You Need YNAB

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My name is Trevor and I am a nerd.

I don’t mean that in a trendy Big Bang Theory sort of way, even though I do enjoy video games and comic book movies. I mean it in the spreadsheet, planning sort of way. My nerdom is one reason I took to personal finance so well. I honestly enjoy budgeting and forecasting and cash-flowing and all those other words that put most people into a coma.

So if there was one thing I had down it was my budgeting system. I used Mint.com and had budget categories that notified me when I came close to overspending. I also had a Google document spreadsheet that split the month into pay periods. I entered in my income, went down the sheet and subtracted all the expenses, yadda yadda yadda. I was on top of it, right?

Then I found YNAB

YNAB stands for You Need A Budget. Tell me something I don’t know. I had seen people singing YNAB’s praises for a while. I just could not figure out why I needed to pay for budgeting software when I was doing so well on my own for free. I finally and somewhat reluctantly downloaded the trial version to prove to myself I didn’t need it.

At first I was overwhelmed. You have complete control over YNAB and as such you’ve got a lot of options for how to proceed. The learning curve is steep but thankfully the YNAB team puts on free classes every week. These classes are informal and very interactive. After participating in two classes I felt very ready to tackle their system.

YNAB unlike other budgeting software is not linked to your bank accounts. That means transactions aren’t entered automatically. They are done manually. This can also seem very daunting. After getting over my laziness though I realize now that this is the truly powerful aspect of YNAB. A budget is telling your money what to do so it only makes sense that you should be in control of entering your transactions. When you have to put into the restaurant category that you just spend $30 more than you budgeted for the month and it’s only May 17 you really get a feel for where your money is going.

The YNAB Method

Rule One: Give Every Dollar a Job
Rule Two: Save for a Rainy Day
Rule Three: Roll with the Punches
Rule Four: Live on Last Month’s Income

There are classes based on each rule and I recommend checking them all out. And each one of them is probably due their on post (and maybe I will do just that). The first two are pretty basic when it comes to doing a budget. Roll with the punches is a great way to insert some grace into your budget because things are going to happen and you’ll have to adjust. That’s why you should make a new budget each month and not try to live off the same one all the time.

But oh man that fourth one. If becoming debt free is financial peace (and it is!) then living off last month’s income is financial bliss. Kate and I recently completed building the buffer in our checking account and just this morning I filled out June’s budget with money we already have. No balancing bills for the middle of the month paycheck to hit. No splitting your budget categories into pay periods. It’s awesome!

Their mobile app is wonderful too. Kate and I never check our bank account balance anymore, we just check YNAB. It updates in real-time across all platforms (our computers and phones). So as soon as I spend some money on groceries, Kate can see the change to our remaining balance.

Whether you are a seasoned budgeter or have never found the system that works for you, I highly recommend everyone give the YNAB trial version a go. Make sure you take some of the online classes and read through the features and method on their site. The best part of the trial is it lasts for over a month to give you the full experience. And when you convert over to the full version, your budget and information migrates with you so you don’t have to redo anything.

You Need A Budget. You Need YNAB.

I’m Busy and That’s a Good Thing

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Hello? Is this thing still on?

I know I’ve taken a longer than usual break from posting and for good reason. In fact I decided to turn that reason into a blog post.

“I’m busy”

It’s a response a lot of people ask how you’re doing. It is also a pet peeve of mine. Not because you shouldn’t be busy; I think you should. And not because you aren’t busy; you probably are. It’s a pet peeve because of the attitude in which so many folks say it.

It’s like they’re dying inside. Their very life force has been sucked out of them. It is a total woe is me moment for them. If you’re busy doing stuff that makes you feel like that, you need to be doing other stuff!

This phrase was such a problem that I had resolved never to answer someone’s question of how I’ve been with busy. I often give my canned Dave Ramsey or Zig Ziglar responses which move my spirit in the other directions (Better than I deserve and Better than good if you’re not hip to the lingo).

Recently I’ve had to change that though because I have been enormously busy. Financial Peace University wrapped up last month but was replaced by another Celebrate Recovery class so I still have two nights a week. And even though FPU ended, my Monday nights are still booked with our guys group that has dinner and hangs out together.

Last week I was in Nashville for 8 days taking the Tennessee Basic Economic Development Course which is the first step toward sitting for the certified economic developer exam. This falls into the totally following in my father’s footsteps category and I couldn’t be happier about it. He recently turned 63 and is still working, not because he has to but because he’s passionate about what he does. And he’s distilled that passion for work into me.

If that isn’t busy enough for you, remember that Kate is still pregnant (over 20 weeks now!) and we just found out yesterday that we will be having a little girl. We’ve got the named already picked out so at least that work is done but now comes the real work of getting a room and really our whole house ready.

I’m very busy but hate telling people that. So what do I say?

Well I’ve been telling the truth. I’m busy doing stuff that I love and gives me life, not take it away.

National Retirement Planning Week

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You may know that April is Financial Literacy Month. What you may not know that last week was National Retirement Planning Week. While the month’s focus is to increase your knowledge (read: literacy) when it comes to all things financial, this past week was laser focused on retirement planning.

The merits of these are debatable (if you didn’t know they exist, what good are they doing?). One thing is certain, we need help in these areas. Survey after survey indicates that Americans aren’t saving enough for retirement.

How can we realize this enough to answer the survey but not enough to do anything about it?

It’s Abstract

Retirement is “over there”. It’s somewhere in the distance. Is it 59 1/2 or 65 years old? Who knows.

It’s difficult to commit to saving money now for an ambiguous concept down the road. Humans are fantastic are registering immediate responses. Just see how long you can keep your hand on a hot stove. But we’re not so great at delayed gratification, which really is what planning for retirement is about. How well do you want to live after you stop working?

Here’s the trick: as you begin planning your retirement, it becomes less abstract. You start realizing how much you could save and what that means for your standard of living. Once you have the numbers, you start dreaming about the vacations you want to take and items to cross off your bucket list.

It’s Complicated

Unfortunately being abstract isn’t the only roadblock to retirement. There are lots of ambiguous terms like 401(k), Roth IRA, Mutual Funds, Bonds, Compound Interest, Taxes. That is a lot going on. There are different vehicles for your plan as well as a variety of ways to fund them.

It is important to balance two sides of the same coin. One, understand that you don’t have to know it all. Meet with a fee-only financial planner and investment advisor that has access to more information than you. In the multitude of council, there is safety. Two, don’t invest in anything that you don’t understand. Identify professionals that have the heart of a teacher that are willing to coach you into understanding your options. You don’t have to know it all to begin with, but this is your retirement. You need to know what you are doing when you begin putting your money into something.

It’s Important

You don’t want to work your whole life. Or, at the very least, you don’t want to have to work your whole life. Do you want to travel? Do you want to leave your family an inheritance? Do you want to donate money to charities and worthy causes you believe in?

Whatever your personal drive, find the motivation to start your retirement planning now.

 

This post first appeared on Upperline Financial

Money isn’t the Most Important

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Since becoming interested in personal finance and promoting the ideas of saving more, spending less and investing, I have had a number of people scoff at me that “money isn’t the most important thing in their life”. Money isn’t the most important thing in my life either and I don’t believe it should be. After all, it is impossible to serve two masters.

But the premise that you shouldn’t manage your money well because other things are more important is actually counter-intuitive. The better you manage and plan your finances, the more options and opportunities you have to enjoy the things you do value.

The following article appeared first on The Simple Dollar. And I would like to share it with you now.

The Danger of “Needing” A Job

I am close to quite a few people who live a “paycheck to paycheck” lifestyle. They drive nice cars and trucks, have tons of expensive toys, and are paying down hefty mortgages. A few of them have student loans and other expenses on top of that.

One of these friends in particular works for the state, and he goes into panic mode any time there’s even a hint about any sort of possible job loss. He goes through these phases of intense stress and worry several times a year. Even between these phases, there’s a certain amount of constant stress in his life due to his job.

Because of all of this stress, he loathes his job. His way of “escaping” from that job is to spend his paycheck on fun things. He has a very nice motorcycle, two different ATVs, a snowmobile, several 50+” televisions, a beautiful new truck, a set of golf clubs where each club costs more than my entire set, and on and on and on. He’s always eating out or going on weekend trips for golfing or for ATV conventions or to Vegas or something.

Looking at his lifestyle, I can’t see how he doesn’t just blow $15,000 per year on completely non-essential stuff. The total is almost assuredly a lot higher than that.

Now, let’s take that $15,000 a year and invest it over the ten years he’s been working at that job. Let’s give it a 7% annual return. He would now have almost $300,000 in hand. That would be enough to cover his living expenses until he was well past retirement age.

That’s not even the biggest value here for my friend. The biggest value for him would be that within just a year or so of saving at that rate, his job stress would drastically decrease and, within a year or two after that, it would vanish.

So what if he got fired? He would have months – even years – before he had to find another job. He could even start down a completely new career path if he so chose. After all, he’d have the money on hand to do it.

All the time, I see people talking about spending their whole paycheck as though spending money rampantly is some great example of personal freedom. They’ll say things like “you only live once” as they go sign up for another debt or plunk down another fistful of cash on something that’s fun in the moment.

Yet those same people wake up on Monday morning and trudge off to work at a job that they hate, one where the mere hint of losing their job or having their hours cut back fills their heart with fear.

To me, having money in the bank so that you’re not in fear of your boss is a much better expression of the “you only live once” maxim. I have no interest in ever again being in a position where my boss has that kind of power over the day-to-day aspects of my life.

Every single working person out there has the power to put themselves in a position where they don’t have to take heat from an abusive boss and they don’t have to be constantly in fear of having their hours cut back and they don’t have to bootlick or play office politics.

They just have to make the conscious choice to stop spending their entire paycheck.

Most of the time, significant portions of that paycheck are used as salve on the psychological wounds of the workplace (and, often, other aspects of life), and walking away from that salve is often the hardest part. I’m not going to kid you – cutting back on short-term pleasures is never an easy thing to do.

The reward on the other side, though, is incredible. You don’t have to worry about the office politics – just be pleasant to others and get the job done. You don’t have to fear your boss or loathe your job, either – if your job is miserable, start hunting for another one and realize that a pay cut isn’t the end of the world at all. If you want a new career, you can just go for it.

What I’ve found is that when you’re in a position where your paycheck isn’t hanging over your neck like a guillotine, a lot of the little workplace stresses kind of melt away. They just don’t matter that much any more.

If you hate your job, the most powerful response you have to that situation is to start spending less money and building up some savings. If you give yourself the power to be able to change employment without stress, life becomes much easier. If you keep going and give yourself the power to completely reboot your career if you so choose, life becomes easier still.

Buying things might be a nice short term salve, but you still have to go into work and suffer through a stressful environment every single work day. Cut back on buying things for a while and build up some money in the bank and you’ve found yourself a permanent salve.