You Need a Budget – YNAB (part 3)

In this series I show how to use budgets without feeling restrained. I do this by using YNAB, an online budgeting tool. This article is about rolling with the punches.

Part 1 | Part 2 | Part 4

Rolling With The Punches

Let’s do a little thought experiment here. I want you to think of a budget.

Was the first thing in your mind a feeling of restriction, of some plan set in stone, never to be changed? Of a set amount of money you can spend? That’s the classic idea people have when hearing the word budget.

The opposite is true! If you budget that inflexible you will have a hard time. You budgeted 200 euros for groceries, and now you’ve spent 210. Oh my, that’s a disaster! What do I do? My budgeting life is over. You see, this budgeting thing never worked. Thanks, B… Thanks for wasting my time with a budget that clearly doesn’t work.

And as quick as that you’re back without a budget, you’ve lost track of your expenses and you’re off worse than when you were budgeting. In a way, it’s like the classic dieting story. After eating one cookie you think you lost it, dieting doesn’t work. You return to a life without watching what you eat, and you’re back at zero.

Budgets Aren’t Meant to Be Rigid

When you budget, it’s not about restricting you to a solid plan, never to divert from. No, it’s about a few things. Budgeting is about assigning your money a job (rule 1), and planning for the future (rule 2). So budgeting is planning, and plans do change.

No battle plan survives first contact with the enemy

This quote by Helmut von Moltke, the Prusian World War I chief of staff, is true for budgeting today. When you make plans for the future, you try to think of all the possible scenarios and then have contingency plans in place.

But just like in war, where the enemy doesn’t follow your rules, life can happen to you and your budget, and things happen you didn’t prepare for.

So what do you do? Like a boxer in the ring, you have to roll with the punches. You move with the punch instead of staying still, and that lessens the impact of the hit.

This brings us to YNAB’s rule 3, roll with the punches.

An Example

A real world example says more than a thousand words. Say that you have 100 euros left in your YNAB category for clothing, plus 100 euros in a category for gadgets that you used to save some money for when you run into a cool gadget.

You are shopping and see a nice pair of shoes. They’re really fancy, you like them a lot, and they’re not that expensive! Only 125 euros. That’s a bargain for a pair of quality shoes right? Without checking your YNAB app, you buy them.

Back home you remember to put the transaction into YNAB. You put in the 125 euros for the shoes, in the clothing category, and BAM! The balance in that category moves from 100 euros to a negative 25, in bright red.

Oops! But is there really a problem? You still have the category for gadgets. With a few taps on your phone you move 25 euros from the gadgets category to the clothing category and all is good in the budget again!

You made plans for the future, and they changed. Because that’s what plans do. Nobody can accurately predict the future, but as long as you prioritize your spending every now and then and at least keep moving in the right direction, there is no problem. You just keep rolling with the punches.