YNAB: Methodology In A Nutshell

Budgeting Software for rainy day fundYNAB (You Need A Budget) software is an amazing budgeting application that will help anyone with their personal finances. The reason behind their success is the methodology of their interface. The creators of YNAB are not just selling a software product; they are on a mission to help people change the way they think about money. Whether you take an online class or listen to one of their webinars, the results are the same: it all hinges on four rules.

Rule #1 – Give Every Dollar A Job

Instead of looking at a lump sum amount in the bank account and getting a false sense of security, YNAB breaks your money up into smaller, laser-focused goals, giving you the information you need to make good spending decisions. When you proactively decide what you want your money to do before you do it, your financial awareness increases. This keeps you from making poor choices and increasing your financial debt. Using the budgeting interface, you can also make adjustments to your budget if unexpected expenses occur. By having different categories for your hard-earned dollars, you can manipulate the amounts to meet these fluke expenses. This type of adjusting is normal, expected, and encouraged.  It means you’re setting a plan and then adjusting that plan as new information arrives.

Rule #2 – Save For A Rainy Day

Sometimes, bills are due six months away. For these and other delayed expenses, you have to plan ahead. With YNAB, that is part of the plan: saving for a rainy day. This software helps you save a portion each month for these expenses so by the time they arrive, you have no problems paying them. But more than just bills, you use Rule Two to save for things you want as well: Vacations, Anniversary getaways, and new gadgets.

Rule #3 – Roll With The Punches

Unexpected expenses mean that adjustments are necessary. YNAB calls these events “rolling with the punches.” If you overspend in a category, look through your budget and move some money around. Rule Three is proactive and responsible. You make adjustments first, and YNAB then makes gentle, monthly corrections to cover the rest. If you overspend in a big way, you’ll feel it in a big way the following month.  That’s just part of facing the music; it’s a really important reality check.

Rule #4 – Live On Last Month’s Income

This is the poster child of a good budget. With YNAB, you will, over time, be able to set aside a month’s income so that you can stop living paycheck to paycheck. This is the ultimate goal of YNAB.

As you can see, YNAB’s methodology is vital to their and your success.


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