Personal Budgets That Work

Budgets do a lot of good, but you probably heard that already. If budgets do so much good, then why do we avoid them? 

Budgets are like exercise and eating right. We know diet and exercise is good for us. We know diet and exercise will help us be better people. We know the amazing benefits that happens when we follow a diet and exercise. Yet, we don't. It is easier, and more rewarding in the short term to gorge ourselves and sit and surf the interwebs. 

Budgets suffer the same stigma like diet and exercise. We know the benefits, but the discipline and work involved to maintain a budget or dieting or exercise scares us to accept the short term pleasures in lieu of long term success.

How do we make a budget work? If you're single and you have a money spending issue, then get someone who you trust and is responsible. Make them your "sponsor" and submit yourself to their direction and oversight. Some churches offer budget counselors to help in this area. 

Married couples need to be on the same boat. If one person controls the creation and maintaining of the budget, make sure to do weekly budget meetings with the other spouse. The reason is to make sure that everyone is clear on where the money goes during the week. This will prevent one person having all the control and keeping the other spouse in the dark.

The last thing you should do is get a budgeting program. If you read my other posts, you'll  know I'm a fan of YNAB. The cost for YNAB is $60 dollars but you can get $6 dollars off by following this link. While $60 dollars may be a lot of money, just remember YNAB offers a 34 day free trial, and if you follow the rules in YNAB, the money you'll save will  pay for the cost of the program.

Using YNAB for Small Business Finances

I've used YNAB for a while now, and as you can see from my blog, I like the program. My wife and I are not perfect and sometimes we hit financial setbacks that are beyond our control; however, each time we do we stick with our budget. What we see is that we always have enough to pay for bills and get food. YNAB does work, and it works well for personal finances. 

However, what about small businesses? Does YNAB work for a business owner? 

The answer is... It depends.

It depends on your business. YNAB does extremely well for cash flow budgeting and cash based businesses. If you use a cash based accounting system (you get paid when a product/service is rendered and you pay bills when you receive them) then YNAB is great for you. If you need to have an accrual system, YNAB may not be the best choice.

I have a small company that I run part-time, I sell items online and also do some consulting work. I have QuickBooks Pro (since I am a QuickBooks consultant), but I find myself using YNAB more often. Even though I use both systems, there isn't a lot of work since both programs are able to import and categorize transactions. 

I use YNAB to help me keep my cash flow steady and also keep my spending under control. It has the same effect on my company's finances like it does on my personal finances. There are some things that QuickBooks does that YNAB doesn't, like track and manage taxes. Also, YNAB doesn't track inventory. Lastly, the reporting features are lacking when it comes to business reporting, and it cannot do a balance sheet yet.

However, Jesse (the creator of YNAB) is working on improving YNAB for small business owners, so I believe these features will be available eventually. 

If you want more information follow these links:

YNAB for Small Business

Different businesses who use YNAB

Video about YNAB for small business

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?

YNAB Coupon Code

Get $6 off of YNAB by using this code!

YNAB vs Mint

Get a $6.00 Coupon Code by clicking this link

I've tried many different personal finance software. From the uber complex Quicken, to the free services of Mint.com, and now YNAB. I've gone over why YNAB is superior to Quicken. To quickly sum up why, it is because YNAB helps you on the path of saving money by being a forward thinking financial program. Quicken is excellent looking at past data but it doesn't show you were you are going.

When I compare Mint against YNAB the choice is clear. YNAB is the best choice to start controlling your financial destiny.

Mint is a less robust version of Quicken. It imports and categorize transactions in your checking account, and creates fancy graphs. It allows you to track (though limited) investments. It is a great way to get organized with your finances, and get a complete picture of your state of affairs. The biggest problem I have is that Mint then tries to sell you financial items (credit cards, home loans, auto loans, etc...).Another issue is that its budgeting tool is mediocre at best. The best factor of Mint, its free.

YNAB is 60 dollars (get 6 dollars off by clicking this link). It is as expensive as Quicken Deluxe. It doesn't offer the same reporting or major tracking abilities like Quicken and Mint. At first this was a reason why I didn't buy this program, but I realized that if I don't get my money in order, no amount of reports will change my habits. I switched to YNAB and used it, and the methodology does work.

Unlike my last post about YNAB vs Quicken, if you are just starting to get into managing your personal finances. Start with Mint, since it is free. I would just go straight to YNAB. My wife and I started March first with 1395 in our checking account. We ended March with 1675, which is a gain of 280 dollars. Trust me, one month of using YNAB will easily pay for itself.