You’re at the mall, it’s the 12th of the month and you want to buy sunglasses. Do you have the money? If you’re living paycheck to paycheck, it depends on whether the mortgage will come before or after your paycheck. It might also depend on your checking account balance. This is normal for most Americans.
This is also insanity.
The best thing YNAB did for us is encourage us to get a month ahead in income (they call this Rule Four). Paychecks we receive in June pay July’s expenses. But for most stuck in the paycheck to paycheck rat race, the idea itself seems like a fantasy.
We were there, definitely, but we got obsessed with getting a month ahead because we wanted to experience its benefits of simplicity, peace, and clarity. Here’s how we did it:
We Took Advantage of Bi-Annual Three Paycheck Months. Luckily, January 2010 was a three paycheck month. We budgeted every month for two paychecks, so we were already halfway to our goal the very first month. If you’re paid biweekly, every six months is a golden opportunity to get ahead.
We Drew a Line in the Sand. Before we started using YNAB, we had used our credit card and were in the process of paying it off. Normally that would have been our top priority, but instead of working on that, we made those off budget accounts and set them to the side and paid the minimum. This rerouted some cash that was planned on paying off a credit card balance to being a month ahead. This is how I recommend approaching YNAB:** what’s in the past is in the past; focus on creating a system that will work for your future and everything will fall into place.**
All Margin Went to Rule Four. We had a few hundred dollars a month that we had extra every month. Sometimes it would go to something fun or to meet one of our goals. When we implemented YNAB, all of our money went toward this one goal.
Moved End of Month Bills to the Next Month. We paid our car insurance every month. I called the insurance company and had them move the bill to be due from the 28th to the 2nd of the next month. To them it’s a few days. But in YNAB, it gets you out of the current month and into the next month…and closer to being a month ahead.
Planned for a Lean First Month. We put everything into getting a month ahead, so it was OK if we didn’t have the full set of monthly income for our first Rule Four month. We just needed to cover the necessities, and let a month pass. At that point we would be a full month ahead on income. This is the time to have one of those “I won’t buy anything” months!
When we were close, we cautiously overrode Rule Three. Over the years I have really grown to appreciate the wisdom of Rule Three: every month start over and budget the money you have available. Don’t worry too much about making every month perfectly balance. When you override Rule Three by carrying a negative category balance, you run the risk of having to focus on your account balances and you lose many of the benefits of the YNAB system. When we were just getting started, and within hundreds of dollars of being able to make it through February on January’s income. We had to prepay our portion of a family vacation that would happen in the summer. Rather than wait another month or two to meet our goal, we had that category carry over a negative balance for the next month. We had done the steps before so there was no risk that our balances would get too low.
Now that we’re a month ahead, if we’re at the mall and we want to buy something, we check the category balance. We don’t care about when the mortgage payment will go through, when I get paid, or the checking account balance. All of those variables have been removed because we are spending last month’s money this month. Now that we have clarity on just focusing on the category balance, we put our energy into making better decisions. And that for us has made all the difference in helping us go wherever we want to go financially.