The One Money Habit that Changed My Life, a.k.a. How I Fell in Love with YNAB

This entry is part 1 of 5 in the series YNAB Love Story.

When I was in my first year of college, I found Jesus. Last Memorial Day, I found YNAB and my life will never be the same. That sounds dramatic and hyperbolic, but the effect both of those encounters have had on my life is astounding. How I met Jesus is a story for another day. This is the story of how I met YNAB.

I’ve always been thrifty, so despite taking on loans to help pay for college, I did reasonably well financially. I even made it through grad school on a pitifully low salary (technically a stipend) and with most of my savings intact.

Post-college work was a different story. Everyone knows that ministry doesn’t pay well. However, even in as cheap a state as Texas, I found myself struggling to make ends meet. In April of 2013, facing an unmanageable rent increase and a job that I could no longer keep working, I took a huge leap, not knowing how long I’d stay in the air or how far I could possibly fall.

I landed hard. I was unemployed from May to August. I found a new home with roommates and lower rent, gave up cable TV, and drove less. (Not having a job meant I didn’t have anywhere to go. How convenient.) I watched my savings account balance drop lower and lower and was genuinely scared about what would happen if I couldn’t find work.

In the middle of August, I got a call for a temporary job that finally gave me an income greater than the pennies of interest on my dwindling bank accounts. That temporary job turned into a full-time job, and that led to a raise in February and a promotion this past June.

By January, I knew that raise was coming, so I knew I needed to have a plan in place to keep it from slipping through my fingers. I also knew I would pay off my car loan before my birthday, and I definitely didn’t want that to disappear once it wasn’t promised to the bank anymore.

The first step of my plan was the dollar-a-day money challenge. There’s only one rule: Save a dollar a day. I literally set aside one dollar each day. Savings accounts can only have six transactions per month; otherwise I would have transferred that dollar every day to stay honest. In reality, I set up a $15 automatic transfer from checking to savings twice a month: one dollar for each day of the month. Despite my meager income, I didn’t miss a dollar a day, and I kept that up for 9 months! (I recently switched two dollars a day.)

The second step was YNAB: You Need a Budget.

I’d heard of YNAB before. The landing page was familiar when I followed the link from a FOCUS blog post. (Titles with numbers in them really work!) Amanda Teixeira’s ringing endorsement, a 10% discount code, and the promise of 34 free days to try it fully-featured (along with the free app) was enough to push me over the edge. You don’t give someone over a month to try something unless you know you can hook them in that time frame.

YNAB hooked me. It hooked me hard. I took two webinars over Memorial Day weekend and two more before the end of June. I accounted for every single dollar in my possession (by zero-sum budgeting) and gained a heightened awareness of my cash flow. I don’t balance my checkbook monthly anymore (or even read the statement) because I balance quickly and easily twice a week. I don’t need an email from my bank for every transaction because I record them all immediately and account for every purchase in my budget.

My day-to-day checking account balance is twice as high as it was in April, and I make no more money than I did before. It’s like I got a raise. All I did was make a commitment to budget and stick to it.

If you don’t have a budget, you need one: You Need a Budget.


On Friday, I’ll have more information about the details of my new budgeting life and the lessons I’ve learned along the way. In the meantime, feel free to leave a comment or use the contact form to ask questions. I want to tell everyone about YNAB!

7 Steps to Falling in Love with YNAB: Part One

This entry is part 2 of 5 in the series YNAB Love Story.

I hereby forbid myself to ever promise a specific post on a specific day ever again. I was so optimistic about my ability to get this post up two Fridays ago for 7 Quick Takes over at Conversion Diary. I even had a whole day off from work (although I did have to start getting ready at 4:30 p.m. for a wedding at 6:30). I’m not a quitter, though, so I bring you the first part of the promised post now.

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Seven Critical Moments

In my previous YNAB post, I talked about how I met and began to fall in love with the You Need a Budget philosophy and the accompanying software. Think of this series as my personal finance love story. I can break my buy-in to YNAB into seven steps, seven times when I realized that YNAB was changing my financial life.

Step One: Increased Awareness

The first moment that helped me see my bright future with YNAB was awareness. A zero-sum budget like YNAB requires you to be aware of the specific “job” of each dollar and how far your income will actually go. Organizing only the cash I had in my wallet and in the bank (not money “available” on credit cards) kept me aware of the plan I was creating for my money. The necessity of entering each transaction and balancing/reconciling one or more times every week brought me to a new level of knowledge.

I didn’t have a new savings strategy. I still don’t have increased income. Nevertheless, I effectively got a raise. My checking account balance was already higher (i.e. I had more money) simply because I stayed aware of my plan and my actions. The power of that awareness cannot be overstated.

Step Two: Predicting Rainy Days

My second YNAB epiphany was discovering that I could save for rainy days. In my very first YNAB budget, I was able to start funds for Christmas, hair salon visits, my domain name registration, and my car registration. Those were not going to sneak up on me anymore. (I’m delighted to say that I was right, and they didn’t.) Saving for so-called predictable rainy days left me with a cushion in my checking account. That’s not extra money for spending on drinks and clothes, though. That money has a job. It stays in my account until the job starts.

I can’t quite describe the encouragement that came just from seeing my account balance positively affected by my rainy day funds. For the first time ever, I realized I didn’t have to be caught off guard. By putting away a little at a time (well, I had to put away a lot more at first because I started so close to “time for work”), I could just pay those less-than-monthly bills in cash when they came. That kind of freedom is so sweet.


I’ll have the remaining steps soon. It’s a long story, and I think it’s best told over time instead of in one huge onslaught. In the meantime, I encourage you to check out YNAB. What have you got to lose?

7 Steps to Falling in Love with YNAB: Part Two

This entry is part 3 of 5 in the series YNAB Love Story.

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In the first part of my YNAB love story, I talked about how awareness of my spending and preparing for rainy days helped me see my monthly cash flow in a whole new light. I was on cloud nine until reality hit.

Step Three: Facing the Credit Card Float

My third big moment with YNAB left me with egg on my face. This part is especially embarrassing.

I had gotten into the habit of buying groceries and gas on my credit card with money I didn’t have. I told myself I was doing it for the convenience, the (meager) cash rewards, and the technological security. Every month, I paid my statement balance in full. Most of that habit was good. I still use my credit card for groceries and gas because it’s still convenient and secure. The problem was that I was always a month behind. I was riding the credit card float. (I’m not floating anymore.)

If you’ve never heard of the credit card float before, I don’t blame you. I Googled it and found mainly posts about YNAB! (See Additional Resources below.) Essentially, “floating” credit cards is spending now and paying off the balance with next month’s income.1 It’s the opposite of spending using a debit card. Debit cards only allow you to spend money you already have (when they don’t allow overdrafts). The way I was using my credit card allowed me to spend money I didn’t have yet. I was trapped in the cycle. One bad month could have ruined me.

Some months in that cycle were fine. Others were painful (especially when Christmas bills were due in January). The biggest pain of all, though, was when I entered my credit cards in YNAB and had to face the ugly red numbers of Pre-YNAB Debt. I was horrified to realize that, although I had always sworn up and down that I did not have credit card debt, I did. The grace of starting YNAB in May was that I had fairly low balances on my cards (one regular card through my bank and one store card), so I was able to make a mid-cycle payment on each card and eliminate my credit card debt immediately.

This 4-minute video explains the credit card float in detail. Pictures of my shocked face are not included.

Added August 2015: YNAB produces a weekly video series called Whiteboard Wednesday. Jesse Mecham, founder of YNAB, explains the credit card float with a diagram and a friendly face.

Step Four: Less Email and Even More Awareness

The fourth habit change caused by YNAB was small but not insignificant. Ever since I turned eighteen, started college, and began managing my own finances, I have balanced my checkbook monthly. All the financial advice I’d ever encountered admonished me to always stay on top of my checkbook balancing, so I did.

Then came online banking. I could see which transactions had posted to my account and when they cleared on a daily basis. But my old habits didn’t change. I was still waiting four weeks to balance my checkbook. When money was tight, I set up an automatic email from my bank for every outgoing transaction over $10. When money got tighter, I lowered that minimum to $5.

Then came YNAB. As I got into the habit of entering transactions daily and rolling with the punches, I used the reconciliation feature to keep YNAB in sync with my online account balances. Getting that flurry of emails was useful, but it started to feel like overkill when my account always reconciled/balanced perfectly.

It took months for me to realize that it was overkill. I didn’t need those emails anymore because (A) I recorded every direct expense immediately, (B) the scheduled transactions feature entered my bills automatically, and they’ve all been on auto-pay for ages, and (C) I was reconciling/balancing at least once a week.

I stopped the automatic emails. I don’t even read my monthly statements anymore, because I know what they say. YNAB knows, too.


I promised you seven steps, so you know the rest are coming. Stay tuned!

Additional Resources

I found three other blog posts online that mention the credit card float. They’re all about YNAB, which shows how useful YNAB is for rescuing floaters like me.


  1. There is another version of the credit card float. It involves taking advantage of the grace period between the day you spend and the day you pay your credit card statement balance. You leave the cash in your checking or savings account so it can grow interest during the grace period, spending it only when the due date arrives. That’s not what I’m talking about here. 

7 Steps to Falling in Love with YNAB: Part Three

This entry is part 4 of 5 in the series YNAB Love Story.

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The first part of my YNAB love story featured growing in awareness and planning for future cash flow needs. The second part detailed the credit card float and my new approach to balancing my checkbook. Next came one eureka moment and yet another cloud in my financial picture. Read on for the silver lining!

Step Five: Easy Transaction Records

As I mentioned in my very first YNAB post, I had tried to budget using Excel before. When that didn’t work, my Excel “budget” turned into a transaction log. It was an excellent transaction log, though, because I never fell out of the habit of tracking every single penny that went into or out of my life.

I had one problem staying on top of my records, though: I could never remember cash. (That’s probably why I’m not an envelope budgeter.) When I use my debit or credit card to buy something (or even when I pay by check), I have an automatic record of my spending. When I paid with cash, I had to make note of it somehow and get that note into my Excel spreadsheet back at home. (I hadn’t converted to GTD-style ubiquitous capture yet, either.)

Before I had a smartphone, there was a lot of guessing (and even more forgetting) when I spent cash. Even after I got my first iPhone, I didn’t have a system. Sometimes I made a note in the native Notes app, but I rarely remembered to transfer that note to Excel. I emailed myself for a while, but the habit didn’t stick. I needed a way to record cash that was uniform, fast, and easy to get into my transaction log.

YNAB solved that problem. The software comes with a free app (which is also available during the 34-day trial) that syncs mobile with desktop. It was the missing piece to my budgeting life. Now, I spend, I enter the transaction on my phone right away, and my records are updated. Done.

The app, however, is where I have all of my problems with YNAB.

The data sync options aren’t the greatest. We live in a world where security is important and it’s only a matter of when your information will be stolen, not if. (I’m up to one unimportant online account and one set of college records so far, not counting Heartbleed. My dad had a cell phone contract started in his name by someone else.) I won’t go into detail about my problem with YNAB information security here (because volunteering that kind of information is just silly), but it’s less than ideal.

Similarly, I love that the app syncs transactions automatically, but I wish I could change the budget from the app. With the current version of the app, my budget is automatically updated to include scheduled transactions, but when I can’t roll with the punches on the go, I have to brace myself for later. That definitely affects my workflow. It can also throw things off to have my paycheck hit the bank several days before “payday” but not be Available to Budget until the scheduled day.

I have seen the difference in dollars, though, especially since I became Buffered, so I’m sticking with YNAB despite some room for improvement with the app.

Step Six: Acknowledging Interest and My Negative Net Worth

My friend Carly DeFelice runs an Austin-based personal finance business called Cash Money Revolution. She gave a presentation at Spirit & Truth last year about personal finance and Christian stewardship. She spoke some about budgeting, but she also spoke about interest.

I don’t have credit card debt anymore, and I paid off my car loan this year (the agonizingly slow and steady way), but I do have several thousand dollars in student loan debt. I’ve forbidden myself to take on any more non-free education until I pay off my debt. None of it is from graduate school (thanks to ACE and AmeriCorps, that was free), but I still have my undergrad loans. Since I pay toward them every month, they are categories in my budget.

It was YNAB that first made me acknowledge the reality of my student loan interest. YNAB allows you to track accounts off-budget. For me, that’s my student loans (individually, since they have different balances and interest rates) and my retirement accounts from my current and previous jobs. I pay the same amount each month toward my loans: a little principal, a lot of interest. When my loan account statements come, I update the balances in YNAB. I was stunned the first time I realized how much interest my loans accrued every month! Looking at that number convinced me that I needed to pay extra toward my debt. Seeing the numbers made them real.

What was even more real and frightening was my net worth. YNAB generates a number of reports automatically. The one I spend the most time with is the Net Worth tracker. YNAB only knows about the accounts you enter. I track all my accounts in YNAB, so I can see the grand total of my cash, checking account balance, credit card balances, savings account, student loans, and retirement accounts.

Added all together, I faced the truth: I have a negative net worth. I owe more than I have. There’s another truth, though. Slowly but surely, my debt is decreasing (especially with my recent loan payoff), and YNAB shows me exactly how much less I owe and how much more I have, all the time.

Awareness of my baby steps toward being debt-free is awesome.


There’s one more step to my YNAB love story, and then I’ll offer some conclusions about this journey toward financial awareness and freedom from debt. Stay tuned!

Additional Resources

Kristin Wong, writing for Get Rich Slowly, shared her decision to go back to the envelope system even after paying off her debts. Constant awareness is key. I’m not sold on the absolute necessity of actual paper money, but the YNAB app is a virtual envelope system if you’re into that.

7 Steps to Falling in Love with YNAB: Part Four

This entry is part 5 of 5 in the series YNAB Love Story.

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Almost a full six months after the last installment, my series about how I fell in love with YNAB has finally come to an end. It was a year ago that I finally downloaded the 34-day free trial version and took all the live classes I could. It was a year ago that I finally got control of my money. I sit here now, with literal thousands of dollars more to my name and with a positive net worth in sight. I couldn’t have done it without YNAB, but there’s one more step to my journey.

Step Seven: Following All the Rules

YNAB has four rules. The final rule was the most difficult for me and took the most time for me to be able to follow: live on last month’s income. There is such wisdom in that rule. If I suddenly lost my income or faced a gigantic bill, I would have a whole month to make a new plan, find the money, and avoid going into debt (or at least not borrow one more penny than necessary). It makes sense.

I couldn’t do that right away, though. YNAB taught me to look ahead for rainy days. I go home to visit my family every Christmas, and since YNAB requires me to account for all my spending as I do it, that meant saving up enough cash to purchase my plane ticket. I saved aggressively in September and October, and I actually found the cash. I can’t quite explain my surprise after years of putting on my credit cards and bracing myself for bill payment in January. I saved for YNAB (which I got for $6 off using a referral link), and I budgeted for my CrashPlan subscription, but I never thought I would be able to save cash for Christmas.

Yet I did. I bought my plane ticket in the middle of November, and although I paid for it using my credit card, I had the cash to cover it sitting in the bank that same day. I saved so aggressively that I even had enough cash left for all my gifts and Christmas cards. (I wound up sending Epiphany cards, but that’s not the point.)

Two years ago, I had to skip sending Christmas cards because I was so broke. This past Christmas, I had hundreds of dollars available just for gifts and cards. In the meantime, I socked away the extra money I found by saving aggressively toward my Rule Four Buffer.

It was hard to watch that Buffer grow when I really wanted new clothes, play tickets, and more dinners out, but I held onto my lifelong sense of discipline. In January 2015, I got Buffered. My annual bonus from work was the tipping point, and since then, I have been living on last month’s income. It feels glorious.

Conclusion

My lowest daily balance in my checking account for the month of November was 5 times greater than the lowest in May.

I paid off my car loan and saved enough cash to put 4 new tires on my car without blinking.

I budgeted the entire month of June in under 30 minutes on Friday night.

My only regret is that I didn’t start budgeting sooner, the very first time I heard of YNAB. Please don’t make my mistake. At least give it a try. Read the four rules. Ask me questions in the comments or via my contact form. There is freedom in having a budget!

Additional Resources

Holly Johnson at Get Rich Slowly describes how to build a zero-sum budget without YNAB. I’m not just in it for the referrals, I promise. It is entirely possible to build and maintain a YNAB-style budget without YNAB. But are you actually going to do it? Why not let YNAB do it for you?

In addition to writing for Get Rich Slowly, Kristin Wong also curates the Two Cents sub-blog at Lifehacker. Like the rest of Lifehacker, Two Cents curates other articles online, but it focuses specifically on personal finance advice from experts and readers. I’ve found it indispensable for following PF topics without needing to follow each source separately.

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