MM’s Money

September 8, 2008

What We’re Doing

Filed under: Planning — mmsmoney @ 12:00 am
Tags: , , , ,

So we had a budget for many months and unsuccessfully tried to spend only what we made only when the money was available in our checking account. But that really wasn’t working for us…timing of bills, the variability of DH’s income, fixed expenses were just piling up at the wrong times. So we have been struggling, even with the help we’ve received this year. Recently – like 6 weeks ago, and I wish I could remember how I found the link/referral, I found the  http://www.youneedabudget.com/blog/ And I read a lot without even realizing the blog was in support of or accompanied a product! Duh! So I was reading about these “Rules” and thinking, yeah – that makes sense. How simplistic (and not necessarily in a good way) – I could have come up with that!

When I finally looked to the top of the page and saw the links to success stories and the history of the blog, the light came on – OH This is Selling Something! And that something is You Need A Budget software – YNAB.  The creator of the software is an accountant who started his homegrown spreadsheet budgeting solution when he and his now wife were still in school – trying to live on pennies a day and struggling to forecast what monies they would have to spend in the future. Well, we’re there, DH and I. We needed a tool and a system that allowed us to budget without knowing the variables that would impact the upcoming month. So here it was – the tool and the system – and for the bargain basement price of $39.95!

Funny the timing – August was a good month, since I actually caught up on the electricity bills for the summer ($300 June $450 July $360 August) and had about $150 to live on after the month’s first paycheck. So I spent that $39.95 and downloaded the software, the bonus excel worksheets and the YNAB way ‘book’ which is the detail of how The Rules work and how to begin integrating the budgeting and The Rules into your life.

I read the book at the gym that next day (I run on the elliptical machine for an hour every other day) and installed the software that afternoon. And we’re on our way! In a nutshell, YNAB advocates the following Rules:

1) Spend last month’s income to pay for this month’s expenses. Since you know at the end of the last month what you’ve made, you can allocate that amount and only that amount for this month’s budget.  To live under this rule, you have to save up the amount of a typical month’s expenses (including plug numbers to accumulate annual expenses across a budget item) before you can truly be worry free! So far we are $200 towards our one-month’s buffer.

2) Give every dollar a job – allocate all monies to specific budget line items to balance to zero each month. This concept is not new (see my simplistic comment above), but the execution approach is – sock any extra income into that buffer category instead of letting it be ‘unassigned’ in a savings account. That way, you know what each dollar is doing for you and this removes temptation to reallocate if things get tight in the month!

3) Prepare for circumstances – like annual bills – that you can expect, but sometimes don’t know the numbers! Setting aside money in categories within the budget to prepare for these amounts seems simple, but again, something about the methodology and software allows me (or will allow me to try) to resist the temptation to raid a category to fund a minor budget gaff.

4) Roll with the punches. Once you’ve funded the buffer and aren’t living paycheck to paycheck you can proact for #3 events and react as necessary for the stuff you can’t foresee.

So we’re 3 weeks in…and ended August with $200 ‘in the black’ on our buffer.  And we’re budgeted into the middle of September without ‘raiding’ savings. Maybe by the end of September we’ll be a week ahead in earning vs. spending!

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