No doubt about it, I’m a money nerd. Despite being in the financial industry for over twenty years, I still read as many personal finance books as I can. Even the ones I find to be a rehash of timeless financial strategies usually at least offer a tidbit here or there that might provide a new way to explain financial concepts to clients.
But I REALLY experience a thrill when I find a book that completely nails it. Jesse Mecham’s book, You Need a Budget* is one that nails it. Budgeting has never been my forte when it comes to counseling people about their money. While I know HOW to budget, I have determined over the years that there is no single best way for people to approach budgeting.
Plus, I have a very judgmental mind when it comes to reviewing what people spend their money on, and frankly, it’s exhausting to keep my mouth politely shut!
You Need a Budget (also known as YNAB) is different. My all-time favorite book in the personal finance space is Vicki Robin’s, Your Money or Your Life. I read that book many, MANY years ago, and until now, no personal finance book since has even come close to it in my esteem. However, You Need a Budget is now firmly my second favorite personal finance book ever. It’s that good.
At the risk of sounding like a complete fan-girl (and I should note that no one asked me to write this review, I am doing it as a public service!), I loved pretty much everything about this book. Let me give you a brief tour of what you will find if you choose to read it, and then I will wrap up with a few additional highlights.
Give every dollar a job
Jesse’s YNAB system follows four simple rules, and this is the first one: give every dollar a job. I have used this same expression for years, and even wrote a blog post about it prior to my acquaintance with YNAB last summer. When I initially read the table of contents of YNAB and saw the first rule, I burst out laughing and knew I was going to absolutely love this book. I wasn’t disappointed.
Assigning jobs for your dollars is a simple way to think about money management. All you are doing is deciding in advance what your money will be used for. Sounds simple, right? It is, and yet, most people get their paycheck and THEN start paying bills and hoping there will be something left over for savings and fun. Deciding in advance where the money will go is the crucial key to successful financial management.
YNAB is all about developing goals for your life (and thus your money), and then assigning jobs to the dollars that come into your household in alignment with those goals.
Embrace your true expenses
Rule number two in YNAB is to embrace your true expenses. What does this mean? It means to not forget about the expenses that don’t rear their ugly heads on a regular basis. You probably have bills that come semi-annually or annually (instead of monthly), and those can be easy to overlook when planning out your expenses. You probably also have incurred expenses that popped up unexpectedly, such as car repairs or appliance replacement.
The unexpected expense is one of the chief causes of people failing with the budgeting process. They get all excited about controlling the month to month spending, feel like they are making progress, and then Bam! – along comes something unexpected that throws them for a loop and makes them fly the white flag of surrender.
Roll with the punches
Those unexpected expenses are one example of why rule number three is so important. Life happens, people. Really, it does. So instead of quitting your budgeting in a fit of hysteria when something goes wrong, follow rule three: roll with the punches. Instead of giving up, make adjustments to your budget. Or you might even have to go back to the drawing board and start your budgeting over. (In fact, Jesse actually suggests doing just that every few years to gain fresh perspective.)
Age your money
Rule four is a bit more challenging to understand, but once you do, I hope you will find it as life-changing as I did. Aging your money is simply lengthening the time between when you earn the money and when you spend it. You might be thinking, “Huh?” or maybe, “Yeah, right!” But stick with me here.
If you have no emergency fund and you await each paycheck anxiously to make the bills, your first project will be to cut back in order to give yourself breathing room. Ultimately, the goal will be to have at least an entire month’s space between earning the money and spending it.
This was a unique approach to me, even though I consider myself to pretty money savvy. I immediately went to work to set aside funds instead of applying every dollar to our saving and debt pay-down goals. Pretty quickly, I was able to get my two paychecks during December, and I had already paid ALL my December bills and funded my debt pay-down and savings goals for the month.
So, in essence, I now had ALL my December income ready to go for January’s expenses. This approach gave me 100% ability to give all those dollars a job, ahead of time! I’m definitely a convert to this new way to approach our budget.
Let your goals lead
Here is the powerful bottom-line theme of the book, in my opinion: let your goals lead the way. Either alone or with your spouse/partner, establish what you want from your life. Then create your spending plan to support those goals. The mechanics of budgeting are really secondary to having a clear picture of where you are going. Once you know, then you can give your dollars the jobs necessary to achieve those goals. Jesse refers to this as using your budget to write your future (page 23).
And best of all, this method of letting the goals lead will help curb impulse spending! If you know those dollars are earmarked for your important goals, you’ll be less likely to let them go astray in the heat of the moment.
A couple more highlights to check out
Don’t ride the credit card float (page 50): This is the RIGHT way to use credit cards. Credit cards aren’t evil, they are tools. You are using them correctly when you use them as a convenience and not as a 30-day loan.
Have a budget date (page 119): Budget with the people in your household! Make it enjoyable!
What to do when you want to quit (end of the book): Jesse outlines reasons people want to quit budgeting and offers tips for what to do instead.
There’s a budgeting app available: I cannot vouch for this, as I have not tried it. But if you like the YNAB philosophy, check out the website for lots of great information. You’ll also be able to see if using the YNAB app is for you.
There you have it, my review of You Need a Budget. Have you read it? Have you incorporated the method into your financial life? Let me know what you thought of it! Share below! Or if you want to start a discussion with some like-minded friends, join the free SimpleMoney Community on Facebook to share your thoughts!
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