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Wait...there are rules?!


The best budgeting program I've come across is YNAB. If you have no idea what those four letters are, you’re in luck. I'm going to break down the four rules that make up the methodology behind the app. Four letters, four rules. One ring to rule them all (Lord of the Rings jokes stop here, promise). YNAB stands for “You Need a Budget”. It’s the platform that I attribute to my personal finance success, and the tool I use with my clients. I know what you’re thinking, and nope. It’s not like Mint. Other budgeting apps focus on forecasting where you guess what future expenses and income will be, and hope you stick to it.


That’s why they don’t work.


With YNAB, you can only budget the dollars you have NOW. Like a healthcare worker, you must triage those dollars and decide what jobs they need before more dollars come in. That’s where the first rule comes in:

Rule 1: Give Every Dollar a Job

Let me explain before you protest and call this “too intense”. You check your bank account and see dollars sitting there. Let’s call it $1,000. You think you have the green light to pick up groceries, hit the mall, or head out to dinner. That money is to be spent, after all!

Purchases are made and there is now $500 in the account. You forgot that the car insurance automatically drafts the next day, now the account only has $400. The phone bill is due two days later. Oops, you need groceries again. The dog just threw up a sock. And suddenly, you’re in the red.

Giving every dollar a job ensures those $1,000 are divided up to categories you’ll need until payday. No more guesswork or hoping your card isn’t declined with a slew of auto drafts. Think of it as virtual envelope budgeting.

Fast forward, you now have a YNAB budget that is tailored to your life. You know you have enough money for upcoming bills, to purchase groceries and gas for the week, and even to dine out.


Rule 2: Embrace True Expenses

Clients assume these are their regular monthly bills. True expenses are things you KNOW are coming, but they aren’t billed monthly. With coaching, we flip the script so you aren’t “surprised” by these bills.

Some examples are:

  • Holiday and birthday gifts

  • Annual membership renewals (think Costco, Sam’s Club, Prime etc.)

  • Annual or semi-annual insurance payments

  • Car maintenance

  • Taxes

  • Vet bills

  • Quarterly HOA dues

  • License renewal fees

  • Vacations

Yes, even vacations! Sometimes you don’t know how much you’ll need, and that is ok. Work with me to start saving, even if it’s a guess (like those sneaky car repairs). You may not need to put all of these into your budget, and you may have more. Just having these items in your budget provides peace of mind that you won’t be scrambling to find payment for these events.


Rule 3: Roll with the Punches Has life ever knocked your finances out? If you said no, I don’t believe you. We have all had those WTF moments where our spending decisions are made for us. This is when most people abandon their budget. They feel ashamed that the didn’t stay “on track” and abandon it all together.

I tend to compare a bad budget to a bad diet. If it’s too restrictive, you will fail and the pendulum will swing in the opposite direction. With a broken diet, you may binge chocolate cake. With a broken budget, you spend without checking if you can afford it. Good news! YNAB is designed to be flexible. We implement Rule 3 when life hits.

The mechanic charges you $50 more than last time. So what? You peek through the categories and see you have $20 for clothing and $30 for pet food. Payday is just 4 days away, and you don’t need either of these items before then. Like magic, you simply roll over those dollars and there suddenly is no overspending.


This works both ways. Say you come in $50 under budget for groceries for the month. This isn’t the Federal Government, if you don’t spend it it’s still yours. You can roll that money into a fun category or throw it at debt. What if you choose to do nothing? That money carries over into the next month for groceries and you have extra to spend.


Rule 4: Age Your Money

Do you live paycheck-to-paycheck? We all have at one point or another. The fourth and final rule of YNAB gives you a tool to address this.

Think about this. When you get paid on a Friday, how long does the money sit in your account before it is spent? Some people can make it to the next paycheck. Others have overdue bills, so that check is spoken for before the ink even dries. The ultimate scenario? Not even noticing it’s payday because you’re ahead on bills (yes, it happens). YNAB has a feature where you can see how long your money lives in those accounts, right there on your dashboard.

The goal is to age your money 30 days to start. Why 30? This means you are living off of last month’s income. Think of it as a practical start to an emergency fund. When you hit this number, you are well on your way to breaking the paycheck-to-paycheck cycle.

The number can keep growing as you are more diligent with your budget. One of my favorite moments is when a client hits 7 or 14 days, because they see their hard work paying off. Let’s get you there, shall we?


What did you think of the 4 Rules? Are you intrigued to try this app?

p.s. my clients get a free 3 month trial of YNAB, and a certified coach to help you learn it. Book your free consultation here.




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