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How YNAB Changed Our Finances

February 21, 2022 By MelissaB Leave a Comment

How YNAB Changed Our Finances

Years ago, when my husband and I were first married, I had a budget binder. It was simply a spiral notebook, and on each page, I put a different budget line item such as “groceries” or “electricity.” Each time we were paid, I put a certain amount in each category. When I paid a bill, I deducted the amount from that category. It was a tedious process, especially in a category that had a lot of deductions, like groceries. In desperation, I started researching budgeting software. I tried several before finally settling on You Need a Budget (YNAB). There are so many ways that YNAB changed our finances!

What Is YNAB?

You Need a Budget (YNAB) is a budgeting software based on the envelope system of budgeting.

The YNAB Principles

The YNAB system has four principles.

Give Every Dollar a Job

Using YNAB, you should budget every single dollar that you receive. Doing this helps you map out how to spend your money. If you have $40 left in your grocery category, you might need to have a small shopping trip and eat up the items in your pantry so you can keep within your budgeted amount.

Embrace Your True Expenses

Your true expenses are not just the ones that are due every month. You also have to budget for those expenses that you only pay once or twice a year like car insurance, property taxes, home insurance, and car registration. You should also budget for irregular expenses such as vet and medical bills.

Roll with the Punches

Your budget is flexible. If you only have $40 left in your grocery budget but your food costs $75, you can move $35 from another category to cover the overage. Things happen—roll with the punches.

Age Your Money

YNAB Changed Our Finances

The age your money principle refers to how long it takes you to use the money that comes in. If you have money coming in that you don’t have to use for 30 days, your money is 30 days old. The longer you use YNAB, usually, the older your age of money is. Currently, our age of money is 73 days.

YNAB Trainings

YNAB has many free training videos, so you can watch those to learn more about the principles in YNAB and budgeting. In addition, the creator of YNAB, Jessie Mecham, wrote a book, You Need a Budget: The Proven System for Breaking the Paycheck-to-Paycheck Cycle, Getting Out of Debt, and Living the Life You Want, that you can also read to learn about the YNAB system in-depth.

How YNAB Changed Our Finances

I started using YNAB over six years ago, and the program has revolutionized how I handle our finances.

Electronic Version of My Budget Binder

How YNAB Changed Our Finances

At its core, YNAB is an electronic version of my old paper budget binder.

Easier to Use than Paper

However, using YNAB is so much easier! All of those calculations I used to do on paper? YNAB does them automatically.

More Flexibility

Plus, when I put in an expense, I have the option to split the cost into several categories. So, if I spend $70 on Amazon, I can split the expenses into separate categories such as $45 for groceries, $15 for toiletries, and $10 for spending. I love that flexibility, and the process is so much easier and quicker than doing it by hand.

YNAB Is Portable

Plus, I can always consult my YNAB budget on my cell phone. I never carried around my budget binder previously, so I would have to guess how much I had left in each category.

Create a Budget Buffer

Besides being easier to use than my clunky budget binder, YNAB taught me new budgeting principles such as creating a buffer. When you first start using YNAB, you’re encouraged to create at least a one-month buffer. That means that slowly you start covering next month’s expenses with this month’s money. Say, at the end of the month you have $150 leftover. You don’t go out to eat to celebrate. Instead, you take that money and put it in some of your categories for next month. Then, slowly, you keep adding until you have all of your categories for next month covered with this month’s money.

Having a buffer gives you an automatic one-month emergency fund and gives you a sense of security. It also makes budgeting easier. You can pay all of your bills at the beginning of the month instead of waiting until you get your paychecks during the month because the money is waiting to do its job.

Can See Your Finances in One Glance

What I love most about YNAB is that my husband and I can see our finances at a glance. Since I do all of the budgeting, YNAB allows my husband and I to sit down every one or two weeks and together look at where we stand financially. My little budget notebook never made much sense to him, especially because he’d have to flip through 20 pages to see the amount of money in each of our categories.

Easy to Track Net Worth

YNAB Improved Our Finances

The best feature is the net worth feature. Often when we feel like we’re not making much progress financially, we look at our net worth and see that we are improving our bottom line. We sit down together at the end of each month to go over our net worth.

YNAB’s Price Increase But We Kept It

Recently, YNAB had a significant price increase. I thought about searching for a cheaper budgeting software. However, my husband said no, he wanted to stick with YNAB. He feels it is a valuable tool that makes budgeting and money management easier for me. In addition, he loves how easily he can keep up to date with our finances thanks to the program. He feels that YNAB is well worth the price, even after the price increase, so we’re staying.

Final Thoughts

YNAB has changed our finances and made them so much easier to manage. If you’re looking for budgeting software, I highly recommend You Need a Budget.

Read More

Feed a Hungry Teenager Without Breaking Your Grocery Budget

6 Unexpected Baby Expenses to Budget For

How to Feed Your Family on a Low Budget

P.s. if you’re looking for a good all around quality site to review while you’re working with YNAB, consider Moneycrashers.com.  I’ve been following them for year – and their advice is generally really solid.

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: budget, Emergency Fund, Saving Tagged With: budget, budgeting, budgeting software, ynab

What to Do When You Have More Bills Than Income

November 2, 2020 By MelissaB Leave a Comment

It can happen to the best of us—we have more bills than income.  Every person’s situation is unique.  Maybe you lost your job, or you had a medical emergency, or you just went through a divorce.  The situation doesn’t matter.  What matters is that you find yourself in a desperate position.  Rather than panicking or ignoring the problem, know that there are strategies to implement to get yourself out of this position.

More Bills Than Income

Steps to Take When You Have More Bills Than Income

The process of getting out of this situation isn’t quick, but finding your financial footing again can be done.

Write Down Your Financials

The first step is to take an honest account of where you are.  How much money do you have coming in?  How much debt do you have?  What are your monthly payments and bills?

Cut Ruthlessly

Now that you have your financials on paper, you need to cut ruthlessly.  What do you pay for monthly that you can slash from your budget?  Start first with subscriptions like DisneyPlus, Netflix, Amazon, etc.  You can get those services back once you no longer have more bills than income.

Next, look at categories you can’t eliminate but can reduce.  We all have to eat, but we don’t have to go to a restaurant to do so.  If you’re not already cooking all of your meals at home, now is the time to start.  Also, make a plan to shift the type of food that you’re eating so you can lower your grocery bill.  Now might be the time to eat some beans and rice and vegetarian soups.

Learn how to lower your electric bill.  Turn off appliances and devices that you’re not using at night.

Consider switching cell phone providers so you don’t have a high monthly cell phone bill.  You might want to move to a lower cost provider like Ting or Tello Mobile.

In short, cut or reduce everything you can.  Then, you’re on to the next step.

Prioritize Payments

More Bills than Income
Photo by Scott Graham on Unsplash

If there’s not enough money even after slashing your expenses, there’s not enough.  Once you write down your financials, list your bills in order of importance.  Think survival here.

Survival Expenses Should Always Be Paid First

Bills and expenses that you likely want to be sure you pay every month can include:

Food,

Clothing,

Utilities,

Housing,

Transportation

The most important goals right now are to feed and clothe yourself as well as keep the lights on (along with the heat or air conditioning) and maintain your house and car.  Without the latter two, keeping and getting yourself to work is very difficult.

Keep in mind, you’ll still want to be conservative in these categories.  You won’t be eating fancy meals and you won’t be buying designer clothes.  You’ll spend the minimum you need to get yourself fed and clothed.

Expenses to Pay with the Remaining Money

After you’ve done looking at your spending priorities, look at how much money you have left.  You may find that you have many more bills to go and only a little money left.  That’s okay.  You knew you were in this position, and now you’re writing it all out and making a plan.  This is empowering even if it feels terrifying.

Let’s say you have four debts remaining and you only have $250 leftover.  Spread that $250 between each of your remaining debts.  For instance, let’s say your four debts have these balances:

CC #1: $10,000

CC #2: $3,500

CC #3: $5,000

CC #4: $1,500

At this point, don’t pay attention to the minimum payment.  Instead, add up all the debt, in this case, $20,000, and figure out which percentage of debt each is.  For example, CC #1 represents 50% of the remaining debt, so you’ll give it 50% of your remaining money each month, $125.  CC #2 is 17.5% of your remaining debt, so it will get 17.5% of your remaining money–$43.75, and so on.

Negotiate Credit Card Rates

If you think your current financial situation is temporary, call your credit card company and ask them to reduce the amount of interest you’re paying.  By doing this, more of your monthly payment will go to principal, lowering the overall amount that you owe.  You’ll likely be successful with agents lowering your rate about 50% of the time.

Negotiate Monthly Payments

If you feel your financial situation may last longer than a few months, call your lenders and explain your situation.

Credit card companies have the power to reduce your monthly payment.  When you negotiate with them, they will ask you how much you can pay monthly.  Using the math that you did above, let them know exactly how much you can pay a month.  (You’ll tell credit card company #2 you can only pay $43.75 even if your monthly payment is $70.)  The credit card companies will likely lower your payment to what you can pay because you’re making a good faith effort to meet your obligations.

Remember to call your other lenders.  Your mortgage company may be able to work with you to reduce or temporarily suspend payments.  You can also apply for deferrals on your student loans.

The important advice is to call these companies early, before you fall significantly behind.  Call them while you still have good credit.

Find a Side Hustle

More Bills than Income
Photo by Garrhet Sampson on Unsplash

Reducing expenses is important when you have more bills than income, but the flip side is just as important.  Can you start a side hustle as a way to make extra money and boost your income?  I started freelance writing 10 years ago when our youngest was a baby.  Now, my freelance work contributes 25% of our monthly income.  Imagine adding an extra 10 or 20 percent to your current income?  How would that money help you improve your financial situation?

Final Thoughts

If you’re in the unfortunate position of having more bills than income, know that you’re not alone.  There are steps you can take to improve your financial situation and help you survive this current financial difficulty.  Most importantly, remember that this situation is temporary.  Things will get better.

Read More

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

How to Feed Your Family on a Low Budget

How to Create a Zero-Based Budget in Excel

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: budget, General Finance Tagged With: budget, budgeting, debt, extra income, income

How to Create a Zero-Based Budget in Excel

April 27, 2020 By MelissaB Leave a Comment

Whether you feel like your finances are a mess and you don’t know where the money goes every month, or you want a better handle on your spending and saving records, I highly recommend keeping a monthly budget.  I know, I know, people always complain that they don’t want to keep a budget, or that their finances are too complicated for a budget.  The simple truth is, once you learn how to create a zero-based budget in Excel, keeping a budget is quite easy.   And if you’re short on cash, that’s all the more reason why you should keep a budget.

How to Create a Zero-Based Budget in Excel

Why Keep a Budget?

A budget can be helpful at the beginning of the month to act as a map.  This map tells you how much you have to spend and save and helps direct how you use your money.

At the end of the month, when you fill in what you spent, the budget serves as a financial journal, so to speak.  I find it very helpful at the end of the year to see how much I spent on groceries, miscellaneous, etc.  That helps me make next year’s budget.  Also, if my savings is smaller than I would like, looking over past expenditures helps me see what was the cause.

Why Use Excel?

There are so many budgeting software programs out there.  Why not use one of them?  Well, you certainly can, but I’ve discovered that most of them charge a monthly or yearly fee.  I don’t know about you, but I find it irritating to pay $5 to $8 a month just to have a platform for maintaining my budget.  However, after you initially buy Excel, it’s completely free!  And, once you learn how to use Excel, it’s easy to use.

Sure, you could keep your budget on paper, and I did that when my husband and I were first married.  However, as finances get more complicated, a paper budget is harder to maintain.  It’s also harder to evaluate your spending at the end of the year because you can’t organize it by categories and expenditures.

What Is a Zero-Based Budget?

A zero-based budget simply means that each paycheck, you plan expenditures that are equally to your income.  So, if you create your budget, and you discover you have an extra $200, you don’t just leave it sitting there.  (Most people will slowly pitter away that money during the month.)  Instead, you earmark that extra money for something.  Maybe it goes to your emergency fund.  Maybe it goes to debt repayment.  The point is, you give that money a job so you don’t spend it because you see it as “extra.”

How to Create a Zero-Based Budget in Excel

Creating a zero-based budget in Excel is fairly easy and quick.

Create Categories First

When you start your budget, you’ll want to have several categories.  These categories will run vertically down your Excel column.

Categories to Add to The Budget

The first column should have several major categories:

  • Income
  • Fixed Expenses
  • Variable Expenses
  • Debt

These categories represent your income and all expenses for the month.

How to Create a Zero-Based Budget in Excel

Fixed expenses will be those expenses that are the same month after month.  Think rent or mortgage, cable & internet, etc.

Variable expenses will be those expenses that vary every month such as gas, groceries, spending, utilities, etc.

Debt will obviously include all of your debt such as credit card payments, student loan payments, car payments, etc.

By now your Excel spreadsheet should contain two columns.  The first should be the broad categories of income, debt, fixed expenses and variable expenses.

The next column should contain the names of all of those particular expenses.

How to Create a Zero-Based Budget in Excel

Get Ready to Record Data

After that, you should have two new category headings, each in their own column—Budgeted and Actual.

At the beginning of the month (or pay period), you will put in the budgeted amount you plan to use for each category.

As you incur expenses, you will put the actual spending under the “Actual” column heading.

Customize to Your Choosing

At this point, you can customize how you would like.  Some people focus on the aesthetics and make each column a different color.

Some people budget for the entire month, while other people budget for each paycheck in the month, whether that be four or five for a weekly paycheck or two paychecks for a bimonthly payment.  You decide what works best for you.

Keep in mind, if you look in Excel, you don’t need to create such a simplified budget.  Excel has plenty of budget templates already designed for you such as this:

How to Create a Zero-Based Budget in Excel

What If You Don’t Know How to Use Excel?

What if you’re convinced you need a budget, but you are intimidated because you don’t know how to use Excel?  No worries.

There are plenty of free online tutorials that can teach you how to use Excel.  If you’re a visual person, check out YouTube tutorials.  If you prefer online websites that explain how to use Excel, there are plenty of those, too.

For the most part, learning how to create a zero-based budget in Excel only requires the most remedial Excel knowledge.

The only tricky part is that in some places in your budget, you will likely want to add a calculation formula.  For instance, if you have a category for “Emergency Fund” and at the end of the month you want the $400 you saved this month to be combined with the $600 you saved last month, you’ll need a calculation formula.  Again, this is easy to learn in less than two minutes through a video like the one below:

Final Thoughts

Learning how to create a zero-based budget in Excel will be worth your time!  Once you have the budget set up, you can create a plan for your spending and also track how you spent your money at the end of the month.  When you have a clear view of how you’re spending your money, you’ll be able to have more control of your money.  As a result, your financial situation should improve.

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: budget Tagged With: budget, budgeting, Excel budget, simple budget

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