We Can't Afford That

My husband and I are both frugal about most things. At times, I will mention various improvements that would be nice to make around the house or things I might like. Other times, he mentions bike or running gear that he would enjoy. We've both frequently responded to these dream purchases with the stock answer: "We can't afford that."

Around tax season this year, I started to reflect on whether we could "afford that"--whatever "that" may be. I realized that since my husband starting paying the bills 10 years ago, I haven't had the intimate awareness of our funds that I had early in our marriage--the awareness that enabled us to have a buffer in savings and to pay a vehicle off early. Sure, I'd look at the reports in Microsoft Money and see the income/expense comparisons, but it didn't mean much to me. I'd go shopping and blindly swipe the credit card, confident that we could pay the balance each month, but not really considering the future or our savings goals. We've had the van for 14 years. At some point it will need replacing, and I don't want a 5-year car loan!

I offered to relieve him of the money management duties earlier this year, not because I could do a better job than he could with paying bills, but because I could do a better job with my spending if I was more aware of our finances. After paying the bills and recording in Microsoft Money for a couple months, I wondered if there was a better system. We have attempted to use the Money budgeting tool for years, but it is cumbersome and doesn't give me the control and focus I was hoping to find in financial software. I couldn't easily change the dollars in a category to reflect the month-to-month changes in life. My husband has told me for years that budgets don't work. He's an accountant, and is 3/4 through the testing for the CPA, so he knows more about business and finance than I do. Although I didn't want to believe budgets couldn't work, it seemed he was right. 

Four rules for YNAB Method.
Image credit: http://www.youneedabudget.com/

I wasn't ready to give up, though. Like any modern thinker, I started searching the internet for answers. How could I better manage our funds so we could "afford that" if we really needed it? My search brought me to "You Need a Budget (YNAB)." YNAB is a method of money management that helped me recognize the problem wasn't with budgeting. The problem was with forecasting--planning a whole year's worth of spending before the dollars ever hit the bank accounts. If you look at the four rules of YNAB, you'll see that the first rule is to give every dollar a job. What does that mean? Simply, the money you have gets assigned to a budget category. No forecasting here. You take the money on hand, you look at your monthly expenses, and you start assigning the money to categories. 

The first thing I realized about YNAB was that it seemed friendly. I know, that sounds like a dorky reason to pick a budgeting software program, but stick with me here. YNAB offers a 34-day full-featured demo of the program so you can work through a full month's worth of bill paying and learn to use the software before making a financial commitment. YNAB also offers free online live classes, discussion forums, and personal support. I have taken several of the webinar classes, and each instructor was personable, knowledgeable, and helpful. With each webinar, I learned new skills to use for our budget.

The second thing I realized about YNAB was that it works the way I thought a budget should work. Forecasting is frustrating because there is no "typical month." Every month has an emergency or a surprise expense. Rules two, three, and four help us to plan, adapt, and adjust for those surprises so that we can "roll with the punches" and make informed decisions about our spending. 

YNAB utilizes the Cloud, so if you share accounts, each computer and smart phone for your household can share a single license. You can add spending instantly and check category balances before making a purchase, and every device will have up-to-date information. That also means that when my 5-year-old netbook dies, I won't have to worry that I've lost all of my budgeting history like we did when the old computer died with our only backup of Money 7 or 8 years ago.

Click here to purchase YNAB with 10% discount.

My experience with YNAB began with reading through the website and downloading the software. I started setting up accounts and categories for a day or so, and then participated in my first webinar. I didn't realize until the class started that for each class, YNAB gives a free license to one participant. I never won a license, even though I took four webinars. However, by the fourth webinar, and the 30th day of my trial period, I had budgeted for the purchase of the software! 

Since I found the software through another blogger's website, I realized I could get a 10% discount if I used her code to purchase the software. She, in turn could earn $6 for the referral. Since I purchased the software, I now have a referral code which can save you 10% on YNAB! If you are new to my blog, please bookmark this article and then download the YNAB trial. If you don't win a free copy through the webinars and decide to purchase, please come back and use this referral code to get your 10% discount!

I have been using YNAB for almost two months now. As I mentioned earlier, we live a frugal lifestyle, but seemed to be living paycheck to paycheck. By using YNAB, we're very close to achieving the Rule 4 ideal of living off of last month's income. The rainy day funds could be bigger and our retirement planning definitely needs more attention, but in the short term, I feel more confident about our spending. This morning, I was able to say: "You need new running shoes? Yes, we can afford that today."