Flashback six months ago: I thought I was doing well, financially. I’d been making a decent salary at Rapt Media, I (thought I) was making some progress on the credit cards I had run up while working on Signal Genius, and I just generally seemed to have a lot of money in the bank. Then on February 1… my mortgage, CrossFit membership and car insurance autopayed; the next day, my roommate came asking for the rent check, as well as two months’ rent for the Vail ski house I’d never made the trek to.
Mother effer. Suddenly I was back to carefully timing checks, watching my account balance like a hawk, and crossing fingers when the debit card swiped at the grocery store. There had to be a better way.
I’ve had my bank accounts hooked up to Mint for a number of years, until their sync stopped working with USAA. From their responsiveness in the support forums, it was pretty obvious how much they cared about fixing it. I took a look at ReadyForZero, and Googled the shit out of personal finance software. One tool that repeatedly surfaced was “You Need A Budget.” With a campy name like that, how could it be for real? I visited the site. Once I got over the shock that it was software to download instead of a web service, I read on.
Their four-rule system appealed to my inner pedant, and reading the description of each rule was a blinding “duh” moment:
- Rule 1: Give Every Dollar a Job
- Rule 2: Save for a Rainy Day
- Rule 3: Roll With the Punches
- Rule 4: Live on Last Month’s Income
On February 5, I installed and started my 34 day trial. At first, there were some mental aerobics to figure out how to set it up against the current snapshot of my finances, but I got it somewhere it looked right and ran with it. The change in my behavior was almost immediate — instead of being fooled by a high balance right after a paycheck, I knew exactly what upcoming outflows were in the queue, and how much of an impact my 6-month and annual expenses had on my monthly spend.
One thing I didn’t realize, and have since corrected, is that I was ‘cheating’ by forecasting paychecks: On the first of the month, I would enter my paycheck (which doesn’t come in until the fourteenth), and “give every dollar a job” [Rule 1]. In hindsight, this was silly, because then my budget wasn’t a definitive go-to source for how much I could afford to spend. While out and about, I would have to check the budget… then cross reference with my account balance… silly. Now I budget on the fourteenth after my check comes in; I fill out the rest of the current month, and allot the first half of the next month. (I haven’t quite managed Rule 4 yet).
So what’s the upshot? Six months later, how am I doing?
- I haven’t overdrafted any account since March eleventh. Probably my longest streak since moving to Colorado.
- I’ve “found” hundreds of extra dollars out of my paycheck each month. The impact of simply measuring something cannot be overstated.
- My credit card debt is down >20% since March first. I’ll publish exact historical numbers once it’s all gone.
- Anxiety about money is gone. Mostly. Now I only angst about how much is lost purely in the servicing of debt.
I haven’t dialed it all in yet — I still “roll with the punches” [Rule 3] in a number of heavy-hitting categories month after month: Dinner, Lunch, Happy Hour, Coffee, Booze, … etc. :), and it’s still not clear to me if crushing debt or prioritizing Rule #4 first is more valuable yet. (I’m working up the nerve to email the YNAB blog with my budget and ask their opinion on the matter). I have cut out a lot of trivial spending, and I’m getting a little bit better at that every month.
Seriously, if you don’t track your income and (real) expenses, getting ahead is impossible, I don’t care how much you make. I find YNAB to be incredibly useful, and I think you will too. This link will save you $6 on the one-time $60 price tag, and they’ll give me $6 for referring you. We both win: