One dark and stormy night, as I watched the rain fall trails on my window, glistening in the street lamp’s haze…
Okay, truth be told, it was a brilliantly sunny, hot summer day when I realized my not knowing what’s going on with my finances was getting the best of me that I summoned the courage to do what I haven’t done for years: write a budget. And not just any budget. A “You Need a Budget” Budget.
This is no small feat and here’s why:
Part 1: You Need A Budget
If you’ve never seen this system before (and you probably haven’t if you’re like me and look like this when it comes to your finances) you need a quick primer because it’s a completely different way of thinking about money than you probably have before. And before you get self-righteous about it, if you don’t have a budget, you’re probably not a money expert so…give it a chance.
YNAB, as us locals call it, forces you to think only about the dollars you have access to right now. No credit applies. So if you get paid bi-weekly, you budget for the money you have right now. If you get paid monthly, you work with that amount.
Honestly, it’s a mind-bender when you start. Who thinks about money this way in a world of credit and over-spending?!? Not you (or me) and that’s why we’re in this pickle we’re in, so YNAB says. Conclusion: they’re exactly right. I do actually have a PhD in spending money I don’t have. So there.
I bought this subscription to this software a year ago, tried it, couldn’t get it, and dropped it. Then I proceeded to spend more money than I had without a budget for almost exactly one year. So when it auto-renewed on my credit card (ironic), I took it as a sign from a greater power that it might be time for me to do the adult thing and get it together financially. So I had a good cry, reset my password and got to making my new YNAB “only spend dollars you have” budget.
Part 2: Coping with the Pain of Not Having Enough Dollars
Lo the pain of coming to real terms with what you really have. Hear the anguished cry of the collapsing middle class? Sure, I’m definitely part of that chorus, potentially in the running for section leader. In YNAB, the rule is that every dollar has to have a purpose. So it’s not an accounting of the money in your checking and savings–you actually go deeper to assign every single dollar in those savings account, in your paychecks, and every other kind of income you have to a specific purpose. In breaks down into these categories for me:
- Paying a necessary bill
- Paying for things you use or want (like Netflix subscription or dining out)
- Paying off debt
- Creating savings for specific purposes (including vacations and fun stuff…whatever you want to have)
- Creating savings for an emergency fund
Once you give yourself over to the fact that you’re not looking at a summary of your accounts but you’re actually looking at an action plan for how you want your money to work for you while you have it, it’s an AMAZING, very freeing way to think about money.
But before you get to amazing, there’s a necessary step of accepting the fact that, if you’re me, you don’t have enough money for all the things to which you’ve grown accustomed. And it takes awhile for that pain and disbelief to subside. I think of it more as righting a bad habit: I’ve been thinking about my own wealth all wrong. My approach has been “How can I get what I want to have every month?” as opposed to “what can I have with what I make every month?” Once you switch over to the latter question as the driver for your spending, at the very least some control ensues. Even if you’re overspending, the knowledge that you’re overspending is freedom. That habit you can fix. Ignorance will only end in homelessness…again, if you’re me.
Part 3: Accepting Reality and Leaving Virtual Spending Behind
Living where I do is expensive. There’s no doubt. That said, I spend $$$ on a lot of stupid shit every month because, frankly, I don’t know that I can’t. I’m too steeped in the idea of credit…until YNAB periodically rolls in a slaps some sense into me.
“Katie,” it says, “don’t spend money you don’t have. Better yet, don’t spend money you want to work differently for you in another area.” YNAB imposes basic reality on you gently by suggesting and implying things like:
- If you want to save money, you can’t spend it on something else
- You can’t spend money twice
- Don’t spend what you don’t have
- You don’t make enough money to have everything you have right now…so prioritize
All, very important reminders. And most importantly, YNAB, with a sense of humor, reminds you regularly that you’re better off thinking this way. You only stand to benefit from being in control of your money. The big lesson for me in this iteration is that the amount I spend on rent is high but it’s my biggest priority. I love the place I live in and I spend a lot of time there so that spending there is worth it to me. Do I need every gadget I see on Instagram? No I do not. So here are my action steps for this month specifically:
- Cut credit card spending to 1/4 of the total of last month and maintain for at least 6 months
- Use the “snowball” payment method to keep paying off my credit cards as systematically as possible.
- Spend less/month on food by shopping smarter and buying less junk
- Take lunch more days than I eat out
- Optimize spending on coffee–make this at home in high quality and skip shitty Charbucks
A Plan is the Perfect Solution
Bar none, the hardest thing about money to me is not having a plan. Like driving a car, I’d rather drive on a road than through wild sagebrush (harder to find here in Chicago than this metaphor would incline one to believe). Take a day. Go through the grieving process for all of the internet shit you won’t be buying. Let go of the shame of going so long without a plan. Write a plan. Execute the plan.
It’s the best I can do for now which will never be perfect. But wrapping my hands around it and not running away from it are the big wins here.
It’s the best I can do for now which will never be perfect. But wrapping my hands around it and not running away from it are the big wins here.
To financial freedom when I’m 80!
My Tent on the Beach 