About 3 years before we were married, my wife and I attended a Christmas break college youth group seminar in Gatlinburg with our church. We decided to pool our poverty money and track it. I can’t remember how much each of us contributed to the pool, but it wasn’t much! As I recall, we only had about $80 and it had to last about 4 days for both of us. We faithfully tracked every cent and at the end of the seminar, we were missing 9 cents. We thought we were on top of it, even though we spent everything we had!
A week or so later, we were exchanging gifts with her side of the family and I mentioned to my future brother-in-law that our budget was only off by 9 cents (did I mention that he was a CPA?). His response nailed me right between the eyes:
You can account for virtually all your money, but did that exercise help you spend LESS? Knowing where it went is worthless unless it helps you make better decisions.
The point of a budget
When you set up your personalized spending plan through YNAB, you’re able to not only monitor your money, you’re able to give every single cent a specific job. You give a purpose to every single dollar. Most other budget systems, even the very good ones, only monitor where you spent last month’s dollars. In essence, you’re constantly looking backward at what happened rather than making plans for what you want to happen. That isn’t real budgeting.
Align your money with your values
When you set up a real budget, you’re able to align your money with what’s important to you. For example:
- If taking your spouse to a movie once per month is important, you budget for it rather than look back and say, “Wow, we went to the movies 5 times last month – and put 2 of them on the VISA card.”
- If dining out each Sunday afternoon is important, you budget for it., rather than look back at last month and say, “Uh oh, we ate out 11 times last month – and spent $285 doing it.”
- If saving is important to you, you budget for it, rather than look back and say, “We can’t put anything into our emergency fund because we spent it going to movies, eating out, and paying on that blasted credit card.”
By using budgeting software such as You Need A Budget instead of financial monitoring software like Quicken, you’ll be more aware and more purposeful with your money. Remember: knowing where it went is worthless. Using that information to help you spend less in the future is what’s important. When you give your money a job, that’s exactly what you’re doing, and it’s one of the basic rules of using YNAB.
The point of budgeting is more than just spending less
My wife and I did a great job of tracking our cash. We didn’t spend less, but just spent until we ran out of cash! We did a horrible job of giving our money purpose – deciding what was important, whether it was dining out, skiing, ice skating, buying souvenirs, or putting aside a few bucks for our savings account.
Don’t make the same mistake we did! Give your money purpose, give it a job, and give a few of those dollars a long term career!
Photo by Gem Images
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Great point! I know that I am able to monitor my money easily because my bank does it for me online but what I do with that money is the important step and at this point I don’t really have a budget, which is why it is crucial for me to set one up soon.
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i bought YNAB and i’m loving it. thanks for telling us about it and pushing me to get it. i can see that in a few months, i’m going to be very glad i took the plunge and got my personal finances in order with YNAB.
keep up the good work
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This is a fantastic explaination and I will pass it to my friends. They have a hard time with budgeting. I think it is because they are monitoring their money and calling it a budget.
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