Over the years we have gone through a few different solutions for managing our money. We were never quite satisfied with what was out there and we were looking for that silver-bullet solution, a place to track all our transactions and also help us budget effectively. Our prayers were answered a few years ago when we discovered YNAB. YNAB stands for “You Need A Budget” and is a cloud-based software solution. There is definitely a bit of a learning curve; you do need to put in some time initially setting things up and then monthly/weekly attending to your budget. Lastly, and maybe most importantly a few mindset changes are required.
When you think of monthly expenses, what comes to your mind? Mortgage payment, groceries, internet, gas/electric, car insurance and phone bills to name a few. These come in every month and they are pretty much always fixed payments. What about holiday expenses, simchas, car repairs or vacation? Shouldn’t those be monthly expenses too? What happens when we get a big car repair or a boiler breaks? Wouldn’t it be nice if we could just write a check or swipe a credit card for something unexpected and not feel strapped for that month? We just look over at our home maintenance category and see that we have enough to cover the bill because we were saving for this day. Most of us can get away, b”h, with these “smaller” bills, but what about a bar mitzvah, or a wedding or something else that is a large expense? In YNAB you can set goals by specifying the goal amount and the time frame, and then you can set aside monthly for these bigger expenses.
The following are a few mindset shifts that YNAB encourages:
1) YNAB will be your only go-to place when you’re deciding on a purchase—not your bank. You spent time and thought setting up your budget and have been allocating your hard-earned dollars there. Now it doesn’t make sense to look at your bank account—you just look at your budget when making those purchase decisions. I’m not saying not to eat if your grocery budget is depleted, but you would just need to cover it from another category. There are going to be times in the month that certain categories might need additional funds, and YNAB is designed to help you easily “move” money to different categories for those occasions. This is what I mean by “attending” to your budget—tweak it and fine-tune it. In this way you ensure that you are allocating enough money to the various categories you’ve set up in your budget. This exercise can be eye-opening as you will now see exactly where each of your dollars is going.
2) Get out of the “living paycheck to paycheck” lifestyle. YNAB encourages users to get to a place so that you are spending your money for the current month with money that was made last month or earlier. They call this “aging your money” and if you can do this, you are in a much better place financially. For one, you are no longer timing your bills. In other words, you are no longer living paycheck to paycheck.
3) YNAB is designed to impress upon you a novel idea, that you don’t spend money you don’t have. If you swipe your credit card for groceries, your grocery category is debited and your credit card category in the budget is credited. This design ensures that you’ll always have enough funds to pay your credit card bill and thus never be in a position where you carry a balance (something we never want to do). The beauty here is it doesn’t matter where you are paying from—debit or credit card—that is irrelevant. You are not spending money that you don’t actually have. With this in mind, we all know there are times that we need to purchase something on credit or we’ve developed bad habits and are in debt. The good news is that when you start using YNAB you can now tackle this debt.
Some people might be uncomfortable with the idea of budgeting. They might think “budgeting is stifling or restrictive; with a budget I can’t spend what I want.” Others might say, I don’t need a budget as I’m financially well-off and budgets are for people of less means. Not true. A budget is for everyone, and it is powerful because it lets you decide what is important to you, whether it be tuition, family vacation, charity or future retirement, to name a few. With a budget and the help built into YNAB you can live financially responsibly. You will always know where your money is going. YNAB is cloud-based, so you can budget easily on the go on your phone or on a browser on your computer. You can record transactions manually or you can connect your bank accounts securely and have YNAB download your transactions. The subscription for the service is $50 a year and worth every penny.
By Ron Tovbin
Ron and Renee Tovbin are proud new residents of Bergenfield. They have four kids: Zev, Azriel, Mikey and Tobi.
