The Next Logical Step (You Need A Budget!)

Now that we have the analysis out of the way, I thought the next logical step would be some sort of way to budget.

Our 'old' M.O. was on payday, see what bills were due up, pay those, and if there was money left for gas and groceries, get those too. If we were behind, we'd skip a bill to be paid later out of the next incoming check, and get gas and groceries with that money. If we paid the bills, and had enough for two weeks of gas and groceries, AND there was money left over....well, you know what happens then! It got spent!! Oh, the opulence of unfettered corner store trips (DH) and Goodwill runs (my occasional guilty pleasure).

All too often though it seems like we were behind and trying to make the gas in the car last long enough to get to the next paycheck. Boy am I hoping those days are over!

MMM shone the light (although he is so far ahead that he doesn't budget or use budgeting software) on a program called YNAB (you need a budget!). We are financially illiterate and backwards enough that we need to budget, though, so after lurking on their website for a few days reading testimonials and watching intro videos, we signed up for the free 34 day trial. I have to say, so far I like it! It doesn't just track what you've done in the past, but it helps you assign each dollar a job, so that there is no 'extra money' floating around, just itching to be wasted. You can assign it to yearly expenses so you don't have the imperception that it's freed up.  And you can apply the appropriate amount of 'should I' or 'do I really need to' thought-prefacing before you grab the debit card.

You can enter all your spending categories (current and also the ones you want to have in the future, like 'Vacation fund' and 'Christmas'), assign a certain dollar amount to each (what it's likely to be and/or what you want it to be), you can enter your income as it comes in, and then as you make transactions during the month (the automatic car insurance comes out, then you enter that, or you make a grocery run, then you enter that) and it subtracts the transaction amount from the total budgeted amount, so you can see if you have any left (or if you went over). The YNAB software tells you not to feel guilty if you go over-budget in a category. But if you do, you have to take it away from another category. It's a constant adjustment, and you get a good picture of your spending habits, and hopefully use this info, as well as meetings with your spouse, to tweak it and hopefully keep you close to being on the right track.

One thing they recommend is to have a meeting each time money comes in. Then, consult each other for any purchase over $10. Heck, I think its best to be accountable for each and every transaction. They say to budget in some fun money for each person, and I think that's important, although it should be kept to a reasonable minimum, for people like us who have no savings and next to no investing (if we ever want to retire)! Accountability and transparency, I say! It keeps you honest.

Actually YNAB is where I heard the idea that you should be using this months paycheck for next months bills. That was mind-blowing, I tell you. Which is probably SAD. But I digress. The software calls this Emergency Fund, I think, and you eventually want to get to where that has at least one month's expenses saved in it, and then (when you're REALLY rich!!) three months, etc. etc.

The GOOD news (always a silver lining somewhere!) is that we always get a tax refund back, usually around 2,000. We plan to pay back the in-laws with half of that, and with the other half, pay some bills in advance so we can get closer to being ahead one month instead of behind or current. I'll update you on the happy day that we get that accomplished!