Money can be a touchy subject. But if you want to be in business, you need to understand your money, and being in control of your finances is essential. Also, if you want to get out of that living from paycheck to paycheck cycle, you need to be in control of your home finances too.
If you are having an internal groan and your pointy finger is all poised to click away STOP… because what I have for you today my friend is actually FUN!
I know right, fun and finances, how do they go together?
I very much have a love-hate relationship with accounting and all that goes with it. Like I talk about here answering one of the A Question A Day videos. More precisely I have a hate relationship with the Japanese banking system and the headache it gives me when I’m trying to do my accounts. Three currencies and banks that refuse to hook up so I can integrate everything together, it drives me nuts.
My motto in life is to keep things simple and so my accounts are done on a simple spreadsheet. Not fancy, not the most convenient but it works. But the problem I have with this simple solution is that I can’t tell at any one time how much I actually have and whether I have the budget for this new fancy app I have set my heart on!
And Then I Found My New Love…
You Need A Budget, yes, that is the name of the business otherwise known as YNAB.
It’s brilliant, it checks the boxes for simplicity and fun and finally, I can see what I have got, where we stand financially as a family, and whether I can buy the new shiny thing without stress!
The link shared here is a referral link which means we BOTH get a free month if you decide to sign up. Before you rush off, let me tell you a bit more about it.
Firstly, YNAB is not accounting software and it is not meant to replace accounting software. It is a budgeting app, one that you can use across all your devices and if you are using it as a family, everyone can log into the account. So both my husband and I can update our budget.
We also set our teen up with his own budget so he can keep track of his money too, upgrading from the money box method! Starting kids young is important like I talk about with Denise Duffield Thomas here.
The reason YNAB works and works better than your average budget system is down to their Four Rules. I suggest before you dive in, learn about the rules and set up your budget as you do so.
Rule #1 – Give Every Dollar (yen, pound…) A Job.
I already did this, but in my head, which as you can imagine, isn’t the best way forward. But as I make money I tend to assign it to things. Now with YNAB I can really assign it so I know I will always have the money at hand to pay for the things I use to run my business. Even those big-ass expenses that sneak up on you and present themselves just at the most inconvenient moment!
Rule #2 – Embrace Your True Expenses.
Talking of big-ass expenses, using YNAB you can set goals and then budget a bit each month to get make sure you have enough set aside when that big payment comes around. Whether it be a holiday you plan to book or renewing your website hosting.
And YNAB does the math for you. Say you have a big expense coming up later in the year, you set up a goal for that amount, for example, $500 for October 23rd. Then YNAB calculates how much you need to budget in that category each month to make the goal.
This takes the stress out of it, now you don’t need to find $500 all in one go, you just need to find $70 that month, far more achievable. And it works for anything, from Christmas spending money to University fees to buying a car or gym membership.
Rule #3 – Role With The Punches.
This my friend, is seriously brilliant. Because this is real life and sometimes we overspend (hello trips to Ikea!) or life throws a curveball and something totally unexpected pops up. Rule 3 helps you deal with that.
If something happens and you need to move money around to cover an unexpected expense you can do that. And because the app shows you exactly what you have where and you know which bills are imminent, you can make sensible, informed decisions.
Rule #4 – Age Your Money.
If you are currently living paycheck to paycheck, this will change your life. And I don’t say that lightly. Financial gurus will tell you that you should have 6 months worth of savings set aside in case you lose your income for whatever reason. But when you are living month to month, the idea of having a six-month buffer feels impossible right?
With YNAB, because you use Rule #1 and give every dollar a job, any category that you over budget in, let’s say you put $200 aside a month for eating out but you only spend $180. That unused #20 rolls over to the next month. You could then budget $180 the following month, topping you up to $200 OR you budget $200 and you have some extra in there. After a couple of months all that extra adds up. yes, sometimes you might use it dues to Rule #3 but mostly it rolls over and ages your money.
In the app it will tell you the age of your money, so if you have the age of money as 30, that means you are currently spending money that is 30 days old, so you are covering June’s rent with May’s paycheck. Once you get on a roll with this, it becomes a bit of a game!
As you use your budget you become more aware of what you are spending your money on and become far more purposeful. It helps you to spend less and also you will find those places where you are ‘leaking’ money. Subscriptions that you signed up for years ago and are still paying but forgot about. Or fees for something that you no longer use.
There is far more info and explanations on the YNAB site explaining all this
Things To Be Aware Of Using YNAB with Your Money and Being in Control…
The first couple of months are a bit bumpy. You think you have got the hang of it then something crops up and you are like What The…?
Stick with it, use the forums and the support desk. The support staff are top notch and even if you feel like you are totally clueless, they are really down to earth and explain things clearly.
Credit Cards… it took me quite a while to get my head around how these work in YNAB. To be honest, I’m not a big fan of credit cards and try to use my debit card when possible but some places insist on a credit card! When setting YNAB up, I moved everything I could over to debit cards which help me feel in more control but set it up in a way that feels good to you.
Multiple Currencies… What a headache, what I did in YNAB is set up a new budget for each currency I use. I also signed up for Wise (previously known as Transferwise) and moved the majority of my business expenses so they get paid out of that account. As my expenses are usually in US$ it means I’m not getting knobbled with the exchange rates anymore!
Checking Your Balance… Don’t use your bank balance to see how much money you have got or to base a purchase decision on. ALWAYS check in your app because when you use Rule #1, your money has been assigned. It might look like you have $10,000 sat in your account but if your age of money is 45 days and that money has all been assigned a job, you don’t actually have $1000 to drop on whatever you have your eye on.
Use It Daily… the thing about your money and being in control means that you need to keep on top of things. For my business, I sit down and do my accounts every Friday morning. It’s blocked off in my schedule so no excuses! For everyday expenses, I enter them into YNAB as they happen or in the evening. Then I reconcile the accounts on a Friday when I do my business accounts. When you do it daily it is easy to stay on top of things and you know you are in control.
The other thing is that if you know you are in a bit of a sticky financial situation, the thought of budgeting or trying to get out of that financial hole can be really intimating.
Time to pull on the big girl pants and tackle the beast, because if you don’t things will only get worse. Using the app will seriously help you get your head around what is going on. You will be able to see where you can reduce expenses. Sometimes it can be the little things like the daily cuppa you buy on the way to work that really adds up over the month.
Hannah, one of the YNAB experts shares a great way to kick start things and get it you into some new habits…
How To Get Started With YNAB
It can feel quite overwhelming if your finances are currently a mess, so take a deep breath and keep it simple!
Your first month is free, so you can have a play around with it and get a feel for how it works. You can also set up a category to pay for your YNAB subscription, if you get the annual subscription it is like $7 a month. Also, when you sign up you will get a series of emails, read them, they are really helpful!
What I did was tackle one bak account at a time. Set one up, added in all the regular expenses that come out of that account (by checking through old statements), and also cancelled anything that I no longer need. This act in itself will save you money! When my husband did his set-up, he kept finding money in accounts that he had forgotten about! (I have no idea how anyone forgets they have money!)
For all the regular expenses, I set up goals so that I know the bills that need paying are covered.
As I have 3 currencies, it took me a while. The first month really was just getting things set up and learning how to use the app. I did a little bit here and there and binge-watched Hannah’s videos on YourTube! Months 2 and 3 were the real test, we had to rejig things a few times. Sometimes we have estimated what we needed for a category and were completely out, so there was quite a bit of tweaking going on.
By month 4 we had it down and everything started running smoothly. By this time we had gotten into the habit of checking in daily and reconciling once a week.
For the first time in years I feel I have control of my finances and able to make sensible financial decisions regarding my business rather than spending the money and hoping for the best! YNAB really has been a game changer!