Friday, April 26, 2013

How to use YNAB to Recover from Financial Set Backs

My emergency fund went from $1,200 to nothing within two weeks.

An unexpected bill for a doctor visit a month ago. The car is overheated, my other car needed two new tires. A class was cancelled and financial aid now says we owe money. My son's medicine was more expensive than normal. 

Things for April were going well, but it is amazing how bad things happen quickly, silently, and without warning. In two weeks our funds dropped to zero. The financial peace we've been building now has taken a step back, and for the first time in awhile, I am feeling the strain of more month than cash.

What happens now? Use debt to bail myself out? Isn't that the mantra, have a credit card for emergencies. My plan of attack (my budget) is now thrown out the window. We are starting May with only $1,050 to budget for May. This only covers my mortgage, one week of food, and to keep the water and lights on. Not a happy place to be at for the average person, but I'm not too concerned.

I get paid next Friday (start of May basically) so does my wife. This adds a cool grand to our account, which will cover our basic needs and mandatory obligations for the month. My next paycheck then covers our comfort obligations and some fun money. Since May is a month that my wife gets an extra paycheck (I get two since I'm paid weekly), the rest goes back into the account. By the end of May our fund will be replaced, and next month paid for with May's income.

How did I do this? 

Using the income you've set aside for next month and any funds not budgeted. Fill the budget categories and go as far down your budget until you are left with zero or close to zero. Then, as you get paid, continue filling your budget until zero. For us, we will have May completely paid by my second paycheck for the month. If you overspend, just move funds between categories to make up for the shortfall. We are expecting the other 2 paychecks from my wife, and 3 of mine to cover June's expenses and refund our emergency cash reserves by the end of May. 

The key is to keep to your budget and spend less than normal, and not to give up.

How about you? How you been in this situation before?

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