YNAB Budgeting Rule #1: Give Every Dollar a Job
Everyone should have a budget, because failure to plan is planning to fail. And that's all a budget is. A plan for your money. I don't really care what tool you use to budget, just so long that you are budgeting. The result of not budgeting is your money doin' it's own thang ... gross. Don't let it happen to you!
After three years of using an Excel spreadsheet budget, we came across budgeting software called You Need a Budget. I loved the matter-of-factness baked into the title, and wanted to see what it was all about (read our full review here).
After digging into the methodology of the company behind it, it was easy to see that following their methodology could certainly help anyone with personal finance. Of course, there is always that self-motivation problem, but we all struggle with that, don't we?
Anyway, I thought I would take some time to dive into YNAB's four rules a little deeper, because they are fundamental stepping stones to sound finances. And even though we had been budgeting for years before using YNAB, another old adage applies here as well: "You learn something new each day." And, Mark from the YNAB blog (one of our favorite blogs) challenged the community to help teach some others about YNAB. So, here we are.
If you were in charge of a company or a factory, wouldn't you want all of your employees to be doing something? I'm not even talking about max efficiency or working at max capacity, I'm just talking about every employee having a job to do. If they all didn't have jobs, then why would you need them?
YNAB's Rule One, "Give every dollar a job," is the simplest example of budgeting. You simply assign all of the dollars that are coming into your hands a job to do. Some jobs (budget categories) are bigger than others. Your mortgage payment is probably bigger than your utility bill.
And budgeting is as simple as that. Of course, this is the premise of budgeting and you could do this with any budgeting software, or homemade spreadsheet. But, YNAB makes this really easy because it keeps track from month to month the performance of your dollars on the job.
Say you assigned $20 in Hair Care last month, and only spent $7 (the cost of my hair cut... thanks to my cousin and the family discount). You have $13 left for next month. YNAB automatically moves this extra money over to the next month.
You then have a couple options. You could re-assign those dollars to another job (budget category), or you could leave them in the Hair Care category and in a few months, your wife can get that thing they call "ombre" if she wants. No guilt, and you hardly feel the transaction because you've set your budget and let YNAB take care of the math and savings per category.
This was the biggest saver of time and stress that we found when we switched to YNAB from our spreadsheet.
Every Dollar Needs a Job
I just want to say that again. Every dollar needs a job. (And no, I don't think Miscellaneous is not specific enough.) If you leave dollars sitting around without a job, they'll end up wandering around, get lost and will certainly keep you from hitting your performance targets (budget goals). It's too easy to buy things you don't need when you have extra dollars unassigned on your budget. Don't suffer another poor performance month. Give EVERY dollar a job.
You don't have to use YNAB. But we do, and we love it. You can check out their free 34-day trial and decide if it works from you. If you do decide to buy, you can get 10% off YNAB by using our link. You get a deal, we get a little bit as well, and you get some awesome budgeting software at a discount while helping support this blog.