Confessions of a YNAB Teacher

Mark’s recent blog post about the buffer reminded me of how I saved mine, so I thought I’d share my buffer journey.

I remember the day I found YNAB.

It was 2006, and I had just added up my credit card debt (almost $9,000) and knew I needed to do something. YNAB popped up in a google search. I spent two days pouring over the material on the site before purchasing. When you finally come to the realization that you don’t have any money, spending money to solve the problem feels counter intuitive, you know?

But I couldn’t poke any holes in the method. Give Every Dollar a Job. Save for Rainy Days. Roll with the Punches. Live on Last Month’s Income*. This felt like common sense stuff, except for one thing I could not get past:

“I will never be able to save up one month’s expenses. Who does this Jesse** guy think he is? Does he really think people can do this?”

I was finally facing my debt and it felt like THAT should be my top priority. One month’s expenses felt like a lot of money. I needed to rid myself of debt!

So here’s my confession: When I bought YNAB, I had no intention of implementing Rule Four. It felt insurmountable when weighed against my debt. But I figured the other rules would still help address some of my issues.

And you know what, they did. I immediately felt more control over my finances. I knew what my money was doing thanks to Rule One. Rule Two really helped me even things out so I wasn’t blindsided by less frequent expenses. When things went wrong, I adapted and adjusted per Rule Three. Things were going…okay.

I became a forum rat and read the blog whenever Jesse posted something new. But I still wasn’t feeling this “magical thing” that people on the forum were talking about. Things were better, but months later, my life didn’t feel radically changed.

Then I started reading posts on the forum by people who’d been successful with YNAB. They were living on last month’s income and their lives really did seem changed.

That’s when I realized that unless I tried, I would never get a buffer. By not trying, I had removed all chances for success.

So I made a deal with myself. I decided that I would put something toward my buffer that month. I would try. In my mind, I imagined that it would be about $10. But hey, $10 is a step in the right direction! I resolved to work on it even if it took a long time. I wanted to grow a surplus in some categories (car repairs) but in others I didn’t care about a surplus (eating out). So I shuffled things around and I threw any extra money I could at the buffer. At the end of the first month, I’d saved $100.

Here’s the kicker: It wasn’t that hard. That $100 was surprisingly easy to find. Hey, if I can do it one month, I can do it every month! I decided to send a set amount of money toward my credit card debt and put everything else to the buffer. (I had moved my credit card debt to a zero percent card, so the debt wasn’t costing me anything, at least in that sense.)

Then I had a month with an extra paycheck, so I threw a bunch of that at the buffer. The positive momentum fed on itself. I went through my house and looked for all the things I hadn’t used or touched in years and sold some stuff on craigslist. That went to the buffer. Within a few months, things started to feel really different. Cash flow was no longer a concern. I wasn’t worried about the bank balance.

My buffer was growing and more importantly, it started to feel possible. I could see the light at the end of the tunnel.

Now, full disclosure: I had two setbacks while I was saving my buffer. I had a car die and a computer die. If those things had not happened, I would have saved my buffer much sooner. In the end it took me about a year from when I started trying. I believe it was June 2008 when I finally got my buffer. A few months before that, I was thinking ahead a bit. I realized that with an extra paycheck and a little cutting back, I could squeeze through June on the money I’d saved. That meant my June paychecks could take care of July and I’d be there.

It wasn’t until I finally arrived that I understood the magical part of having a buffer. The peace of mind can not be overstated. I set all my bills on auto pay. I knew I could because the money would be there. If a month was going to be tight I could see it coming before it arrived, giving me time to adjust and adapt.

But the biggest change was the impact on my cash flow. Here’s a few charts to illustrate my point.

This is what my cash flow situation looked like before YNAB. I was paid twice a month. The dollars represent my paychecks.

I’d get paid and immediately spend down the paycheck. Sometimes I’d run out of money before the next check arrived and have to use a credit card. It was a state of constant stress.

Then I started saving money for rainy day funds and that helped a little. I had more cash in the bank cushioning me from the financial edge and the spending and earning was sitting on top of those funds.

But take a look what things looked like once I had saved my buffer:

My earning and spending was happening on top of a huge cash reserve. My buffer and rainy day funds grew my bank balance. I was living on less than I earned.

It was totally worth it. I would never go back. Never having to worry you have money to handle things is magical. Not having to time paychecks to bills is life changing. With this in place, I now spend far less time managing my money because things just hum along.

It reminds me of something that happened every year when I taught public school. Before working for YNAB, I used to teach high school music. Fall was audition season when kids would try out for regional and state honors festivals. Every year kids would come up to me and ask, “Miss Lowell, do you think I have a chance of making it into the District chorus?” My answer was always the same. “If you try out, you have a chance. If you don’t try out, you have no chance at all.”

Do you want a buffer? Increase your odds immediately by deciding to try. $10. $50. Put something towards the buffer each month.

The positive momentum will feed on itself. Things will start to feel easier. You’ll worry less. You’ll feel more confident. It doesn’t matter how long it takes you. Just work on it and consider each dollar saved progress.

Join the cool kids in Bufferland. Because I can assure you, once you are there, you will never want to leave.

*When I found YNAB, Rule Four was Rule One. Mark was wondering in his buffer blog post about why we changed the order. We did it because when Live on Last Month’s Income was first, it gave new users the impression that they couldn’t use YNAB if they didn’t have a buffer when they started, which is of course not true. It’s the only rule most people need to work towards over time. But the other three rules help you get there, so Rule Four is really the ultimate goal.

**Jesse is one of the smartest guys I know. He knows money. Listen to him.