Have you ever thought, “Wait a minute? I know I make pretty good money, so where’d it all go?”
You’re not alone.
Wondering where all your money goes is a pretty common struggle and one of the main reasons you might be looking into different budgeting tools to help.
You Need a Budget (more affectionately known as
One of the biggest reasons I love
These four rules are designed to guide you toward more awareness and better financial decision-making so you can reduce money stress and ultimately reach your financial goals.
Rule #1: Give Every Dollar a Job
The first rule of
This means that before you spend any money, you deliberately decide what to spend it on.
The reason this is the first rule is that it helps you get intentional with your money, making sure you’re deciding where it will go before you spend it.
Most budgeting software functions more to track your spending, showing you where your money has already gone.
YNAB’s first rule is meant to break this habit of looking back and create a new one of planning ahead.
Looking back has its uses, but if you’re trying to save money and get ahead, you need to assign some dollars to that job in your budget.
The beauty of Rule One is that you treat all your dollars the same, regardless of whether you plan to spend them now or in the future. After all, savings goals are really just future spending goals.
And while it can be tempting to stock away some unassigned money (just in case), there’s another purpose behind forcing yourself to decide.
By giving every dollar a job, you ensure your money is being spent in alignment with your priorities and values.
Rule #2: Embrace Your True Expenses
YNAB’s second rule is to embrace your true expenses.
You’re probably well aware of your regular recurring monthly expenses, but this rule encourages you to save for irregular and infrequent expenses as well.
Things like annual insurance premiums, holiday gifts, and car repairs can all catch you by surprise when you’re focused on the day-to-day.
But Rule Two can help you acknowledge these expenses and plan for them in advance.
By anticipating and budgeting for your actual expenses, you can break your savings up over time and avoid the stress and financial strain of having to find the money on short notice. Or worse, put it on a credit card and risk going into or adding to your debt.
Rule #3: Roll With the Punches
The third rule of
Rule Three is my favorite because it encourages you to be flexible with your budget.
Most people think budgeting means pre-determining how much money you can spend in any given category and then forcing yourself to stick to that decision.
But your budget isn’t written in stone, and no matter how well-crafted you think it is, life happens.
Think of your budget like a roadmap.
You know where you want to go (your financial goals), and your budget gives you a route to get there. And just like with travel, there may be delays and detours that cause you to re-route, but you’re still on track to reach your ultimate destination.
So, for example, when my antsy kid falls out of his chair and ends up needing ten staples in his head, I’m able to focus on taking care of him and not stress out about paying the bill.
I know I can pull that money out of other categories to cover the extra expense. (Although I will probably revisit Rule #2 and create a new “Clumsy Accidents” budget category.)
Rule Three gives you permission to adjust your budget whenever you need or want to without feeling bad about it.
Being able to change and adapt your budget when life throws you a curve ball or your priorities change is one of the key aspects of making a budget that works for you.
Rule #4: Age Your Money
Rule Four, the final
The idea behind this rule is primarily to break the paycheck-to-paycheck cycle by extending the length of time between when money comes in and when you spend it.
A lot of us have a habit of spending our money the minute we get it.
Whether it’s on outstanding bills or just to have some fun, this instant spending keeps us trapped in the paycheck-to-paycheck cycle.
Aging your money not only encourages you to focus on building your savings, but it will also give you peace of mind knowing unexpected expenses won’t necessarily ruin your budget.
And if you’re wondering how you’d track this, you don’t have to!
The starting goal is to build your Age of Money to 30 days so you can cover one month of expenses. But the more you use the software, the more excited you’ll get to see this number continue to rise.
Final Thoughts on
YNAB’s Four Rules
YNAB’s Four Rules are a
Whether you’re trying to break the paycheck-to-paycheck cycle, pay off credit card debt, build your emergency fund, work toward financial freedom, or all of the above,
Adopting these rules will help you gain a clearer picture of your financial situation and work toward achieving your goals and living your best life.
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I would love to help you gain clarity and confidence with your money! If you’re ready to stress less, save more, and enjoy your money, click below to learn more about financial coaching.