Spending Money Is Not Bad

At YNAB, we have four simple rules that help people get control of their money. (If you don’t need to review, skip down to Old & Wise.)

Rule One: Give Every Dollar A Job. Super self-explanatory, but the idea is to be intentional about what you need (and want) every dollar to do before you spend a dime.

Rule Two: Embrace Your True Expenses. We want you to look ahead, and think about larger, less frequent expenses, and instead of letting them sneak up on you and force you to scramble or use credit cards, treat them like monthly expenses and put money aside for them every month. Think Christmas, insurance premiums, summer camp, car repairs, etc.

Rule Three: Roll With The Punches. By which we simply mean that as life changes, as you change your mind or your circumstances shift, change your budget. No guilt. You aren’t doing it wrong. Your budget should be a living, breathing thing that changes right alongside your life.

Rule Four: Age Your Money. We want you to get to a place where you are spending money that you earned at least 30 days ago—money that is at least 30 days old. Will this happen overnight? No, probably not. How do you get there? Just keep following rules 1-3 and it will happen. Why is it so important? Because it basically eliminates financial stress. Truly.

Old & Wise

As you save, your age of money goes up. You earn more money and you save more money.

And when you go to spend money, you aren’t spending the money you just earned, you are spending your oldest money. It’s like a grain silo. You pour money into the very top, and pull money out of the bottom.

As your pile grows, and your spending rate decreases as compared to the rate with which the money is being added to the pile, you will see your Age of Money really climb.

Peace Of Mind

Age of Money is not intended to be the end-all, be-all measure of your financial security, but we find that the bigger the number, the happier you feel. It’s just a little extra peace of mind. You are making progress. You can see it. You are getting ahead. It feels good. No surprise there.

Spending Money Is Not Inherently Bad

However, your Age of Money will not go up and up and up forever. There will be dips, and ebbs and flows, and maybe even, crashes. You aren’t just saving money to save. You are saving for Christmas and vacation and tuition and a new computer and home improvements. When you reach your goal and it is time to spend that money, your Age of Money will drop. The next time you spend money, you will be spending newer money, because of the big chunk you just grabbed.

Should you feel bad about that? Um, no. You just bought fill-in-the-blank with cash you’ve been saving. That is a budgeting win! Did your Age of Money dip in December when you paid for an awesome Christmas with cash designated for that express purpose? That is financial responsibility, my friends! Did your roof just collapse and you have to buy a new one with cash you have put aside for emergencies? Well, that is sad about your roof. But you have the money and that’s a pretty great thing.

If money is there to pay for things, you’re doing really well. The Age of Money metric is just a way for you to say, “Look at me! Over time, I’m doing pretty well! Great job, self—keep up the good work!” Now, go, and enjoy spending money, that you’ve planned for, on things you care about!

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