The end of the month is a trying time. Or the end of the pay cycle, for those people who are living pay-cheque to pay-cheque. Money is running low. It’s time to think about whether you can stretch the washing-up liquid to last until more money is available, whether the milk will last, whether you can make it to work without fuelling up the car…
For some people this cycle means they literally have no money. The bank is empty, and they may perhaps end up having to dive into the overdraft, or charge things to their credit card.
We’re lucky. We’ve never had to do that.
The only time I’ve ever been into overdraft was when I started uni in England and had to pay for my accommodation before my student finance came in. In fact that was the only time I’ve even had an account with an overdraft.
As for the credit card, I only recently got one and I PIF it. If you’re unfamiliar with the term PIF is paid in full, and means that you never run a balance on the card. You pay it off, completely, every pay cycle. Although even if you are PIFing you may still be on the credit card float. If you are, I would suggest trying to get off it.
Anyway, I was talking about the end of the month being tight, wasn’t I?
As I said, we’re lucky. We don’t have to go into overdraft. We don’t have to rely on plastic money that’s really just borrowing from our future selves. We have a buffer. We live on last months income.
You’re probably wondering, what does that mean exactly? Unless of course you are a fellow YNABster in which case I salute you and thank you for coming by!
Living on last month’s income means freedom. It means that all the money you need for each month is sitting there waiting to do its job when the month begins. It means you don’t have to worry about whether your money will be enough for food, petrol, electricity and everything else you have to cover before your mid-month paycheck arrives. The money is already there, waiting patiently to do its job. You can see at a single glance whether this month is going to be tight or not.
Maybe you’re even more confused now. How can money be tight for me, you wonder, if I have February’s money already sitting around waiting to be used? I can understand your confusion. I can see how it is easy to think we’re flush with money, considering that February has been funded for the majority of January.
When you budget the YNAB way your bank balances are irrelevant.
Okay, that’s not entirely accurate.
As a YNABster the bank balances are not the thing to pay attention to though. You want to look at your category balances. Our grocery budget was empty halfway through the month, more or less. It was stressful.
It’s irrelevant that, over in the next month, February’s grocery money was taunting me. That’s not much help – February’s grocery money has its job and that job is to buy food in February, not January. As a result I had to pull money from our emergency fund in order to buy milk. I had to take money out of the cat food fund (where we had excess) to buy carrots.
But, and here’s the important part, I did not have to charge anything. I did not have to go into debt to keep us in food. Even if I hadn’t had categories to WAM (that’s whack-a-mole) from I would have been able to manage, because the buffer would allow me to take the money from next month instead if needed.
Finances are stressful. Believe me, I know. I’ve talked before about the fact that we are losing money faster than a sieve loses water. But a buffer, and a budget, makes everything that little bit easier.
PS, If you think that you too could benefit from a budget then you can try YNAB’s free trial. If you decide to buy then you can use this link to save 6$ (Full disclosure – I will receive 6$ as a reward for each successful referral), or if you use Steam keep an eye out there as YNAB is sometimes included in their sales. And if you are a student you can get YNAB for free.