YNAB Personal Budget

I have just received a reply from Jesse from the You Need A Budget site. YNAB is one of the sponsors of No Credit Needed, and I wanted to give you an opportunity to learn more about his spread sheet based budgeting plan. I personally use the YNAB system, and I think that you would benefit from using it. I want to thank Jesse for being an affiliate, and I hope you’ll check the link above or below, and check out his work. Here’s the email interview:

1. How long have you been actively budgeting?

When I was in high school I decided to write down everything I spend. After a few months of that I noticed I spent way too much on nothing and it helped me realize the control you can gain over your spending by tracking it. I wouldn’t call what I did “actively budgeting” though. I have been following the Four Rules of YNAB since I married my wife in February of 2003.

2. Why did you choose to design around excel? (What other platforms does YNAB support? Open office, mac, etc?)

I chose to design it first in Excel because that just seemed like the logical choice if I wanted to set up my own budget. I had MS Money (a free copy w/ the purchase of my laptop) and it did anything but budget — so making one seemed like an obvious answer. The nice thing about users of YNAB for Excel is that they can customize it to their liking, dig into the formulas themselves, alter it (for their personal use), etc. I’ve seen many users’ sheets and they are impressive: goal tracking, checkbook balancing, reminders, etc…anyway — back to the topic. YNAB can also be used with a very nice free spreadsheet program called Calc, which is part of the OpenOffice suite of products. It’s also compatible with Excel for the Mac.

3. Do you consider yourself to be more of a natural “saver” or “spender”… depending on your answer, does this make it more difficult or less difficult to budget.

I’m a natural spender. My wife is a natural saver. I honestly would prefer focusing on the income side of the equation so I don’t have to worry about the outgo — but everyone knows that’s a fallacy. Expenses mysteriously match income when they’re not consistently monitored and told what to do.

4. Do YOU ever stray from your budget? (or, do you find that you have plenty of “play” money due to having a good, honest budget)?

Every single month there’s something. In the free 10-day ecourse I’ve written, I mention that we have never once stayed within our grocery budget. That’s not entirely true now and needs to be revised. We’ve stayed within it the last two months. I’ve noticed that if we don’t remind ourselves of the budget balances a few times throughout the month, it doesn’t do much good.

As far as what a “good, honest budget” does for us? It increases our dollars’ capacity to do their jobs and in that regard, we do have more peace with our money than our comparable peers around us that choose to purchase and financially react on a whim.

5. Does your system work with IRREGULAR income?

When I first developed YNAB, I was on a very small, irregular income. Rule One is just for those types of people. I’d recommend your readers head to the site for an in-depth explanation, but the short version of the story is that there’s a way to remove the unknown factor of variable income relatively quickly.

6. How much does your system cost?

Well, if you don’t buy it, it will cost you hundreds of thousands of dollars in lost time and money — Oh! You mean what’s the price? It’s $19.95 and comes with a 60-day moneyback guarantee. I try and give people enough confidence to go ahead and try it out without worrying about whether it will work for them.

7. Do I have to be a money “expert” or super-duper math dude to work the YNAB system? (How DIFFICULT is this system to use, compared to say Money or Quicken?)

You parenthetically asked to compare the ease of use of YNAB with Money or Quicken? There is no comparison. With YNAB, there is a 14-page setup guide, and a repository of FAQs for special cases (business reimbursements, credit card usage, etc.). Most people get their heads around the system within about a half hour. Another half hour of testing it out hands-on and you’re there. I have users now that are so savvy on how it all works they consistently teach me a thing or two. You need a very, very rudimentary knowledge of how spreadsheets work (they’re made up of cells, you can type in those cells…) but other than that — well, let’s just say that there’s a 75-year old lady in New Jersey who’s having a lot of success with it.

8. Can I use the system to create multiple budgets? (In other words, can I use it for my personal budget and a personal business budget?)

While I haven’t really delved into specific business budgeting to nearly the same degree as I have with personal finances, I don’t see why you couldn’t incorporate the same Four Rules into how you handle your business’ cash flow.

9. What are the 5 personal finance sites you visit most often?

I subscribe to dozens of personal finance blogs so I can constantly guage the pulse of the personal finance blogosphere. I’m a huge fan of the Wall Street Journal as well. I don’t know if five even would do justice to the amount of reading I do online regarding personal finance.

10. Are you debt free? (You know I had to ask!)

Eh, a few months ago I could’ve said yes without qualification. In reading so much about personal finance — and seeing quite a bit about credit card arbitrage — I thought I’d try it out and see what all the hype is about. So I have some 0% interest debt that’s sitting in a high-interest savings account earning some money. Personally though, I won’t be doing it again. It’s not that I find it inherently difficult, wrong, or dangerous — just a slight annoyance for me to initiate the online payment each month to stay current. And as any YNAB users know, I prefer to keep things simple, simple, and simple.

My only last point would be to say that if you’re spending more than an hour or two each month managing your money, you ought to give YNAB a try. We all need a budget.

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If you’d like to give the YNAB system a try, please click the link below:

YNAB Personal Budget

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How would you like to have an extra 290,000 dollars available at retirement? Well, here’s a VERY SIMPLE way to make that happen. Seriously.

Most of have regular, daily, no-big-deal expenses, right? Well, what if, instead of totally eliminating those expenses, we could space them out, so as to lessen the frequency of those expenses? Could we save some money? How about some BIG money? You bet. Check this out:

By changing the frequency with which we purchase certain items, we can radically affect our long-term savings.

Hair cuts: I pay about 12 bucks for a hair cut. I used to get a hair cut every 2 weeks. Now, I just get a slightly shorter cut, and I go every 3 weeks. Annual savings: 108 dollars

Sub Sandwiches: I used to eat at a local Sub joint 2 or 3 times a week, averaging about once every 3 days. Now, I treat myself once a week, or every 5 days or so. Annual savings: 288 dollars

Disposable Razors: I shave with a “decent” disposable razor. My beard is not all that thick, but I used to use a razor for about 4 or 5 days. Now, I skip a day of shaving once a week, and I make a razor last 6 to 8 days. Annual savings: 21 dollars

New Books: I love to read, and I used to purchase a new book every week or so. Now, I space my new book purchases out and purchase a new book every 2 weeks or so. (I also use the library a lot more!) Annual savings: 182 dollars

Total Annual Savings: Almost 600 dollars

So, how does this make me rich? What’s the big deal about 600 dollars? Well, if you put 600 dollars a year into your retirement account, for 40 years (age 30 to age 70), and you earn a return of 10 percent on your money, you will have a total of over 290,000 dollars. Yep. Over a quarter of a million dollars in “extra” money, just by changing the frequency of certain purchases.

Now, imagine if you ELIMINATED or GREATLY reduced the frequency of such purchases. Can you get a free haircut from a friend? How about a 2 dollar sandwich instead of a 6 dollar sandwich? Disposable Razors? How about a rechargeable electric model? Or growing a cool beard? Books? Who needs to buy books, especially at retail price! Go to eBay or Half.Com, or just hang at the library?

As you can see, NOBODY has an excuse for not having at least a “small” amount in their retirement savings. All it takes is a bit of thinking, planning, and executing, and anyone can save a good deal of money, every day, every week, every year.

(By the way, when I calculated the return on your investment, I used a simple annual contribution and annual compounding. Had I actually taken the time to break down the investment into monthly sums and monthly compounding, your actual end balance would have looked more like 320,000 dollars…!!!)

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I have created a brand new blog. No Calories Needed can be found here. I am going to use this blog to track my weight loss, and I will update it every, single day. I will lose 50 pounds before Christmas Day. I hope you will check it out. Thanks, NCN.

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I logged into my ING Direct account and was pleasantly surprised to see that they have raised the APY to 4.40%, up from 4.35%. Not a HUGE bump, but every little bit helps. Contact me for information about an ING Direct referral. You get 25 bucks, I get 10 bucks, and we both get a brand new rate of 4.40%! That rocks!

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So, you have your debt reduction strategy in place, and you are ready to ramp up your debt reduction with some advanced steps? Awesome. (If you do not have a solid debt reduction strategy, check this post out.)

1. Call your credit card companies and ask them to lower you interest rates. In many cases, your current company will bump your rates down, especially if you have been a good customer. Don’t give up! Call, call, call, until you are certain that your company is not going to hook you up. I suggest calling once a week for a month, always asking for a manager or supervisor. Still no luck?

2. “Surf” your balance from a higher rate card to a lower rate card. If your current card company won’t work with you, there are other companies which probably will. How does this work? Find a decent offer from a card company. (You probably get a few zero-interest or low-interest card offer in your mail every week…) What to look for? No balance transfer fee and a decent period of time before your higher interest rate kicks in. Remember, never, ever sign up for a card offer that you don’t completely understand. It is better to pay higher interest (for a short period of time) than it is to get taken by a card company offer that you don’t understand.

3. Maximize the interest on your savings! You need a decent savings account which pays a decent amount of interest on your money. I use ING Direct (Click here for information about ING Direct Referrals…) You should have a small emergency fund in savings (around 1000 dollars) at all times, to keep from having to go further into debt if (when) you have a financial emergency. AND, you really, really want to maximize the amount of interest you are earning on those savings. Why? So you will have MORE money at the end of the month to send towards your debt reduction!

4. Check those debt interest rates. Are they higher or lower than the rate that you are making in your savings account? If they are LOWER, then it pays to keep your money in savings until right before a bill is due, sending in your payment say 5 days before the due date. (ALWAYS be on time… one mess up and you could ruin your entire plan with penalties and rate hikes!) If they are HIGHER, then send your payments in as soon as you can! Why? Because most cards charge interest based on your average daily balance, and the quicker a payment reaches your card company, the quicker your balance is reduced. (Card companies are not stupid, and the methods that the use to charge interest vary from card to card. If you are in doubt, send your debt payments in as soon as possible, so that you will have peace of mind, knowing that you have reduced your over all balance.)

5. I know what you are thinking. NCN, if I am making a higher rate of return on my money than I am being charged by my credit company, WHY should I be in a hurry to pay off my debt.

Reason 1: 2 + 2 = 5 Sometimes, the math does not matter. There is an “emotional” component involved in debt freedom which cannot be quantified. Trust me
Reason 2: ALL interest rates are variable, even fixed, settled, rates. Why? Banks get bought and sold, recessions happen, payments get lost in the mail, etc. etc. Never under estimate the reality that your debts could be bought or sold, that your card agreement could be changed, or that something else could “happen” which could upset your delicate financial footing.
Reason 3: You want to get out of debt. Prolonging your debt reduction for just a few dollars in interest is ridiculous. Once you have experienced debt freedom, you will know what I am talking about. Do not play games with credit companies. They own those big fancy buildings for a reason!! They know how to play the game.

There are tons of personal finance folks out there who have no problem with carrying debt and debt balances. I am not one of them (check out the title of the blog!) If you want to get out of debt, you can!

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