Those of you who know me on a personal level will know that I am a bit of a spendthrift (okay, maybe more than just a bit). Although I can go into long debates about the importance of each item that I purchase, I had a wakeup call a few months ago that made me recognize my spending habits were unsustainable and ultimately irresponsible.
So in the true nature of a ProductiveMuslim, I started to look for online web applications that I could use to help me control my spending.
I went through a dozen online applications, but I simply could not find a holistic solution that would suit my needs or organize my finances. Then I stumbled upon YouNeedABudget.com (affectionately known as YNAB); the name of the product attracted me instantly as I indeed did need a budget. This software has a beautiful story behind it described in the FREE YNAB eBook. (you can download here)
The beauty of YNAB is that it’s not only budgeting software, but a budgetingsoftware with 4 key principles that it propagates:
1. Give Every Dollar a Job
Each month YNAB asks you to assign your Available income to spending/savings categories. I cannot tell you how empowering (and shocking at times) this is. You realise the so many ‘little’ expenses that eat away your money and you become more aware of where your money goes.
2. Save for a Rainy Day
If you have a big expense that comes every six months or so, YNAB encourages you to save for that day so you can eliminate the crazy ups and downs of billing life.
3. Roll with the Punches
When you fail and overspend (yes, this happened to me in the first month I started using YNAB), the program allows you to adjust your budget, see in which category you’ve overspent, and decide how to fix it. When you fall, you don’t quit. You start each month with a clean slate–a huge psychological boost.
4. Stop Living Pay check to Pay check
This principle resounded deeply with me. I always thought that the solution to my spendthrift habit was to make more money, but I realised that there was something chronic about my spending habits – no matter how much I earn or make in a month, I would spend all of it one way or another. YNAB helps me work towards living on last month’s income, which is nice change and relief.
So, how do I use YNAB?
Here’s what I do:
- At the beginning of each month, when I receive my pay, I launch the YNAB desktop application and start giving every single dime a ‘purpose, whether it is in the spending or savings category.
- During the month, whenever I make a purchase or spend money anywhere, I use the YNAB iPhone application to record the expense in the appropriate category; this ensures that I don’t forget to record my spending, and then I usually synch the YNABiPhone application to the desktop application every evening.
- Whenever I have the urge to do some impulse shopping, I check my YNABapplication; if my budget allows me, I’ll go for the purchase, but otherwise I hold off. It really is incredible how knowing how much you have and how every penny should be spent helps control overspending.
- If I do overspend in a particular category, I sit with my YNAB application and start to think carefully about which other category I need to reducing my spending in to make the books balance again.
Did it work?
In my first month of using YNAB, I was able to save up to 25% of my income and pay it towards paying off debts. This would have been very difficult for me to do a month before. So, yes, it works, And I highly recommend that you try it!
Since I’m sure you’ll appreciate the advice above, here’s an affiliate link for you to click on and help me make some money with your purchases of YNAB (please note – you are not being charged extra!)..
Happy budgeting!
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Alhamdulillah, I have a good savings. So not really in a hand to mouth state.
But here’s my issue: I’ve been spending a lot – with no tracking. I spend a
couple of every day -most days- on mainly luxuries that I can survive without
it. And i want to control /limit/ track these spendings.
so i guess i should set my “spending limit per month” as the “available amount”
and see how I can split that up? Also some months I have more expenses that
usual, like my dental payments, which is not an “overspending” per say..
1. I firstly created categories for every spending area I have, e.g. ProM, Personal, House, Car, Savings..etc.
2. I then created sub-categories under each categories, e.g. for Car, I have car insurance, maintenance, gas..etc.
3. Then I filled up each sub-category with my budget or how much I’m willing to spend in that area. The key is to use the YNAB principle of give “every dollar a job”, don’t let leave any penny for “available income”, just assign that to a sub-category such as saving, or give yourself “fun money”(money you can spend on whatever you want without feeling guilty).
4. If an expenditure comes up during the month that does not fit in any of the categories/subcategories, and it’ll be recurring, I create a new category/subcategory for it. Otherwise I stick it under a sub-category called Misc.
Other things I do:
1. I have 2 accounts, one is my current account and one is my credit card account. (One of YNAB’s success story with me is that last month, for the first time i was able to pay for my credit card bill from the previous month budget, and not from my new month’s income)
2. Any automatic transaction, especially on my credit account,I added it under “automatic transactions”.
3. Having the iPhone version is pretty helpful so I keep it up-to-date when I’m on the go then sync at night.
The most helpful element of YNAB is giving every dollar a job, and building buffers for some categories/sub-categories..e.g. I have a one-time per year shopping for clothes and stuff, so I’m building a buffer for it from now, so I don’t have a huge dent when the time for it comes.
Hope this helps.