Saturday, February 07, 2009

You need a budget

February 4th, 2009 in Money
Why Most Budgets Fail but YNAB Succeeds from Lifehack

You have no money

Chances are at least one of your New Year’s resolutions had to do with money. So how are you doing on your budget?

I can’t count the number the times I’ve created budgets only to throw in the towel and decide that they just don’t work. Usually my frustration is due to any of the following:

1. The amount assigned to a category just isn’t realistic. After figuring the numbers and seeing I had a little distribution problem, I determined I could eliminate entire categories or set them unrealistically low. I let my excitement and determination to save money and get out of debt cloud reality. Amidst visions of picking up second-hand clothing at Goodwill and planning to cook all meals from scratch using basic pantry staples and spending $100 a month on groceries, I just knew I could make this strict budget work! A month later I was discouraged and feeling like a budgeting failure.
2. Projected income for the upcoming month never manages to be close to actual income. If you’re salaried, this becomes easier. If, however, you’re an hourly employee or an entrepreneur, it’s much more difficult to predict what you’ll make next month. Without fail, a project will fall through, you’ll have to take days off work, or whatever. I’m sure Murphy has a law about this. Just know it will happen.
3. Projected expenses are never accurate. If you do manage to come near budgeted amounts in many of your categories, there will be some unexpected expense that hits you and throws the whole budget off. Your car needed a new radiator. Your child had to be taken to the urgent care center.

Once any of these things happen, it can lead to questioning your entire budgeting philosophy. If you suddenly need to pay toward your insurance deductible this month, do you then take that money from another category? Eventually budgeting can seem like a science that is only for those who have some special know-how, a surplus of income, or are likely living in straw bale houses and making cheese from their goats. All-or-nothing syndrome sets in, and you determine you’re just a free spirit, incapable of being fettered by the tedious nature of budgeting. It occurs to you that since you have some debt already, what’s a little more debt going to matter?

How I stumbled on the software You Need a Budget (YNAB), I cannot recall. I imagine it was likely in my search to find answers to these basic questions above. Spreadsheets, budgets on paper, Quicken, Microsoft Money–all of these just weren’t addressing my budgeting issues. After perusing the web site, I decided had nothing to lose by downloading a trial copy. After only a few days, I was so impressed that I purchased the software.

While you’ll find that YNAB has the same features of charts, graphs, downloading statements directly into the software, etc., that software like Microsoft Money does, you’ll immediately note that YNAB has one major difference: It actually gives you a plan with education and support to help ensure your success.

The YNAB Plan

1. Stop living paycheck to paycheck. That’s what all budgeting advice says, but YNAB takes a different approach that I think is the key to making a budget work. With YNAB your expenditures in the current month are based on your last month’s income. So there’s no guesswork about what you think you’ll make or spend next month. You’re working with what you have.
2. Give every dollar a job. Since you’re working with last month’s income, you will be portioning that money to categories. Every single dollar will be planned for a particular category (or job).
3. Prepare for rain. It only makes sense to set aside money so those unexpected expenses don’t crash your budget.
4. Roll with the punches. I like this one. It promises you will fail! Failing is part of the program. Microsoft isn’t going to tell you that. How many times do we quit because of an all-or-nothing tendency? YNAB makes small adjustments if you overspend in a category. And since failing occasionally is part of the program, you can pick yourself back up and resume your budgeting, knowing you’re still on track.

The company further supports you by offering a free PDF book (upon purchase of the software) and free videos and information on topics of budgeting.

One of the keys to the YNAB philosophy is that you must get a month ahead on your income in order to have last month’s income at your disposal for this month’s expenses. This is the hardest part, but if you look at it as a challenge and take joy in watching your savings grow, it becomes easier. Accumulating a month’s savings is expected to take several months.
A Chat with Jesse Mecham, CEO and founder of You Need a Budget

I have my own ideas on why budgets fail, but I was curious to see how Jesse Mecham, CEO and founder of YNAB, would answer some questions related to YNAB and the challenges of budgeting in general:

Q: Jesse, what gave you the idea to create YNAB with a budget based on last month’s income? I am unaware of any other software that does this.
I was using spreadsheets before marriage, and then after becoming married, I had this idea. I knew I wanted to assign money to categories, but I wondered how I could possibly know how much to assign without overdrafting or getting ahead of myself? When asking someone to create a budget they often don’t even know what they’re spending in the first place. If you go over budget, just keep moving.

Q: So what would you say is the reason that most budgets fail?
The biggest reason is people don’t see a reward that matches their work and their input. So there’s a lot of work and thought up front, and for most people the budgeting process is fairly unnatural. What happens is people don’t see the results they’d expect from the work they put in. It’d be like eating really well for three months and not seeing a change.

Q: How, in this economy, can people get a month ahead in income? Is that advice still feasible? This seems like the hardest step.
It’s definitely is the hardest part, and with the hardest part comes the most rewarding part as well. Consider sales of belongings. The goal is not so much having a month saved. What you’re really trying to do is just last an entire month without touching that month’s paychecks. Look to your current employer first; do some overtime. Most of the time it’s people ridding themselves of clutter that makes the fastest progress.

Q: I was using your software before being surprised with a diagnosis of cancer in my 30s in 2007 (I’m cancer-free now, thanks). For individuals and families facing major financial crises, what advice would you give them for making budgeting work when there simply isn’t enough money available for expenses? Can YNAB still somehow work for them?
That is tough. First, make sure every dollar has a job. There are parts of the budget that can be done even if you’re in the red for long periods of time. No matter what you do, still record everything you spend. Maintain some awareness as much as possible. When people get in emergency mode, they lose control and awareness. The best way to fight back is to simply record what you’re spending. It’ll rein you in much quicker than not doing it at all.

Q: Your web site states that YNAB makes small adjustments to your overspending. How does it do this?
YNAB is like a virtual envelope system. The software wants you to maintain your savings but still have money for Christmas or your vacation you just borrowed for, so when you bring in money for the next month, you take that wad of money and drop that back into other envelopes that need replenishing. Every overage is automatically deducted from next month’s income.

Q: I do see you have a 60-day money back guarantee. Do you also have a free trial?
There are both. The trial is not advertised. People were getting the software and not understanding the why behind it. Weekly webinars are available with a live teacher to see. However, if readers want the free trial, they can go to .

Q: It doesn’t appear that YNAB automatically downloads transactions from financial institutions on a regular basis. Is this feature coming?
Technically it’s not very difficult, but it is very expensive. That expense would either have to be passed on to the customer or we would have to find another revenue source to support it. Banks and credit cards want to keep us separate from what we’re actually spending, which is contrary to YNAB philosophy because it reduces awareness. The feature is planned, but we also want the customer to look at the methodology. As far as time lines, the new Mac/PC version is first priority. After that, we would look at implementing automatic downloads of transactions.

Q: I see that you have the guide in the form of a PDF file. I really like the idea of a paper book. How long before this is available?
I’m currently trying to see where the book is fitting the overall system. We are considering a paper book.

Q: Are there any new features in the works that you’d like to share?
Our next software version will be using Adobe Flex AIR technology. The methodology will be the same, but the design will be different. The interface will be easier to use. Reporting will be much more dynamic and flexible. We hope to have that in beta in May/June.

Q: Is there anything else that we haven’t covered that you would like to add?
If people don’t want to worry about the 60-day money-back guarantee or purchasing the software yet, I’d recommend they just sign up for the free budgeting course at It’s not a sales pitch. In 10 days people walk through the methodology and get down to the nitty-gritty of budgeting, money in relationships, why cash flow is sometimes so stressful, how it can be made easier, talk about rule number four, and discuss why people don’t talk about budgeting.
The Downsides?

I haven’t found many, but they are:

* No integration with a handheld device. If you like to enter purchases on the fly on your smartphone, it can’t currently be done with YNAB. According to Jesse Mecham, YNAB wants to store the data online so people can get to their transactions and category balances through possibly an SMS approach, mobile web interface, and/or an iPhone application perhaps the middle of this year or later.
* Since the company has never taken any funding or loans, some major features like integration with a handheld device tend to take a bit longer to roll out.
* YNAB Pro is not Mac-compatible (the basic version is). However, a new Mac and PC version is expected to be available in the summer of 2009.

The Bottom Line

YNAB’s philosophy and software features combat many of the reasons bugets fail. It’s inexpensive, bug-free, and worth checking out. YNAB ($24.95) and YNAB Pro ($49.95) can both be downloaded from The software comes with a 60-day money-back guarantee. If you want to try it out first, a trial version is available at Both YNAB and YNAB Pro include a free copy of the PDF ebook “The YNAB Way.” The Pro version comes with bonus features, such as a car maintenance schedule, income tax
forecaster, and more. The developers are very responsive to customer feedback and will support you with visual and written materials that help you understand the psychology of successful budgeting.

Six Months

" If you had only six months left to live, would you do what you are doing now?

You can only answer “yes” to this question if what you are doing matters to you. Doing what matters to you is a sure way to excellence since you will do it with all your heart. But you need the courage to be different and follow your heart. Do you have it? I hope your answer is yes. Life is too precious to be lived in mediocrity."

Life Hack is where I got this inspiring quotation.

Today I left my house and traveled with a purpose: Down to the Skate rink at Mel Lastman Square, with my snow pants and Hockey skates. I skated around for 50 minutes and had a wonderful time fulfilling my wish. I was really happy. Sometimes I almost fell but it wasn't as bad as my first trial on ice, last year.

I wonder what would happen if I tried to live for six months and acted as if each day was going to be my last? bah, depressing thought.

I've got too much baggage to be living on the 'six month plan' but really, if it improved my life, I think that six months would be a great period to spend...doing stuff.

In the past I've not finished the starting of any tasks or the finishing of any tasks with the period being six months. Uniquely, I have to say that I have lived the life of a habitual procrastinator. By contrast, I believe most of my friends and colleagues have given up their experimentation phase and 'settled down' into a mundane life.

Most of us who have been bred on a life of adventure and action have really little to gain from living within a reality where adventure is at the expense of everything else, including love, family, friends, and happiness.

I am so lucky to have made friends with people who are true adventure seekers.

I think most humans are in-built adventurers, but it just takes a leader to push the person into a cycle of adventuring.

Myself, I love adventures. I love adventures so much that I've had thousands of awesome adventures already. I've traveled to foreign countries, I have friends living on four continents, and I have journeyed within myself and out again. I'm just twenty three. I don't think many people have had the opportunity to have as much adventures as I've had. But probably many people have had totally different types of adventures from mine.

Some times adventures end up badly, and the result is a period of recuperating from injury and mistakes.

So: It would be irresponsible and self destructive to actively work through a 'six month' adventure while knowing that afterwards the next period of recuperation likely won't be of the victory party type.

Therefore I am back to where I was, wondering where the hell I'm going to drift on my boat in the sea of life.

I love metaphors, and figurative language. I loveeeeeeeeeeeeeeeee making up pictures with words. So I have a great picture in my mind:

I've been running around swashbuckling on an adventure towards the islands and interesting lands of merriment and, having narrowly escaped the jaws of the sharks, the life I've been living has been a type of boat without a sail, stopping off at different islands trying to best refit my boat to sail. I suddenly beached on an island where I have enjoyed the hospitality of the land rather too much, and sea faring adventurer that I am, have begun to feel for a new adventure. I am wary, knowing that I have grown complacent on land, and, even though I am experienced as a mariner and warrior, have become very reluctant to embark on a new journey with undoubtedly many wars and battles to push through victoriously.

Rather than a lost sailor, like Odysseus, I need a path forwards and to use my knowledge to avoid the danger signs that Have littered the path I have come from.
Mainly, to be a six month adventurer, I would need a six month destination. The nature of life is that destinations are tangible or intangible, but journeys are growth and some people want growth to occur at a rate that is quick as possible.

I am taking my own time but maturity is a nasty word in these here parts and no one ever wants to be considered ' mature ' unless they know that they're mature for their own life reasons. Mostly this means money, wealth, power, status, family.

Well, Adventurers don't need to be mature, they just need to adventure. Some die on their adventures, while others mature on theirs. I know that I'm rambling. It is the point of an adventure to ramble on to some where while pursuing an over arching goal. Right now, sitting in my island, recuperating from multiple shipwrecks, I have lost sight of my goals. In Odysseus' journey, Homer presents the audience with many opportunities for Odysseus to get lost and forget his destination: Home.

Buddhists think that time flows backwards, and that everything has happened already, we are living life backwards through time. If I were able to look into the future and pick out my end point, and then come back here to the present, I would be able to live backwards in time into the future doing everything necessary to be where I will inevitably end. Seeing this trend work out the other way, if I continue to waste away, then I will turn in turn be wasted.

In contrast, if I don't have any end point, then what is the point of not wasting and thus doing? When I am able to put aside these existential questions and decide to live, actually sustain myself, then the question becomes obvious: There is a point when it is mandatory to become involved in society simply in order to eat and sleep in peace. Artfully, it is usually the forward seeing people (Prometheus) who understand that to open Pandora's Box is definitely in hind sight a mistake. But one who is able to take advantage of that opening is able to squeeze past fate and make his own fate.

The conclusion here is :

If you choose to assume that for the next six months, each moment counts towards life's timer then you have created a fate that makes those moments count. It's the squandering of those moments that are so awesome too. It is in the losing sight of the end point, where moments are wasted and the future becomes muddled in the quicksand of the past. Once woken, most people fall asleep again. I must wake up finally and pull the future from the magic hat of the present.


Wednesday, February 04, 2009


To get a grip I've been encouraging myself to wrap the handle of reality with grip tape. This is a great time to mention that grip tape is usually sufficient to improve a hand grip, but without any technique then the tape is wasted.
So I'm left wondering what the hell to do about the technique which I'm leading my life. I'd been practicing life quite un-ergonomically for a long time. Certainly got a repetitive stress syndrome which would imply that my tendons and ligaments are wearing out. This is only toward the mind, though. Things going on have rehabilitated my mental wrists.

I am encouraging myself to practice more ergonomically correct methods of life. Too much pressure at the wrong angle, and you're bound to snap! So no more snapping