Sharing is Living

I love to try on new softwares and programs, mostly PC applications and such. That was how I found TechSupportAlert.com’s list of 46+ freewares. Each of them tested, compared and reviewed, with their not-so-free counterparts. Sort of like, comparing OpenOffice with Microsoft Office. But, although I recommend that list highly, which you can get at a cost of an email address, that is not the topic of today’s post. Instead, I’d like to share a new software that I recently found. Someone recommended it at Fool.com’s discussion board, and after reading several posts of how wonderful this software is, I decided to give it a go.

It’s called YNAB. Why NAB? Yes, I do believe it is pronounced that way, but it stands for You Need A Budget.

When I got my first job, I started to read financial books. One that stuck with me to this day is one of Suze Orman’s books. I can’t remember the title, but I remember the message well; pay off your debts, contribute the maximum to your 401k, and make a budget. And so I did.

I made my basic budget in excel, putting in all of her advice and rules, and I thought it worked pretty good. I had a basic financial picture, I know how much to spend for each categories, how much to save etc. It was a good start. However, as months passed by, I knew that the system didn’t really work as it should, and that it could have been better. For one, there was no check balancing capabilities, and so, although I knew how much I allocated my groceries to be, I didn’t really know if I stick to that amount.

Then I used Quicken for a while. Except for the kick that I got from importing my bank statements, that software didn’t really do me any good. It was too complicated, very business-like, not so intuitive, and I hate spending time figuring it out.

So when YNAB came, it was such a breath of fresh air! First of all, it has only 4 rules of budgeting. Second of all, although I was confused for the first 10 minutes, on the 11th minute I was adding and entering stuff like a seasoned budgeter. It is so easy to use, and it is fairly customizable.

YNAB teaches you some pretty basic stuff that are quite important. Rule #1, is basically to live from your last month’s income, and not this month. I was surprised that he adopted this technique, because I’ve been doing it, and I know how wonderfully it works. For one, it gives me great freedom in setting up online payments for my regular bills without having to do a big coordination between their due dates and my checking account balance. Having 2 months income in my account assures me that I’ll have enough funds for whatever it is that I set up. This was largely motivated by my strong belief of of doing as little as I can regarding mundane stuff, but I’m happy I’m doing something right.

Rule #2, is to assign a job to every dollar, which means, to know where every dollar is going or being allocated to. This is pretty obvious, but somehow this method again reminds me to pay myself first, instead of paying myself from whatever is left.

Rule #3, is to plan for the rainy days. This is cool, because Suze Orman talks about this too. I believe she calls this, the freedom account. Basically, you ‘plan’ for every possibly rainy days, and contribute to that ‘fund’ monthly. So, for example, if you know that this year your car will need a major maintenance, you’ll start putting in little by little, so by the time that maintenance is needed, you are fully funded for that big ‘rainy’ day expense. Sort of like Christmas account, if you want to call it that way. And that, I believe, is why it’s called freedom account, because it gives you freedom to spend the money and freedom from debt.

Rule #4, is basically to keep yourself accountable. If you overspend on your entertainment budget this month by $100, you’ll automatically be short that amount for next month’s budget. So how to deal with this? Cut back spending, cut back entertainment, don’t dip into the savings account, and work your way back up slowly to regain that $100. I think Jesse (YNAB creator) can explain it better than me on that one.

So, I recommend you to take a look at his website to learn about more about this wonderfully easy and convenient budgeting system. His software is not free, but I consider this purchase as one that is really worth the expense. Fortunately, he has 2 versions. One is the excel version for $20, and the one is a stand alone program for $40. Try for yourself if you think it’s worth it.

YouNeedABudget.com

Till next time!