One of the most helpful “simple systems” I’ve ever encountered is called You Need a Budget (YNAB, for short). It is comprised of four rules:
- Every dollar has a job
- Budget for true expenses
- Roll with the punches
- Age your money
The simple system that we want to discuss this week is called YNAB. YNAB stands for You Need a Budget. Yes, you do. I do. We all need a budget. Furthermore, we all need to stick to a budget. I’m the first to admit that is super hard to do.
I first started getting into personal finance stuff with Dave Ramsey. He was my introduction into it. I love Dave, and am really appreciative of the things I have learned from him and almost certainly I’m in a different financial position today than I could’ve been had I not been listening to Dave Ramsey. But the thing that really helped me start to filter that out and understand even more what I was doing was the system of YNAB. Once you get into Dave Ramsey, it’s really a short distance to get into the YNAB world because they both operate on zero-based budgeting.
YNAB is a software You Need a Budget, but it’s also a methodology. It’s a system, it’s a way of thinking about the nitty gritty of the budget. I don’t know if you’re into personal finance at all, but you can use this for business finance as well. The way that Dave Ramsey teaches is more of a whole scale of your finances from the bottom to the top. If you’re broke today, how do you start today, and what does the macro look like. The macro system, his 7 baby steps for moving through life and getting to a place of financial freedom. Again, that is a great system. But the most important part of his system is budgeting. In my opinion, the way that he teaches is not very comprehensive around budgeting. There’s less instruction and some of it more vague than I would like it to be. So You Need a Budget comes to the rescue there because it gives specific instruction around the action of budgeting. What you start to find out is that that action of budgeting itself is what helps you get to the point of financial freedom. As you are implementing this, You Need a Budget has 4 rules. The 4 rules of YNAB are this:
Rule 1. Every dollar has a job. As soon as the dollar comes in, we use the software or whatever tool we’re using to give that dollar a job to go to the next thing that needs to be paid. This is true whether you have tons of money rolling in and very little expenses, or whether you have tons of expenses and very little money rolling in. You can only deal with reality. When the money comes in you categorize it, you tell it where to go.
Rule 2. Budget for true expenses. Most of us have a problem because every month is different. What happens is we run into things that we may say that they were unexpected or unplanned. But we all knew they were coming. Christmas comes around every single year. Car insurance payments. They happen. Whatever it is. You might have these infrequent expenses that pop up throughout the year and they can be expensive. Homeschooling. We have homeschooling materials that we need to pay for. Vacations you need to plan for. These are things that in any given month you may not have that chunk of money sitting around to take care of, but you may be able to set aside throughout the year and pay for it and then you don’t have to go into credit card debt, accrue interest, all this stuff. You’re just budgeting for it throughout the year because it is your true expenses.
Rule 3. Roll with the punches. Your budget will change because every month is different and that is okay. You’re going to have some months where you really fall off the wagon. You’re going to have some months where you do really great. You’re going to have some months where your priorities are just different, where you’ve decided that eating out was more of a priority in one month than groceries. That money for groceries has to filter over into eating out to help pay for that.
Rule 4. Age your money. The idea here is to be spending the oldest dollars that you possibly can because the more you age your money the more you give yourself a buffer into the future. The older your money is, the better. If you’re spending money in July that you actually made in April or May, then you’re a few months ahead of where you need to be, and that’s a super good sign.
So that’s it. YNAB. I highly recommend you check it out. You can go to YNAB.com or you can go to youneedabudget.com and check it out if you’re struggling in your personal or business finance. It’s not a magic pill. There’s still a human element. I’m not perfect with it by any means, however, it will help you tremendously once you take the time to learn. They’ve got some great learning resources that will help you out as well.
I appreciate your listening to the Faith-Full Business podcast. If you like this podcast, please share it with a friend, share it with a coworker. I really love this idea of using simple systems and so the fact that we’re going through this series is just great for me. I think we should be organized people. Again, we’re entrepreneurs, but we’re faithful entrepreneurs. We’re Christian entrepreneurs. We like to do things decently and in order. We like to be organized with our work, be organized with our life, because that is something we feel would honor the Lord. Do you agree? Do you disagree? Let me know. I have a feeling you agree with me. We should be people who approach everything in life very intentionally. This being no different. Jesus himself said, which of you is going to plan to build a tower without counting the cost. It matters that we have organization and that we use good sense when we are working in our businesses and this is no different.
God bless you, and we’ll see you in the next episode.