The master bedroom in our house is upstairs, and we have a great, huge chest of drawers there. The dresser was one of our first pieces of furniture, so it has sentimental value.

When the laundry is done, it ALL goes upstairs and is literally dumped on our bed. My wife and I then fold it while we’re watching some show or something.

Your money (and everyone else’s, so don’t feel bad) is not as bad as the clothes all sitting on the bed. If I want to wear my red shirt, I CAN just start rummaging through the clothes. I know it’s there. It takes me a while to find it, it’s not efficient, and I know there’s a better way, but hey, I found my red shirt so the crisis is averted. This money management method doesn’t work long, and leads to stress, and lost clothes (money).

What your money is probably like though (again don’t feel bad) is maybe something like this. You fold all the clothes, and then you remove all the drawers from the dresser and just stuff them into the “shell” of the dresser however they’ll fit. NOW, if I want my red shirt, I KNOW it’s in the dresser, I just have to rummage until I find it. It kind of looks like everything’s fine from the outside (at least when viewing the dresser from the side), but really there’s chaos in there! And it stresses you out. And you know in your heart of hearts that it’s not the right way to do things :) The drawer-less dresser is your main checking account.

YNAB is the drawers.

Each drawer has a purpose. Top-left is for the unmentionables, top-middle for socks, second drawer down for t-shirts and shorts, etc.

Right now you have this pile of clothes in a drawer-less dresser and YNAB’s going to apply some organization to it.

You’ll create budget categories.

Each month your hard-working, educated, super-human doctor husband (seriously, super-human most likely, I have friends trying to make it through residency!) brings home a clean pile of laundry and dumps in on the bed. The way you guys have this working (for every couple, this is different), it’s now basically your responsibility. Your job will be to take that pile of money and organize it into drawers (categories).

Heck, you may have a closet for hanging clothes, and two dressers (a checking account, a few savings accounts, etc.) but YNAB doesn’t care about where the clothes are physically NEARLY as much as it cares about what you’re going to DO with the clothes.

So, back to money.

Let’s say you take home $5,000 per paycheck or something like that. There’s that pile of money. As far as YNAB is concerned, you’ll record that as an Inflow and that’s the equivalent of your husband dumping the piles of clothes onto the bed. Now, that money is ready to be allocated.

You’ll notice the $5k sitting in your Available for that month. You’ll want to modify, create, and delete the default Budget categories to fit your needs. The defaults are good, but you’ll want to tweak.

Now you simply start adding money into the Budgeted column. Have a bill due? Add the money there. Want to start saving for a great vacation? Add some money there. You know the tires are balding…add some money to the Repairs category. Give a little away, save some in your emergency fund, etc.

There are some intricacies to YNAB’s Method that make it a bit quirky (massively effective! :) ) and the first is Rule One. This may be stretching it, but going back to the clothes analogy, if you’re living on Rule One it basically means your husband brings home a pile of clothes in March and dumps it…where would a guy dump it? On the floor.

You don’t care so much though. In April, You (YNAB automatically) take that huge pile on the floor and move it to the bed. You put it all away, organized according to your and your husband’s values/priorities, and you’re feeling really good about things. Because as you’re spending money, pulling clothes out of the drawer for this or that in April (new baby clothes–congrats by the way!) you see your husband — halfway through the month — march up the stairs with a whole new pile of clothes, which he dumps on the floor!

See how good that feels? You’re there spending money and while you’re doing that, your husband’s out there earning money that you don’t even NEED until May!

Rule Two basically says, “Hey, don’t leave clothes on the bed. Make sure they’re all put away.” (prioritized, doing a job, etc.) This is huge psychologically, but we won’t get into that.

Rule Three comes about where you have this HUGE drawer in your dresser that’s pretty empty, but you want to take some sweet vacation. Each month you just throw some clothes in there. As time goes by, the drawer becomes ever fuller until you take that vacation, don’t use any debt, and have the time of your life. When you get home from vacation that drawer is empty and you don’t feel guilty at all, because that’s what it’s there for.

Rule Four helps everything stay in balance by forcing you to pay yourself back if you go over budget. Can’t really extend the analogy too far on this one… ;)

Kiplinger’s Laura Cohn interviewed Dan, who’s been using YNAB since January. My favorite part:

He and Meyka were inspired by new friends to buy an old 30-foot sailboat they found on Craigslist for $4,500. The boat, named “Miss M,” after Meyka, provides an oasis of calm on the weekends, when they drop anchor in the local bays. “We now know we can be content with less,” he says.

Read the entire article.

YNAB is sponsoring the Your Money Bus Tour to help raise awareness about personal finance (the foundation of which, is sound budgeting!). Stop by for some advice from some very qualified experts!

Read more about it here on Fox (Watch specifically at 1:30 for the YNAB mention :) ).

I’ve been wanting the ultimate driving machine for quite a while now. I think since I was seventeen or so. My wife finally caved and I was able to buy one!

My wife’s main concern was the fact that it’s pretty flashy (I chose silver). She said she didn’t want it to go to my head, was concerned about what others would think, etc.

None of this would have been possible except for the fact that we’ve been disciplined and calculated with our finances. This budgeting thing really works.

Take a look at my dream come true!

Taylor sent me a screenshot today of the first looks of the Register in an AIR App. I became giddy. Sure, only a few things work on it, but you could navigate from the Register to the Budget…

Everything’s still subject to visual change…

The back-end programming is all very much in there. We just have to put a pretty face on it. I wouldn’t say it’s the equivalent of practicing and practicing for your play and then just having to apply the stage makeup…there’s more to it than that. But we’re getting there.

Or maybe sending a courier with a copy of the software.

What would you say to Jen to convince her?

Check out her blog post and leave a comment :)

What do I want you to do with all the extra money you’ll find?

Build your buffer…pay down debt…whatever you want!

Shannon emailed me this morning, reporting on the outcome of using a YNAB Savings Tip: She bought a $170 wall hanging for $34:

When the associate arrived, a young thing not more than 23…I looked her in the eye and said….”I love this picture, unfortunately there is a little damage to it. Is this the best you can do?” and waited…..

Finally the associate pointed out that the picture was already 75% off and she could not go any further. I countered with the fact that the wall hanging that was not damaged sold for the same price. At this point she offered to call other stores to find a wall hanging without damage. I am ashamed to say that I caved….I wanted that wall hanging and knew that just a little wood glue would fix the damage. But it doesn’t hurt to try right?

Imagine my surprise when I got to the register to pay for my fantastic find when the manager came up and said” Ma’am, I’m going to take a little more off the wall hanging for the damage!” WOW! I picked up a wall hanging worth $170 for $34!!!!

I look at it this way…..the worst someone can say is no….just ask!

Shannon saved an additional 20% off the list price using a very simple, tactical YNAB Savings Tip.

Taylor (yes, the same Taylor that is YNAB’s lead programmer, working magical things with 1’s and 0’s) just skyped this to me yesterday:

A $350 savings (plus more insurance) isn’t all that bad!

How Do the Tips Work?

1. They’re free. We’re saving money here.
2. They’re simple, doable, and relevant. I’m not talking about being a miser here — at all.
3. ONE tip, each week to your inbox. Implement just one per month and you’ll likely save over $1,000 in the course of a year (heck, the tip I wrote last week will probably save you that all on its own).

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YNAB loves Mrs. Micah as well. If you’re a freelancer (who isn’t these days?) then you’ll need to subscribe to Mrs. Micah’s blog.

Finances + Freelancing = Nightmare

OR

Finances + Freelancing + Mrs. Micah’s Tips = Fantastic

Your call!

Don’t take six months to get there. Don’t do it halfway. Don’t waste time.

Sell every gadget. Sacrifice every luxury. Work every minute. Eat in.

If you can fill the unforgiving minute With sixty seconds’ worth of distance run…

This isn’t pie-in-the-sky talk: I promise it will change your life.