You Need a Budget: The Proven System for Breaking the Paycheck to Paycheck Cycle, Getting Out of Debt, and Living the Life You Want

by Jesse Mecham

In truth, when we’re stressed about our finances, it’s because we’re not sure our money decisions are aligned with the life we want to be living.

The question we need to ask ourselves isn’t Can I? or Should I? It’s What do I want my money to do for me?

What do I want my money to do for me? works like a gut check that helps us see whether our priorities are driving our money decisions. When we know what we want our money to do for us, the options become a lot less daunting, and confidence quickly replaces the stress.

What do I want my money to do for me? is about nothing less than deciding what kind of life you want to live, and then making a plan so your money can help you get there.

the point is to decide what your priorities are, and then make a plan to meet them.

That’s the beauty of a (good) budget: it lets you see exactly how your spending affects the rest of your life.

Rule One: Give Every Dollar a Job, is all about being proactive, so life doesn’t simply claim your money.

Rule Two: Embrace Your True Expenses, combines the power of thinking ahead with taking action here and now.

Whether expenses happen like clockwork (rent), feel impossible to predict (car repairs), or are just far-off dreams (cash for a wedding), they are all part of your true expenses. The key is to prepare a bit at a time by treating them all like monthly expenses.

Rule Three: Roll with the Punches, helps you adapt so you can handle wh...

Rule Four: Age Your Money, gets you working toward spending money you earned at least thirty days ago.

The real secret sauce to making sure your money is moving you toward the life you want is YNAB’s Four Rules. If you embrace budgeting they’ll be emblazoned on your brain in short order: • Rule One: Give Every Dollar a Job • Rule Two: Embrace Your True Expenses • Rule Three: Roll with the Punches • Rule Four: Age Your Money

Just look at the money you have on hand today and decide what you want those dollars to do for you. This is YNAB’s first rule—Give Every Dollar a Job. (If you’re already starting to think about money you don’t have yet, remember, the big shift is to focus only on what you have today. Let go. Try it.)

Just don’t confuse budgeting with forecasting—one is a real-life plan, the other is a series of guesses built on what-ifs and maybes. Forecasting has you “budgeting” money you don’t have and pretending you know exactly what your expenses will be three months from now. You know it probably won’t work out that way, and you don’t feel much better after you’ve run the imaginary numbers. Budgeting has you prioritizing the money you have—and leaves you feeling confident because you know it’s one hundred percent based in reality.

If guilt haunts you it’s usually because: 1. You know in your gut that a bigger priority needs more of your attention; or 2. You’re letting other people’s expectations of how you should live your life color your choices.

Forget future money; use today’s money to write your future.

a top priority to funnel cash into funding future months, with the goal of having enough on hand for the next six months’ worth of expenses.

When your long-term goals are on your radar, your bank account balance is no longer the deciding factor in whether or not to buy something. The question stops being Can I afford this? You can likely afford lots of things if you have the cash on hand, but that’s not the point. You’re now asking yourself, “Does this move me closer to my goal(s)?”

Every time you choose to put money toward a long-term priority, you’re literally sending money ahead to the future, setting Future You up for success.

Accountability is critical, but let’s be clear on what accountability actually is. Accountability is dealing with the truth of every decision you make.

You’re actually never more accountable than when you change your budget. (Go ahead, read that sentence again, it’s important.) If you’ve overspent on eating out and need to take that money from a different priority, like vacation, that’s accountability. You are living the reality of what it means to spend more than you’d planned: you’re now that much farther from your vacation goal. It’s not a failure, but a reprioritization.

But here’s the thing about those big punches: perhaps they weren’t on your priority radar, but they usually do reflect your values, which are your budget’s driving force. While your priorities can actually change fairly quickly, your values are much more resilient. Sometimes we don’t even notice our values are guiding us. We just get the feeling that a certain decision is “the right thing to do,” or simply nonnegotiable.

If you’re in debt the “age” of your money is actually in the negative. You spent your check before you even had it, either through credit cards or loans.

Spend less than you earn and use the difference to wipe out your debts. Once you have cleared that hurdle (and you will), instead of putting that extra money toward your debt payment, you have the luxury of letting it sit there and age. You’re no longer paying for what you spent in the past. Now you’re sending money to the future, so it’s sitting there waiting to be spent later.

Put another way: Without Rule Four, you’ve got a stack of bills waiting for money. With Rule Four, you’ve got a stack of money waiting for bills.

Rule Zero is the process of deciding what’s most important to you. This is fundamental to budgeting. You can’t get far into Rule One without having a good idea about what you value.