Budget Nerds You Need a Budget

YNAB is well known for the Four Rules, or what many YNAB'ers are now calling the Four Habits, which describe the process of gaining control of your money and learning to spend with joy rather than shame or regret. The Four Rules are:
Give every dollar a job Embrace your true expenses Roll with the punches Age your money In today's episode, Ben and Ernie discuss a concept that is implicit in the rules, but perhaps should be it's own rule -- find the money first! Findng the money first means that when you want something that is not in your plan, you need to find the money somewhere else in the plan, that is, re-allocate money from one category to cover your new purchase. This action makes it clear that you are making a tradeoff -- in order to get one thing, you must give up another thing. It may seem arbitrary, but it's an important move! All too often, people will buy something they want without finding the money first, which sets of a cycle of anxiety and fear over whether they can afford it, or whether they will be able to pay off the credit card bill when it comes due. At the very least, spending before you find the money distances you from your money and your priorities, because it obscures the tradeoff.
 
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In today's episode, Ben shares a story about swimming at the YMCA. One of Ben's favorite forms of exercise is swimming laps at his local YMCA, and while it's a great solitary form of exercise, sometimes you can't help but notice how your pace compares to others in the pool. One day Ben started swimming laps only to notice an older lady absolutely hauling in another lane. Which was... discouraging, to say the least. However, as she was exiting the pool Ben noticed she was wearing swim fins, and her blazing performance began to make sense.
 
This woman had a huge advantage, but it was hidden under the water. In the waves and froth of the water, Ben couldn't see it. It's a good analogy for financial circumstances. For the most part, we only see the outward indicators of other people's financial life -- the things they can afford to buy, the places they can afford to live -- and even those obversations can be greatly skewed if those people are buying things with debt! It's important to realize that other people have different advantages in life, and those can significantly influence their financial circumstances. So Ben urges you not to compare yourself to others, because you don't know what advantages they've had, and you can't see their full financial picture from your standpoint. As the saying goes, comparison is the thief of joy!
 
Share your YNAB wins with Ben and Ernie!
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Ben and Ernie respond to a recent survey reported by Jill Schlesinger on CBS Morning about American's 2024 financial resolutions. The top responses: save more money (41%), pay down debt (38%), and spend less (30%). BORING! Ben rants about why "spending less money" is not a good financial plan, and Ernie highlights the importance of putting a why behind goals like paying down debt. There's nothing wrong with paying down debt, of course, but to be successful, and to to truly practice the YNAB habits, there needs to be a reason why you want to pay down the debt. Maybe it's to fund a vacation that you haven't been able to take before, maybe it's to buy something big for your favorite hobby, or maybe it's to fund a charitable cause. As Ben explains, your spending is part of the way you express yourself in the world, so you need to be clear with your priorities and values.
 
To that end, Ben and Ernie share some of the most interesting financial goals and resolutions sent in by fellow budget nerds. From buying a forever violin, to founding a college endowment, to traveling the US in a custom-built bus, there are very creative and meaningul responses!
 
 
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In today's episode, Ben and Ernie discuss what to do with cold, hard cash money. For many YNAB'ers debit and credit card spending fits nicely into the YNAB paradigm, since YNAB can interface directly with financial institutions and pull online banking data. Cash transactions, on the other hand, can create a stumbling block since they exist outside the easily trackable, traceable online banking system. Some decide to just not track cash at all. Cash is money, however, and it probably should be part of your spending plan, so Ben and Ernie recommend tracking it in YNAB. It's not that hard!
 
There are essentially two ways to track cash in YNAB: in a "cash" category, or in a cash account (there's a special cash account type you can select in YNAB). Ben and Ernie break down the pros and cons to each approach.
 
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The short answer is yes. But why? Ben and Ernie dig into the reasons why giving every dollar a job is essential to creating a stress-free life around money. As Ben explains, the point of YNAB is to ruthlessly root out self-delusion, and be honest about both what you want your money to do for you and what tradeoffs you will have to make to accomplish that.
 
When you leave money in the Ready to Assign category, you are putting off making decsions about tradeoffs, and thus obfuscating the real purpose of that money. It's even the same with cash buffers in checking accounts or emergency funds held outside YNAB -- these wads of cash actually obscure what your goal with the money is, because it's unclear how much of it is allocated to each job. That money can create a false sense of security, when you assume that the amount is big enough to handle any emergency that could arise. What if the water heater, the fence, and the roof need to be replaced in one year? The totals can really add up, and leaving cash in an amorphous blob in a checking or savings account does not give you clarity on what and how much it can cover.
 
So, to truly follow YNAB's Four Rules is to, first, give every dollar a job, and start making tradeoffs. Understanding your tradeoffs helps you get clarity on what you really want your money to do for you!
 
Share your YNAB wins with Ben and Ernie!
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Rule Two of YNAB's Four Rules is "embrace your true expenses." True expenses are expenses that may not be regular, but are a normal part of life: new tires, HVAC repairs, emergency doctor visits. Sometimes they are expected -- every car and house will need repairs eventually -- and sometimes they are unexpected, like a trip to the emergency room. All the same, we usually end up cursing them when we have to pay up!
 
In today's episode, Ben and Ernie invite you to change your thinking about true expenses, especially unexpected expenses. With a shift in mindset, unexpected expenses can be a wonderful expression of the things your value. Need a costly tree removal in your backyard? Perhaps that's the price of giving your kids a safe place to play outside. Frustrated about an expensive birthday party? Maybe it's something your spouse really values. As Ernie points out, embracing your unexpected expenses can be an exercise in thinking outside yourself and your own desires.
 
So, the next time you get hit with an unexpected expense... take a deep breath, then consider how you could not only accept it without anger, but even love it.
 
Ben's blog post: 
https://www.ynab.com/blog/how-to-embrace-your-true-expenses
 
Share your YNAB wins with Ben and Ernie!
budgetnerds@ynab.com
 
Follow Budget Nerds on YouTube:
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