Last updated on November 30, 2015 | Follow @deanyeong on Twitter
I always did budgeting, but turns out I am just recording my expenses. Compared to people who doesn’t take control of their cash inflow and outflow at all, recording my expenses is good enough to know my spending habits.
Yes, YNAB is a budgeting tool, stand for You Need A Budget, and so far the best for me. What made them the best is not just their user-friendly interface, and auto-generated report, it’s their philosophy, or they call them the 4 rules of budgeting.
Simple common sense budgeting rules but we usually don’t do it. First, I didn’t do it before because I am only recording my expenses, I never plan in advance how much I should or I can spend for each category.
The second reason why most of us failed to do this is because we don’t assign a specific amount for our savings, or emergency fund, or anything we don’t spend it away. Which usually lead us to spend it on something else end of the month.
Therefore starting today, check on how much cash on hand you have, and then assign every single dollar with a job. Regardless monthly bills or investment savings, they are going to work hard for you starting now, not you are working hard to them.
This second rule alone benefits me the most. We always have something big that we are not paying monthly or less frequently, such as birthday gifts, vacation expenses, and emergency funds.
The idea here is to set an amount aside monthly for these categories, which made up big enough amounts when these spendings come. With this rule, you won’t feel the burden pay a big amount in a certain month, which you had got them ready.
Most people thought about budgeting, but they have a hard time when come to assign every dollar a job. You might think that you can’t control or you don’t know how much you are going to spend on your foods, and that’s alone stopping you from starting this life-changing habit.
Everyone knows about this simple idea, but YNAB emphasise it a lot to get their users started. We don’t need to know how much exactly we will spend, simple estimate an amount and write them down.
What about when you spend more? Just change it then. You might spend more on dining out this month but less on grocery, therefore on your budgeting sheet, you will need just to increase the dining budget and reduce the grocery budget.
After all, budgeting supposes to be fun, just like we suppose to enjoy life.
This is totally a new idea that most of us think we can’t achieve it. What is this rule is about? YNAB basically set a simple goal for their users (or anyone who like to take the challenge) to live a financial-stress-free life.
After months of budgeting with rules above, you will basically understand your spending habits and start to control your expenses. Now, here is one goal for you to achieve.
Slowly save up an amount and start spending your last month salary for this month expenses. Which mean all your expenses for March will come not from the paycheck you received early March, but early February.
When you achieve this, you eventually set yourself stress-free from the paycheck-to-paycheck lifestyle. You will have a peace of mind for monthly rental and bills because you know you have already the cash ready.
So, what your budgeting tool is doing for you? Telling you that you have no money to spend and ask you to eat less in order to survive? You might have the wrong mindset in budgeting.
Since I started to use YNAB, I understand how much I actually have and how much I am making every month. Besides, I have never been so clear on how much I need, not to survive, but live a balance and my desired lifestyle, and let money working harder for me.
With every expense lay out in front of me, I started to change my spending habits. I put higher priority to:
What about my monthly bills and daily expenses? Yes, with the above as my higher priority, I don’t have to spend less, but carefully. You see, we always have enough money to spend, but we tend to spend on things that we don’t need without control.
Finally, the best part is here, when you start following these 4 rules, you will attract more income into your life. How? There is millions way to make more money, the right question is why. Because first, you understand how much you actually need monthly; and then, you have peace of mind to pursuit your desired venture (with rules #4).
By and large, budgeting is important to take us to the next level financially and mentally. It’s a good habit to inherit in our life. If your excuse is budgeting took too much afford and time with the calculation that will turn you off, this is why YNAB is here.
With YNAB, I literally spend less than an hour to budget every month, which is less than 2 minutes a day, do you willing to spend 2 minutes a day to transform your life?
Here is something I read in The 4-Hour Workweek by Tim Ferris: “Understand what you want in life and define your desired lifestyle clearly”. Most of us don’t need millions sitting in the bank; I rather have 20,000 dollars of consistent monthly income. And I personally YNAB is helping me to achieve this step by step.
PS: I am not endorsed by YNAB to write this. I actually share this to my friends who are interested about how I do budgeting this morning, and I think it might benefits you too.
PSS: If you are from YNAB, I like to say thanks to you and your great team!