It is changing mine. YNAB is changing the way I think, not just about how I manage my money, but even in a more general way, about how I manage my life.
I am not new to budgeting. I use Quickbooks to manage my business finances. I have used it to manage the finances for an accounting company with a daily cash flow of hundreds of thousands of dollars. I’m comfortable with the software and I love having an organized system of accounts and procedures. I have been tracking my own spending for years. I use Excel spreadsheets, Mint, and most recently, MoneyMinder.
I set aside one or two days at the end of each month to review my transactions, and log them in the appropriate categories. I check to make sure I haven’t forgotten to record anything. I transfer money to my checking account so there is enough for the coming month’s expenses. In other words, I pay attention, and I’m consistent.
What I noticed is that my spending habits weren’t changing. I wasn’t building equity and my overall financial situation was not shifting in any noticeable way. Then I found YNAB.
My first thought was, “another software?” Yes. It’s different. Most budgeting programs, like Quickbooks or Mint, are primarily tracking systems. Once the transaction shows up, the money has already been spent. Too late to make changes. We promise ourselves we’ll do better next time. Not much changes.
MoneyMinder sounded promising. Here is a system designed to help you be more proactive. You make a plan, and adjust the plan as you move through the month. Great! That’s helpful. It wasn’t enough.
As I started to explore YNAB, through the free daily online training classes and the initial 9-day free program, I learned that most budgeting software is based on forecasting, not allocation. At first, I didn’t understand the significance of that statement. Now I do.
YNAB does not allow you to “budget” money you don’t actually have. What a novel idea! (I say that with sarcasm.) Isn’t that the whole problem? We forecast that the money will be there later, spend it now, and then struggle when we realize our forecast was off, or we overspent.
The process at YNAB is: record the income when it comes in, “give every dollar a job” (allocate it), and follow your plan. Use the (very clean) phone app to check that money is available before making a purchase, adjust the plan if you need to, and record your transaction as you leave the store. Different mindset. Suddenly I am budgeting “real dollars” instead of projected dollars. That’s a big difference.
How is this changing my life? I noticed that the philosophy behind YNAB is filtering into my perspective in other areas. I realized that time, like money, is a resource, and started thinking in terms of “giving every minute a job.” I find myself allocating time to my goals (categories), and prioritizing my “spending” of time. I am no longer forecasting that “someday” I will achieve my goals, and looking back to see that I spent the time on other things, I am allocating the time I have right now to the things that are most important to me. That’s a pretty big shift.
YNAB has become a metaphor for the way I manage my life, and I will continue to use it as my “personal trainer.” Check it out.
Image Credit: http://ahadaily.com/free-android-business-apps.html
