How much do I want to read more? 4/10
If you already used to list all your monthly expenses, with grouping the non-negotiable ones (rent, bills), the required ones (food, transportation), and the others (restaurant, git) then there's not much more to it.
We should all be aware of how we spend our money, and how we spend our time. It gives more control, and prevent the waste.
If you have Common sense and self-discipline, if you have awareness, then you've got it already.
If you’re reading this book, money stresses you out in some way.
Forget about the money.
Seriously. Because it’s not about the money.
But money is not the point, not the end goal. In truth, when we’re stressed about our finances, it’s because we’re not sure our money decisions are aligned with the life we want to be living.
The question we need to ask ourselves isn’t Can I? or Should I? It’s What do I want my money to do for me?
What do I want my money to do for me? works like a gut check that helps us see whether our priorities are driving our money decisions. When we know what we want our money to do for us, the options become a lot less daunting, and confidence quickly replaces the stress.
Gut Check: Go
What do I want my money to do for me?
In all the time you devote to working, spending, saving, and stressing, have you ever asked yourself this question?
Don’t worry if you haven’t. Most of us don’t think about money in this way, and honestly, it’s a hard question to answer.
Don’t worry if your answer is radically different from your current reality. Just think about what’s important to you. Maybe the life you want involves staying home with your kids, annual European vacations, going back to school, or just less stress around bills. It could be all of those things. It doesn’t matter—the point is to decide what your priorities are, and then make a plan to meet them.
The Antidote to Your Money Stress
We all need a budget—no matter how much money we have (or don’t have).
If you’re worried it will be too rigid, restricting, and unforgiving, it’s time to look at budgeting from a different angle.
Forget about the things you can’t do with your money (I can’t afford that trip), or the things you have to do with your money (I have to pay off my student loans). Instead, think of what you want, and go from there. I want to take my family to Italy. I want to live debt-free. I want to hire a personal tutor to learn Italian. A budget lets you plan for all of these things.
Without a budget you have no way to prioritize your spending. You often don’t even know where your money is truly going. You may stress about not being able to afford what’s important to you while you simultaneously spend on things you’d willingly nix if you could see the trade-offs. That’s the beauty of a (good) budget: it lets you see exactly how your spending affects the rest of your life.
There’s nothing like the joy of zapping meaningless expenses and putting those dollars toward something that once seemed like a pipe dream. Imagine seeing your vacation fund grow while your waistline shrinks (double whammy!), or seeing your student debt disappear as your clutter subsides.
Your budget lets you spend and save guilt-free because you’ve already decided where you want those dollars to go.
Meet YNAB’s Four Rules
Rule One: Give Every Dollar a Job, is all about being proactive, so life doesn’t simply claim your money. Instead, you’ll decide on priorities first, then assign dollars. Because your money is going toward your highest priorities, your spending has to clear a higher bar.
Rule Two: Embrace Your True Expenses, combines the power of thinking ahead with taking action here and now. Whether expenses happen like clockwork (rent), feel impossible to predict (car repairs), or are just far-off dreams (cash for a wedding), they are all part of your true expenses. The key is to prepare a bit at a time by treating them all like monthly expenses.
Rule Three: Roll with the Punches, helps you adapt so you can handle whatever comes your way. Your budget is a plan—but plans change, and your budget should, too. Spend more than you expected on dinner out with friends? Life throw you a curveball? No need for stress. Just pull some money from lower-priority categories and carry on. You haven’t failed at budgeting, you’ve adapted with the best of them. This flexibility isn’t how most people imagine a budget, but it may be the key to making it work.
Rule Four: Age Your Money, gets you working toward spending money you earned at least thirty days ago. When you increase the time that passes between receiving your money and spending it, you’re more secure, more flexible. You’re breathing easier. If you’re implementing the first three rules, you’ll be aging your money before you know it
Before There Were Four Rules, There Were Two Newlyweds
On top of that, we were planning for our first child and there was no way we could afford to live our dream of having Julie become a stay-at-home mom. I was feeling desperate, but as a numbers nerd, I knew I’d find the answer in an Excel spreadsheet (where all of life’s magic happens). So I began developing a system to help us track our expenses.
My idea was simple. I planned to record everything we spent. Each of the spreadsheet’s rows represented a day of the year. All of our spending and saving categories were lined up across the top. I had included the usual: groceries, textbooks, eating out, phone, gasoline, etc. The budget was beautiful to me in the way that any ordinary thing is always beautiful in the eyes of its creator.
CHAPTER 1: A New Way to Look at Your Money
My friends Nikki and Aaron were excited about theirs, but they gave up within a month when they discovered their actual spending looked nothing like the numbers in those Excel boxes. They were overwhelmed by the disparity and decided to revisit budgeting when life got a little calmer (spoiler alert: that never happens).
That kind of budgeting doesn’t work for a few reasons. First, there is no room for prioritizing. Every line item competes for your dollars and there’s no structure to decide what should get funded first.
The difference between forecasting and budgeting is a lot like the difference between dreaming and doing. It’s fun to forecast and dream of the life you want if you can someday get those numbers to work. But how about looking at the money you have right now and creating a spending plan based on what’s most important to you?
Hear me out: I’m not saying you shouldn’t think about the future. Your budget is all about thinking ahead. Just make sure you don’t forecast future money. That cash will be great when it hits your account, but you’re only concerned with making sure the money you have today gets you closer to your goals.
We went from wondering how we’d ever afford to become a single-income household with kids to seeing exactly how it was going to happen.
(If you’re already starting to think about money you don’t have yet, remember, the big shift is to focus only on what you have today.)