Do you use a budget for your finances? Do you keep track in your head of money spent? I’ve always used the latter of these methods and am usually successful. Recently, though, I’ve started to rethink my method and I am starting to use a budgeting program.
Why the Change?
A few upcoming purchases and incidents have influenced me. Recently my two year old car was totaled through no fault of my own. I had to come up with a sizable chunk of money to replace it. In addition, my phone has been acting up and will need to be replaced in the near future.
I have the chance to go on a trans-Atlantic cruise in the fall. It sounds amazing, but it is rather expensive. I’ve always encouraged people to make travel a priority, so I needed to look more closely at my budget to make sure I can practice what I preach.
Finding Money
One (terrible) way to cover all these expenses would be to put as much as possible on my credit cards. For over twenty years, I have been in the habit of paying all my credit card balances in full each month. When my husband and I were first married, I struggled with budget issues. After refinancing our home and including a bit extra money to cover the credit card debt, I determined not to let that happen again.
Another (not so great) way to pay for these expenses would be to take the money out of my home equity line of credit. Several years ago, we received an offer in the mail to open a line of credit at a local bank. We thought it might be a good idea to have the line of credit to use for emergencies and we were easily approved.
Two months later, my husband became ill and we had unexpected and astronomical medical bills. I knew we could pay the bills from the line of credit, so instead of worrying about money, I could focus on him. Of course, we would eventually have to pay off the bills, but I knew collection agencies would not be coming after me.
As much as I appreciate the home equity line, I don’t want to use it frivolously. I can’t justify transferring money from this line to cover travel expenses. I need to know that I can pay for the trip from within my regular budget.
Budgeting in my Head
My normal course of action with my budget is to keep track in my head. I know instinctively if I’ve been spending too much and have to cut back. In fact, on my recent trip to Indianapolis for the Roving Indiana yarn crawl, I was very restrained in my yarn purchases. I know, however, that just cutting back on yarn would not be enough to pay for the trip.
Using a Budgeting Program
There are many programs available to use when setting up a budget, including Every Dollar (Dave Ramsey) and Mint, but the one I chose was YNAB (You Need A Budget), designed by Jesse Mecham. One of my daughters has used this program for several years – she was the one who introduced me to it.
I’ve used YNAB before, but wasn’t able to stick with it. This time, though, I have a nice vacation goal, so I am more determined. Although I am pretty good at budgeting in my head, it’s interesting to see everything set out in front of me.
YNAB’s 4 Rules
The main reason that I chose to try YNAB again was because I agree with its principles. Money plans are made before the month begins, so I can see what I have available to spend in each category. I haven’t tried out Every Dollar or Mint, but the reviews I’ve read seem to favor YNAB.
YNAB is based on these four money rules:
- Give every dollar a job. Budget all your money. If there is some left over (don’t we wish) assign it to savings or a goal.
- Embrace your true expenses. Don’t forget about things like Christmas, taxes, and insurance – things that aren’t paid monthly.
- Roll with the punches. For example, if you overspend on yarn, transfer money from your restaurant budget.
- Age your money. Try to get beyond living from paycheck to paycheck.
The program is easy to use and quite intuitive. The website contains more information with numerous articles and videos in case you have questions.
Getting Started
Several years ago, I purchased a copy of YNAB on a Black Friday sale. I’ve upgraded it every once in a while and have the current version (YNAB 4) of the stand-alone product.
Somewhat recently, YNAB introduced a subscription web-based product. They stopped selling the stand-alone one. However, like with the original versions, YNAB offers a 34 day free trial. You can set up the program and try it out. If you like it, subscribe. YNAB does not ask for a credit card to start the free trial, just an email address.
When I decided to give YNAB another try, I opened my old version. I played around with it for a couple days. I decided to sign up for a free trial. The new version looks quite different than what I was used to, but I have 34 days to decided if I like it.
Entering my Expenses
When I started putting my expenses into YNAB 4, I struggled with how to enter credit card balances. Jesse, the originator, encouraged his clients avoid using credit cards. Credit card debt can be a problem, but credit cards can be used wisely. With the web-based product, entering credit card information is simple.
I went through the list of existing categories and guessed at what I spent each month. I also budgeted an amount for savings for travel. I quickly blew through my expected monthly income, but after a little adjustment, I figured it out.
Since I haven’t been keeping close track of what I spend on groceries, household, gas, and restaurants, my budget amounts in those areas were complete guesses. I will have to watch those categories over the next month to see where they end up. Other categories like my cell phone, internet, and health insurance are the same each month. My natural gas and electricity should be going down as the weather warms up, but if I budget more than I need, it will help pay for next winter’s expenses.
Saving for That Cruise
My main incentive for starting again – I think this is the third time – is to save for that trans-Atlantic cruise. I’ll have to decide by the end of June, although I won’t need all the money at that time. If I keep up with YNAB, I should be able to make a good decision.
I plan to update this post after a couple months to tell you if I stuck with the program. If I am successful, I’ll also add a link so you can try it, too. (If you don’t want to wait, just go to YNAB’s website to sign up).
Have you used a budgeting program of any kind? Are you happy with how it works?
How do you budget or save for vacations and travel? Leave your comments below.