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Do you need a budget? - Real Life Review (Part One)

Do you really need a budget?

My wife and I have been married for almost 14 years and for those 14 years we have lived paycheck to paycheck. Overdraft has been an all too familiar friend over the last few years. It was nothing for us to get paid and be ending up in the overdraft before the weekend was out. Regardless of what I make, we were just spending money without much thought into where it was going. As long as we didn't max out our overdraft we were good, we weren't treating $0 as being the stopping point of spending.

My wife and I have tried to budget in the past... well at least in theory. We'd sit down and crunch numbers, and figure out how much was left for things like groceries, gas, savings, etc. It always looked great on paper, like we should have enough to cover everything and have money left over. However, arguments would ensue as we couldn't come up with why this was such a difficult to task to control our spending. Money is one of the leading causes of fighting in a marriage.

By the time we received my next paycheck we would be in the red (some were better then the others), sometimes as much as 1/3 of it would get us back up to 0 then another little under 1/3 would go to the mortgage which left us with a little over 1/3 to go to our other bills, which left even less for things like groceries, which leaves us with a choice: 1. Do I pay the bills or 2. Do I feed my family? Now wash, rinse and repeat every two weeks.

To help a little, the one thing I started to do was pay a chunk of our bills out of our family allowance money. Since this was a guaranteed amount and it helped to free up my paychecks, once we got caught up around income tax time I started to put all my bills on auto pay which helped with not forgetting to pay things like the utilities. 

I set up some of the bigger bills we had by dividing by all 3 paydays in a month to ease some of the burden. This helped keep the bills paid up but not always by the due date. It was enough that we didn't have those nasty calls or the letters you get, but it meant we stayed in the red until payday. If we got close to our max overdraft I would take money out of savings just to get us by and then would transfer money back but not always the full amount in a lot of cases.

In the past we have heard of people like Dave Ramsey and using the envelope system but we were leery about having cash (or at least I was for sure) laying around the house and having to carry it wherever you go, here's a good example that I could foresee happening.

My wife made a list of all the envelopes she figured we would need. A comment she made when she was done, "if only there was an electronic envelope system out there," got me thinking about something we had tried in the past a couple years ago. Unfortunately it didn't work out (due partly to some miscommunication on my part) as my wife thought we were only on a trial and it ran out so stopped using it and didn't realize I bought it.

A little backstory on how I found out about the product, I was at a Promise Keepers conference and one of the ads in the booklet was for a method of budgeting and a software called "You Need A Budget" (YNAB) this peaked my interest greatly as we weren't in the best of financial situations and it had a free trial and discount code making it affordable, so I quickly read up on it and started looking at what it could do and we tried it out. 

Now fast forward to a short while ago and the present time where my wife was wondering about digital envelopes. I quickly found the download and was all ready to install it but in my research I discovered they had a newer version (and I like new things) and they were also no longer updating the old version that I had (YNAB 4), this didn't mean we couldn't use it though but this newer version was Web based, had better syncing between app and client, direct bank sync (this is optional and you can do it manually), nice interface, could set goals, set up automatic transactions which creates funding goals for those categories, quick budgeting and I'm sure there are others. My only dislike was they switched to a subscription model which means a reoccurring yearly cost (no month to month option) which honestly isn't that much ($50 US per year, $45 if previous YNAB 4 customer) though. I signed up for the free trial and got two months following some instructions which I won't go into here, maybe in another post. YNAB is a category and for the number of paydays I have prior to trial running out means I just budget $10 per payday then after that I can simply lower it to $5 a month I need to budget for.

I know I've talked software and Web based but YNAB is actually not about the software, it's just a tool you use. YNAB is actually about their methods which are their 4 rules but the software really helps with this:
  1.  Give every dollar a job
  2.  Embrace true expenses
  3.  Roll with the punches
  4.  Age your money
We officially restarted using YNAB on July 21st and going back to me mentioning Dave Ramsey, following his steps and using YNAB rules and software jives really well. We aren't following Dave Ramsey baby steps other then using his snowball effect method with our debt and starting to aggressively pay down our 3 credit cards. We are paying the minimum on the higher balance ones and as much as we felt we could currently afford on the lowest balance one which at our current rate should have it paid off by January and using the goals feature I was able to determine a rough estimate on paying it off.

This was only Part One giving a little history and in Part Two I will go into more detail on the 4 rules.

"Follow YNAB'S 4 rules and you will succeed financially. You have not budgeted like this". --Jesse Meecham


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