YNAB (which stands for You Need a Budget) is a piece of cloud-based personal budgeting software. But it’s also a new way of thinking about money—and about life.

YNAB encourages users to live by four simple rules:

  1. Give every dollar a job. Sure, other budgeting methods require you to assign money to broad categories. But I always struggled to treat the budget as a rule—rather than a suggestion. Because YNAB makes me add every transaction by hand, I always know exactly how much money I’m spending on what. With the YNAB app, I can even check whether I have money to buy that cute pair of shoes while I’m out shopping.
  2. Save for a rainy day. Adam and I have always had a savings account. Every month, we put in as much as we could. When we went over budget, we took money out. With YNAB, I set money aside in each category every month. Our annual $150 credit card fee becomes twelve budget-friendly payments of $12.50. That money stays in our account until I need to pay the fee each spring.
  3. Roll with the punches. After a minor vacation fiasco, I once told my eighteen-year-old cousin that a big part of being a grown-up was dealing with unexpected expenses. I still mean it. YNAB makes it easier to deal with budget overages—in fact, the creator says he has never had a month when he doesn’t go over budget in at least one category. Instead of eating into savings, like the money I’ve set aside for that $150 credit card payment, YNAB takes the overage out of next month’s income. Sure I have less money to spend next month, but I don’t have to destroy my savings because I spent a little too much on groceries.
  4. Live on last month’s income. Crazy, I know. Adam and I haven’t managed it yet. But the YNAB ideal is to budget my May paycheck to spend in June. That way, I never spend a dime I don’t already have in the bank. If we can get a month ahead, Adam and I will never have to live paycheck-to-paycheck again.

Ready to give YNAB a try?

How to Set a Budget with YNAB

This is just a broad overview. YNAB is very user-friendly and will walk you through the initial start-up.

  1. Create a YNAB account. YNAB has a full-featured, free 34-day trial—you don’t have to pay a dime for the software unless you like it as much as I do. After you create an account, you’ll need to download the software onto your PC/Mac. If you have a smart phone, I strongly recommend you download the YNAB app as well. The software will walk you through creating a free Drop Box account. That way, anything you add on your PC/Mac gets updated on your smart phone and vise versa.
  2. Add your account information. Include your bank accounts, savings account, retirement funds, and credit card accounts. I recommend starting in the middle of the month when most credit card and bank statements come out. It’s much easier to get started on YNAB from account balances you know are correct.
  3. Add your income. Whenever you get a paycheck, add it to YNAB. The money automatically goes into budget. Immediately mark down what you’ll spend that money on. Ideally, you’ll someday be able to follow the “Live on last month’s income rule” and mark your May paycheck as income for June. But you probably won’t be able to do that right away.
  4. Update the pre-existing categories in YNAB to include the things your family spends money on. Our old Mint budget included one category for “Health and Fitness” that included everything from medical co-pays to gym memberships and shampoo. (Medical, fitness, and household goods are now three different categories.) Be as specific as possible to make sure your money is getting where you want it to go. Don’t forget to include quarterly and annual expenses like the water bill or credit card fees.
  5. Discuss your priorities with your partner. Where are your priorities? If you have a chance to splurge, where should it be? How much do you want to save and how quickly? How much, if any, of your income do you want to share? If you have credit card debt, how quickly do you want to pay it off.
  6. Budget every dollar. Start with the expenses you have to pay. After that, add your savings and charity goals. Then budget for necessities like food and, with any leftover money, luxuries like a nice pair of shoes or dinner out at a fancy restaurant.
  7. Whenever you spend money, note it down in YNAB. The easiest way to keep track of your money is to add it to your YNAB app as soon as you spend it. But you don’t have to have a smart phone—just save your receipts and enter them every few days. You’ll reconcile your YNAB budget and your credit card statements once a month.
  8. Do a monthly reevaluation of your priorities and goals. Adam and I have learned that where we spend our money says a lot about what we value. Reevaluating monthly is a great chance to talk about where you’re headed as a family and really helps keep spending in check.

  9. What about Credit Card Debt?

    I only have one complaint about YNAB. The accounting for around credit card debt can be confusing. (I accidentally sent the credit card company money I had also budgeted for other expenses. Yikes!) Before you pay off credit card debt with YNAB, I strongly suggest you watch their free, on-line classes about credit cards. I’ll try to post more about what I learn later.

    Sign Up for a Free Trial

    YNAB has changed my life—and I think it can change yours, too. If you do sign up, please support Experimental Wifery by following our referral link ! As an added bonus, you’ll save $6 when you purchase YNAB through Experimental Wifery.

    Do you keep a budget? Do you have any budgeting secrets to share?

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