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Friday, February 8, 2008

YNAB - Mid-month (sort of) update

As I mentioned a few weeks ago, I recently purchased and began using YNAB. I wanted to post a quick update about how my new budgeting system is going.

To recap, my previous method of budgeting was "Put $X into savings at the beginning of the month. Then spend less than what's left because that is spending money." While that worked fine, I found myself in a sad situation mid-January when I had spent nearly all of the funds in my "spending money" account thanks to some once or twice yearly bills that I had forgotten about, plus a bit of overspending in, oh, just about every area. Sure, I didn't have to go into my savings account to pay the bills. But I had very little cushion in my spending account. I make a good living, so that wasn't something that should be happening.

Plus, after reading some accounts from other bloggers, I realized that perhaps being proud of the fact that one month, I finally managed to keep my grocery spending under $200 was a little ridiculous. I'm just feeding myself! I shouldn't be spending $200 a month at the grocery store!

Enter YNAB. I decided to start right away at the end of January and entered all of my information. I couldn't believe how much money I had spent in some of the categories. Over $200 on cosmetics and toiletries? That's ridiculous. Especially when I also spent over $400 on plane tickets (for weddings that I very much want to attend, so the expense was worth it).

I decided to immediately start by working towards Rule 1. In the YNAB system, Rule 1 says that you have to stop living paycheck to paycheck. You should be living on last month's income. That's pretty daunting to think about, so the YNAB system helps out users who don't have that much money sitting in the bank. It teaches you to slowly start putting money away in a "buffer" until you have saved up an entire month's worth of expenses. (Note - not an entire month's income - just an entire month's expenses.)

I could have just done this by pulling money out of my savings account and been sitting pretty to start February with YNAB. That idea didn't sit well with me, so I decided to do it the hard way. I figured out what sort of "excess" I could pull at the end of January, and then started working on my buffer. I won't be there by the end of February, maybe not even by the end of March. But as other YNABers have said, sometimes it can take months to get a full buffer, but it is absolutely worth it.

I set up some budget categories for myself, and so far, I like the concept. I've bought groceries twice this month, and can clearly see how much money is left in my grocery budget. I think I can make it through the month on that. I can see that I've set aside half of the money I will need for the wedding gift I'm giving next month, and half of the money that I will need for the hotel stay. I like that I'm planning ahead.

My ultimate goal is to be able to plan ahead for all of those infrequent expenses, such as insurance payments and car maintenance. A $400 insurance payment is painful when it hits one month. Saving $67 a month for 6 month is much more doable.

I freely admit that I'm a bit of a geek when it comes to spreadsheets. While I have a strong distaste for all things math and numbers related, I love spreadsheets. I think that's part of the reason that I'm enjoying YNAB so much. I enter these numbers and I can see what I'm spending and where I can save and how I can plan ahead.

But even if you're not a spreadsheet person, this budget is a great way to get a handle on your spending and save more money than you thought you could.

1 comment:

jen x said...

Stumbled on your blog via Blog Explosion and am really enjoying it. It's funny, I'm also someone who is not gifted with numbers or math -- but I love spreadsheets! I like the challenge of living on last month's income. Scary/daunting, but also very smart.