YNAB methodology for managing money is extremely effective as it allows me to be be more proactive with budgeting and spending. It lets me know how much money I have and how much money I can spend on any given category. I find this proactive approach in dealing with money very freeing and powerful.
Below are the categories I use in Actual:
I assign the budgets for the categories at the beginning of each month and am strict with adhering to the budgets. If there is no budget for eating out, don't eat out.
I only have two accounts: Checking and Saving. Where Saving account is off budget and where I put money for future use and in case some unforeseen emergency occurs.
For recurring expenses such as my
Annually category groups, I put the recurring cost as part of the category name in brackets. This lets met easily evaluate the costs of my recurring payments and analyze it at a glance and makes budgeting for future easier too.
- FI is possible everywhere. The idea stays the same, save more than you spend, try generate passive income through stocks, dividends and property.
- I think most people are going to mention credit cards in some way, but for me, it was how my actual bank accounts don't matter. It doesn't matter if I have $X in my savings and $Y in my checking account. I have $(X+Y) to budget and I need to budget $X for an emergency fund.
- Also, having $Z left over after budgeting doesn't mean I have $Z to blow. I have $Z to budget for next month since I already budgeted for my frivolous spending. That doesn't mean I don't just move $Z to something frivolous anyways.
- It's a different way of thinking about budgeting. It's an envelope system. You have a pile of dollars (real dollars - these are all the dollars you own, right now, in your accounts), and a pile of envelopes. You begin stuffing dollar bills into envelopes - some into the bills coming due before you get paid again, some for groceries until you get paid again, some for gas until you get paid again, and with the smaller pile of dollars after those needs are taken care of, you begin to stuff dollars into your True Expenses - things like Car Maintenance, Insurance Payment, etc. When you run out of dollars, you STOP.
- You stop, because you can't put imaginary dollars into envelopes.
- YNAB is all about the now - about giving jobs to the money you have. Not to the money you might have later on. It is a different way of thinking, but once you make that mental shift, it comes clear and works beautifully.