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Get to Know YNAB’s Four Rules
Article 3 in the Financial Fitness Article Series
In the second article in this series, I introduced you how to take a Financial Inventory. If you haven’t started that yet, don’t forget to begin that process. Today, I have one more foundational read before we dive into the how to’s of achieving Financial Fitness and using You Need a Budget (YNAB). That foundational read is about YNAB’s Four Rules.
These four rules work well with any budgeting tool — whether it be paper and pencil, an excel spreadsheet, or YNAB. However, YNAB is purpose-built to help you apply these four rules. They are worth reading and considering in your overall philosophy of money even if you aren’t going to use YNAB.
Rule One: Give Every Dollar A Job
In essence, all four rules boil down to Rule 1 and that is you give every dollar that you currently have a specific job. You assign each dollar you have now a specific role in your budget. More importantly, according to Jesse Mecham, founder of YNAB and author of You Need a Budget: The Proven System for Breaking the Paycheck-to-Paycheck Cycle, Getting Out of Debt, and Living the Life You Want, “with every “job” you assign you’re answering the question: What do I want my money to do for me?”
I think of this as taking control of my money back away from the money itself. For way too many years, I managed life through cash flow rather than a budget. And, as my bank balance got lower and lower each month, I felt like my money was in control of my life instead of me being in control of my money.
YNAB’s first rule also requires that you look only at the money you have and not at the money that you expect to have at your next paycheck. Mecham coaches in his book that you should ask yourself about your current bank balances, “What do I need this money to do before I get paid again?” This question also forces you to take a longer view of your money. Say you’re thinking about buying $150 tickets to a concert or sporting event on your credit card which already has a balance you haven’t paid off and can’t pay off with money already in your accounts. But you also don’t have enough right now to pay the electric bill, which thanks to inflation and winter heating costs is $275. You knew it…
