I know this is pretty outside my normal range of post topics, but since I recommend YouNeedABudget (YNAB) software to anyone who gets even close to talking about finances with me (doesn't happen all that often since I'm a scientist whose day job has nothing to do with managing money) I thought I'd give it a mention since it just won it's fancy award. It's a great tool for keeping track of your finances, budgeting or even learning how to budget.
In order to fully explain why I love this software so much, I'd have to go to the beginning of our financial transformation (which I don't mind talking about, if you're interested, but it's another story for another time), but lets just say that YNAB has saved me HOURS of time. I used to keep our finances in a handy dandy binder full of self-made forms to separate each transaction into the appropriate category. That evolved into a semi-complicated (and also self-made) Excel spreadsheet (ps. I love Excel!) that linked between multiple tabs and spit out summaries and graphs and calculated balances. Then I found YNAB, and I was so excited. You see, no other software worked with the way we manage our finances. YNAB does.
Let me try to explain using Mint as an example because it's the only software I tried to use for several months before giving up on it (I tried Quicken and Microsoft Money on free trials, but didn't like them either). Say you budget $200 every month for groceries. On Mint you get a little meter labeled Groceries with a "full" value of $200 (correct me if I'm wrong, it's been a couple years since I've used Mint). In YNAB, you have a line in your budget tab for Groceries with a balance of $200. Now, say one month you spend $150 instead of the full $200. In Mint, you get to see that your meter did not fill all the way up. You say, "Yay! I didn't max out!" and move on to the next month with another clean $200 meter. Correct? This is where YNAB is different. For the month you spent $150, you would see the $200 budgeted for that month in one box. Next to it, you'll see an outflow of the $150 you spent that month. Next to that, you'll see that you have $50 left in that category as the "category balance". That $50 will also show up in the category balance of the next month. If you budget $200 again for groceries for that next month, your category balance will show $250 instead of $200. Get it?
My best example to show how useful this feature is to us, is our electricity bill. Like most people, we use the most electricity in the winter months because I can't bear temperatures below 74 (we heat the house to 72 to try to conserve a little). On the other hand, the placement of our windows and the fact that they're double paned and energy efficient (some sort of coating or something?) means that we don't normally use the air conditioner in the summer unless we have company. This means that our electricity bills range from less than $20 in the summer to over $60 in the winter. Now, with common budgeting software, I could just set a limit of $65 and be happy all the times we're under that, but the problem with that is that our expenses would be $45 higher in the winter than in the summer. Where does that $45 come from? Fun Money? Random Money? This is how I use the rollover feature in YNAB to account for this--
- I added up all our electricity bills for one year and divided it by 12 to get the average monthly bill.
- I added a couple dollars to that total because I'm one of those "better safe than sorry" people. I'd rather have too much money put away than not enough. Who wouldn't? Also, I'm a dork who likes round numbers and putting $40 away looked better than $38 or whatever it was. :-P
- Each month we put $40 into the Electricity category. That means we have an excess each month of up to $20 in the summer. However, that excess stays in the Electricity Category Balance from month to month. It doesn't disappear. It adds up until...
- In the winter, we continue to put just $40 into the Electricity category, even though our bills sometimes exceed $60. The money that's been accumulating in the Electricity Category Balance covers the extra expense without any other categories noticing the difference.
In a nutshell, we budget similar to the Envelope System, except without actual envelopes and cash. Instead, we use YNAB to make virtual envelopes within our accounts and use our cards when paying. This means that we always have at least a month's worth of expenses available before the start of each new month. No living paycheck to paycheck since we already know our bills are paid and exactly how much extra money we have before the month even begins. Now, YNAB didn't actually help us set up our finances that way. We were already budgeting that way when I found YNAB. HOWEVER, if you're interested in learning to budget that way, YNAB is set up to help you learn.
You can learn more about YNAB on their website HERE. They also have great forums if you have any questions about it. Or you can just ask me! :-)
Our budgeting system is a combination of several techniques I learned from reading personal finance books from some big names in the industry. Check out my favorite finance books HERE. Just click on FINANCE!
Is anyone actually interested in hearing our financial story? I'll give you a teaser: we got married and bought a condo right before the housing market and economy crashed when a significant chunk of our income came from my husbands small retail store. Ouch! Want to know what happened to us and how we dug our way out? Let me know! I'm more than happy to share. :-)
Wow, that was a long post about finances! Let's get back to pictures already!
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