Saturday, April 12, 2014


Recently, while skyping with my friend J.,  in Ireland (my original debt buddy, although she caught her problems earlier than I did and got out of them quicker) I mentioned about how I sometimes feel a bit nervous about how I'll manage post-debt. I've planned various things over the year, have spreadsheets with new budgets made out for various levels of income and that kind of thing but until the time is actually here, I won't really know how I'm going to manage. I think I've learned enough and my spending patterns have changed enough that I'll be okay. But still, that nervousness of the unknown does creep in now and again.

J. mentioned that for the last while she has taken to using an app on her phone called YNAB, or You Need a Budget and has highly recommended it to me. I took a look at their website and have been slowly reading through some of the stuff. Of course, once one person had mentioned it to me, I started to hear about it all over the place. Some people are of the opinion that there are enough budgeting and financial apps out there that it makes no sense to pay for one. A valid enough point, I suppose but at something like 40 or 45 euro (I think it's USD 60 but have heard you can often get good deals or coupons), it's not very expensive really and if it works then it's worth every cent. At any rate there is a free trial version so whenever I do get around to getting a smartphone, I'll definitely get that anyway. I like the idea of entering the amount I've just spent onto my phone as I'm walking out of the shop - far less chance of me forgetting something and although I do sometimes to this with pen and paper, I'm not so able to do that one-handed and while walking.

I think what I like about YNAB is that it reflects most of what I've already learned/come up with on my own. The method is based on four rules. Rule 1 is "Give every dollar a job" - check. When I do up my spreadsheet for the month I never leave an overrun - all expenses that I know about are put in, the remainder is divided by the number of weeks and becomes my discretionary spending (food, going out etc.). On the rare occasions that weekly amount is a lot (I usually have about 50 euro) then I just increase the amount going to debt or savings. Rule 2 is "Save for a rainy day" - yep. Although I don't have a lot of savings, I do put money aside to cover expected annual expenses, including a small buffer for unexpected things. Rule 3 is "Roll with the punches" - absolutely. I check and update my spreadsheet at least once a week, and on the weeks where there's lots of bank activity more often than that. Although it sometimes feels like robbing Peter to pay Paul, I do know that allowing some flexibility in what the money is spent on does make for a less stressful time.

And finally, rule 4 is "Live on last month's income". Okay, not at all something I do but something I have wanted to do for a very long time and talked about on and off over the years. I never really thought I'd ever get to a position where it would be possible though. So this is something I'm going to have to give serious thought to. Because actually, the thought of having a full month's salary just sitting in my current account doing nothing is more difficult for me to take these days. So I may go with a variation on this one that involves keeping one month's worth of salary in an easy-access savings account earning at least some interest.

How about everyone else? Any experience with YNAB? Any favourite apps or budgeting methods to share?


Anonymous said...

I have a spreadsheet (for real expenditure) and use envelopes (for planned expenditure) and the combination works for me, alhough I realise it's not for everyone. The monthly food budget was the trickiest to get under control and in the end the only way I could stick to it was to reduce the figure allocated weekly by 20% and use that 20% as the top up shopping, emergency lunch money and 'wiggle room' for unplanned bargain shopping. I don't envisage, ever, using an ap I'd have to pay for to do something I should be smart enough to figure out for myself - my problem is not the lack of technology, it was breaking my bad habits. And I can't afford a smart phone, anyway! I'm really looking forward to reading your 'I am offically debt-free' post.

Ron said...

We use a debit card for just about every purchase (they are accepted pretty much everywhere here), and I can review the transactions online. At the end of the month, I scan through to make sure everything looks reasonable.

We used to track in more detail, and it did help to see where we were spending more money than we thought in various areas.