Quite some time ago a good friend of mine raved wildly about a new budgeting software package she was using and how it had changed her life. Given that I knew she had previously set up Excel spreadsheets etc and logged every penny she spent I was amused by her latest enthusiasm, listened and nodded, but then forgot about it again! My finances are not that complicated (broadly money in, money out each month) so although I knew I could be more organised than I had been, given that she warned me it would cost money to buy the software – well yes it sounded a good idea but hey … tomorrow and tomorrow etc etc.
However, a few months ago, having doing the best I could to put money into my mortgage for a while, I also started more detailed planning for a future when I expected to have to live on less while having more demands on my money (as anyone who has read any of the rest of this blog will now I’m hoping to adopt in the near future, a pretty finance-hitting decision!).
And so I bit the bullet, asked my friend for more details, and (eventually, I don’t get round to anything like this very quickly!) downloaded You Need a Budget (YNAB) – albeit in the first instance the trial version.
YNAB is basically a set of spreadsheets that someone in America set up for his own use and then refined and improved until, after lots of his friends asked him for copies for himself, he realised he could probably package up and sell on to others.
So, let’s deal with the barriers that stopped me doing anything earlier: yes it costs about $60 (or around £40), although you can sometimes get a discount of about 5-20% if you ask around (nearly everyone who has it has a discount code they can pass on as that’s how it is marketed, by word of mouth). It seems a lot, I would agree. But eventually I decided that if it did the job, saved me setting up my own system, held my hand while I set it up, and then helped me out with apps (android or apple) – well maybe it was worth a try. And my own laziness? Well surely it couldn’t be that hard to set it up!
I decided to try it (you can get 30 days for free) and then went ahead to get the full version. For me it was worth it and still seems worth it.
So what does it do?
Well the key thing is that the software requires you to think about how much you want or are prepared to spent each month on each type of thing you do (buy groceries, fuel your car, pay train fares, eat out – you decide). You then allocate the money you have coming in to each of those potential areas of spending or budget lines, and then as you go to town, shop online, or buy your lunch at work, you simply quickly log every bit of spending (on your phone or when you get home). Over time it adds it up automatically so you can see everything you’ve spent and where, and crucially almost how much you have left in that budget line for that month.
If you truly already know where all your money goes each month, then this might not seem any kind of benefit at all! If however, like I suspect many of us, you can never quite work out where half your money disappears to it makes it very very easy for you to find out – and also, if you want to do so, it helps you to nag yourself to change your spending.
You choose the budget areas you want to use, so if you want to you can break it down into great detail, or you can have bigger categories – so you could do “groceries” – or you could do “basic groceries” and “treat groceries”, or “groceries – food” and “groceries – alcohol” (and even groceries – chocolate” depending what works for you!). Whatever you choose you can change it again if you want to – but in the meantime you can see how much you’ve spent and how much you have left in your “budget” according to how you’ve chosen to divide it up.
Obviously you’ll get your budgeting wrong! Well, if you don’t you’re a miracle-worker anyway I’d say! One month you’ll allocate 100 pounds for fuel yet end up driving to and from a hospital every day for two weeks – in which case you can reallocate funds from elsewhere – maybe as a result you have spent less on eating out or train fare? Another idea they encourage is for you to allocate money now to bills that might come up in the future – so if you pay your house insurance once a year then they recommend you “allocate” budget every month so the money you need will hopefully be sitting there when the bill actually comes in and no panic or overdraft should be needed!
And that’s basically it. That’s YNAB for you.
So why have I chosen to blog about this?
Well, earlier on I spent an hour or so bringing my own budget up to date – and it felt good. I like knowing where my money is going and feeling in control.
Having heard about it from a friend of mine, I shared my new discovery with another friend in turn, who has used it as motivation to get rid of a long-standing monthly overdraft and to watch over the costs of an enthusiastic but also money-draining CD-buying habit. “Have you got a budget line for that?” has become a common feature of our conversations! (Yes it is remarkably easy to become obsessive about it too – sad but true!)
Thus I thought I would share with the big wide world.
I own up – I am boringly, depressingly conservative with my money (very much conservative with a small C mind you!) and have always done my best to be in control of my finances … but even so I have found it useful. For someone who broadly lives in hope that payday will come around before they are entirely reduced to bread and water I would have thought YNAB really could make a difference.
I feel lucky to have found YNAB myself. I did an online seminar/class thing, and watched quite a few of the youtube “tips” they’ve put up to try to help me be as efficient as possible. And now it really doesn’t take much time up but it does mean I know exactly where my money is going (which is, if the truth be told, disproportionately on coffee shops and eating out it seems!).
So I thought I’d pass it on in case anyone else requires that nudge to get going themselves.
Yes, it’ll probably cost you £40, or something like that. But if you want to get in control and know where your money goes – well I reckon that £40 will feel well spent!
(Postscript: I don’t work for YNAB or anything like that by the way – just wanted to share because it works for me! Do shout if you have any questions though, happy to try to answer if I can.)