YNAB – Online Course – Day 3
Ready to get to work? Here is where the real meat and potato part of the YNAB budgeting system begins. The YNAB design is built around Four Rules of cash flow. Rule #1 will help you stop living paycheck to paycheck. That is right! The idea of living paycheck to paycheck is out the window. The pains of not knowing exactly how much money you are going to have to spend this month is over.The idea is simple, but implementing the rule will take a firm commitment to changing the way you look at money.
Most people budget for the month, based on what they expect to see coming into their bank account. This will work for a lot of people, but if you have an irregular income, due to commissions or bonuses, you may not know exactly how much you will be earning for the month.
You must live by the rules
YNAB Rule #1 says that you should live on last month’s income. How can you do that? Simple…you work up to it. Basically, you need to make enough extra income so that you have a one month reserve in the bank. Once you do that, you live off of the reserve, and each month following, you will be able to live off of last month’s income. You no longer have to worry about how to set up a budget with your irregular income.
I will be honest with you. Getting a one month reserve won’t be easy, but it is doable. As a matter of fact, everyone that is winning in the area of finance has what is called an Emergency Fund. An emergency fund is basically a buffer designed to cover 1 or more months without an income. That is what you need; a one month buffer.
We’ve only just begun
Don’t think that a one month buffer is the end, it is only the beginning. The buffer eliminates the unknown part of budgeting that prevents a lot of people from ever trying. As soon as you have your buffer, you can no longer use the ‘unknown’ as an excuse. Each month you will construct your budget based on last month’s income.
Of course your big question is how do I get this one month buffer. Like I said, it won’t be easy, but you can do it. The online course will give you eighteen different ideas on how you can find some extra cash each month. For a short time period you will need to be really crazy coming up with ideas on how to either cut back on your spending or earn extra income. I am not going to give you the list here, but you can get it by signing up for the free YNAB online course. However, I am sure that you are already coming up with some ideas…aren’t you.
Tomorrow we will discuss how simple budgeting really can be.
Related Websites - Get your finances under control in a single day.
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