If you know how to keep track of your income and expenses, how to plan your budget, but haven’t got full power over personal finances yet, the YNAB philosophy can be your last step to the final victory. If you consider yourself to be a complete ignoramus in this matter, you can get the right direction right from the start.
The “father” of the YNAB is a well-known consultant on finance Jesse Mecham.
The philosophy of making budget YNAB
Jesse Mecham called his financial management system very simply – the first letters of words in the expression You Need A Budget. The system itself, in spite of its capacity and efficiency, is as simple as its name, and is based only on the four rules.
Rule # 1. Make every dollar work
Imagine a company where no one knows his professional duties, his work and everybody does what he thinks is necessary. How long such a company will live?
Your family is the same company, and the money is your employees, each of which will be appointed for a certain position. Give every dollar a job.
[blockquote] After the budget planning there shouldn’t be any rest. [/blockquote]
This does not mean that you should spend all your money in this month. Some of your “employees” will be responsible for saving, some – for the future big purchase. But no dollar should be left without work.
Sure, don’t forget about spontaneous purchases. You can call it differently, but allocate a certain amount of money out of the budget, and spend it on whatever you want. This will allow you to feel free, to get more joy out of life and so you will not become a servant of your own budget.
But first of all, if you are married, you need to discuss everything with your partner. Discuss not numbers, but in general the meaning and necessity of the budget. The reason is very simple: each person sees life differently.
When you say: “We need a budget”, – the partner hears: “I want to control you.”
When you say: “We have to plan our major expenses,” – the partner hears: “You spend too much.”
Keep this in mind and be ready for unexpected reactions.
Rule # 2. Create a “financial cushion”
We do not know what may happen in the future and how much unexpected expenses it will require, that’s why we should allocate a certain sum from each income.
[blockquote] The greater the sum, the greater the “cushion” and the less painful and stressful “financial fall” is. [/blockquote]
Rule # 3. Ley your budget be flexible
Wise people plan their day in minutes, not in order to live in a tough frame of plans, but to have a solid foundation for improvisation and confident response to changes.
The budget is the same. Try to live within your budget, but do not worry if you’ve spent a bit more in some categories. Sit and decide from which category of expenses, fill the gap. The YNAB app will do it in seconds.
[blockquote] Do not treat the budget as a foreman. Its mission is to be your informant, helping with conscious handling of finances. [/blockquote]
Rule # 4. Live on the income from the previous month
In practice, this rule seems simple: in June you receive your salary for May, but plan it into the budget of July and, accordingly, spend it in July. And so every month. You feel comfortable and confident, because the money is alredy in your pocket.
Just make the budget
Now you know the rules of YNAB. They are very simple and may seem obvious. Probably. But in practice, not many people follow them. Try it and you will be convinced of its effectiveness.