How to budget, save money & establish financial health

MariaC - June 3, 2022

Advice

I see great forum discussions emphasizing that physical health and financial health are two of the key foundations to a good prep. Practicing survival skills and acquiring gadgets are really fun, but I’d argue that they’re the grill lines on the steak.

John Ramey gives solid notes on how to create a simple budget in the article, “Why personal finance is critical for preppers and tips on money management.” I am such an enormous nerd about that topic, though! To me, budgeting is inherently prepping — they’re one in the same. But how? And where can you get started?

So, here’s deep dive about:

• how do you actually make a budget that reflects your individual values, needs, and priorities?
• And once you’ve drafted that budget, how do you stick to it?

I’ve found success (at last, after lots of failures and self-doubt) with an app called You Need A Budget, or YNAB (“why-nab”) for short.

I like YNAB because it’s a values-neutral system. Want to spend $10 a day on Starbucks, get a dog, pay off your debt, and plan to live off-the-grid on a homestead in 5 years? Yeah, cool! You can do that. Or anything else that’s important to you, because you’re the boss of your money, not a set of arbitrary rules.

The system helps you be the boss of your money by helping you to discern your financial priorities and achieve clarity about what’s most important for your money to do next before more money arrives. You do this by writing down your priorities, then choosing the most important ones to fund, and assigning your money jobs (e.g., “pay for groceries this week,” “sit there and look pretty in my car emergency fund”) until all your money has been assigned jobs.

There are four rules in YNAB’s system to help you make that happen:

1. Give every dollar a job. Whenever money arrives, you prioritize what jobs need to happen first before more money arrives. Do you need to pay the electric bill, buy groceries this week, or make sure to have some money set aside for beers with your friends? YNAB helps you discern that choice proactively, then helps you follow the plan that you create.
2. Embrace your true expenses. True expenses are reoccurring, less frequent expenses. Sometimes, they’re things that we know are coming up on a particular future date, like buying Christmas presents or paying for the kids’ summer camp. Other times, you don’t know when they’ll strike, but you can safely assume that someday, you will need money to pay for car repairs. Rule 2 helps you identify what your true expenses are, plan for them, and start setting money aside for them before you need to have it available to spend.
3. Roll with the punches. Did you dine out one too many times? Or maybe you actually need to replace your cell phone after it went for a dip in the lake, but you don’t have money set aside for that? No problem; that’s normal, not a reason to feel guilty or quit budgeting. Circumstances change and your plans change with them. Your budget is no different. If you overspend in one category, Rule 3 tells you to cover that spending with money from another category and keep on trucking.
4. Age your money. Slowly begin setting aside money to spend on next month’s expenses. In time, you’ll reach a point at which you’re spending money today that entered your bank account for the first time last month. (You’ll be able to cover May’s mortgage with dollars from April.) The app helps you to be purposeful in your spending and consistently spend less than you earn. This allows you to break the paycheck-to-paycheck cycle, establish emergency savings, and build a more secure foundation for your prep.

Here are a few free places to get started:

1. Get Started Video
2. Get Started Guide
3. You Need A Budget book by Jesse Mecham — available free on Kindle through my public library, and maybe through yours?
4. Live, Weekly Workshops
5. YNAB Reddit
6. YNAB Podcasts on Spotify, Apple Podcasts, etc.
7. Free 34-Day Trial — you do not have to enter payment info when you create your account to get started

I’m not a YNAB employee, and this isn’t a sponsored post. I really am just a huge fan of this system. I see how much it helps others, and it’s helped me tons. It’s okay if it’s not for you; no budgeting tool is a one-size-fits-all solution. I share this in case someone else reads this who, like me, feels totally underwater and unable to start.

Budgeting, like physical fitness, sounds simple on the surface. When I started to get into it, I learned that it’s actually deeply personal. It often requires education, access to tools, and peer support for people to be successful at it. It’s hard to establish the habit of it, and easy to fall off the wagon. I hope that this post helps others for whom budgeting is a big challenge in your prep.

Drop a note in the comments if you’ve got questions, or if you’ve used other tools that work well for you. I’d love to read more about anything that helps people succeed in the threads below, even if it’s not related to YNAB.

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I have been using the free version of Dave Ramsey’s Every Dollar budgeting app and it looks somewhat similar to, but not as polished and nice as YNAB. 

The thing I liked about Every Dollar, and it sounds like YNAB does the same thing, is assigning every dollar somewhere. I especially admire YNAB’s rule #4 of aging your money and setting some aside to pay for next month’s expenses to break the paycheck-to-paycheck cycle. 

If I wasn’t budgeting already and wanted to start, I would probably use YNAB over Every Dollar just because it looks more guided, easier to use, and more modern. 

 

Oh, cool! I haven’t investigated Every Dollar before. When I pull up the website, it looks a lot like YNAB! You’re right — one of the things that I see in common between the two is how both ask the user to create categories to determine what that lump of money your bank account is for. That’s had a huge impact on my ability to discern what I want, to plan for my spending, and to establish emergency savings. 

It looks like Every Dollar lets users forecast future bill payments. YNAB does that a little through its Scheduled Transactions feature. I’d be interested to hear how Every Dollar’s future bill calendar works. Does it allow forecasting, i.e., putting income that you haven’t been paid yet into a future month’s budget to plan for that month? I know the bill calendar is something that YNAB users talk about wanting in-app, so I’m curious about the feature differences.

 

It does allow you to plug in bills, income, and other things months in advance. If you know you are getting a raise next month, you can plug that in and start budgeting and planning for that month. 

There is an Every Dollar+ subscription that allows you to connect transactions to your bank and automate some of the process like YNAB seems to do, but I’m not a big fan of having them see all my accounts and transactions so I just plug things in manually using the free version.

 

Thanks for sharing, Maria!  Very informative.  What is the approximate cost of a subscription to the YNAB app?  Their website does a great job of promoting the free 34-day trial but, annoyingly, it makes no mention of what the cost will be beginning on day 35.

 

Oh, sure thing! The cost is $98.99/year or $14.99/month USD. 

I recognize that that is a high price, and that not everybody can afford that or needs that. I get a lot out of using the tool, and the cost is very worthwhile to me. If the cost is a mitigating factor for people checking this out, here are a few ideas:

• I dig how YNAB makes the methodology behind the system really clear, to the point of talking about how to set up a budget using a spreadsheet (without buying a subscription to the app) in the YNAB book. See if your local library has a copy, or if you can snag it on sale on Amazon Kindle.
• College and graduate students can get a free year of YNAB through the student program
• 501(c)(3) nonprofit organizations that do financial literacy work can get access to free subscriptions of YNAB to give to the people whom they serve 

 

Living on a small holding, mortgage free, no car loans etc. has been achieved by compromising on other things in the past. Foreign holidays have been something that happened to other people. Big flashy cars or huge TV’s were something we could do without as bad investments, often bought solely to salve your ego they lose money by depreciation so fast that you may as well be burning your cash.

The key to budgeting is to keep track of your expenses and adopt a mindset of “do I need this”, “can I find it cheaper”or“will it last without needing repairs or upgrading”. 
Another one of my mantras is “quality never goes out of fashion” a quality item may cost more but could outlast several cheaper iterations so if you truly need something make sure it’s going to do the job properly for a long time to come and look after them, respect your possessions (I’m still using hand tools owned by my Father and Grandfather and I’m 53)

 

Great points and ideas.

I’ve got mixed feelings on Dave Ramsey, but I love his quote: “If you will live like no one else, later you can live like no one else.” I hear that idea echoed in your first sentence about compromising, @Joker. I’m feeling that compromise right now in my own budget. Choosing not to go to a dear friend’s wedding in another region of the country in order to save money for a down payment on my first house makes me feel the pinch, but I’m confident that it’ll be worth the sacrifice when I open my own front door and get to walk into a place that’s all mine in 3-4 years.

Keeping track of expenses, too, has really helped me to identify what do I need, what do I want that’s important to me to have, and what’s nice to have but I can do without. Without a plan for my money, it’s easy to say “I need groceries” and spend $80+ per week for just myself. Really, I love to cook and to eat well. I do need some groceries, but I do a good job of limiting myself to $50 a week — more than that is nice to have, but I can do without.

I’m glad that my dad taught me the importance of buying quality. I love that you’re still using hand tools owned by your father and grandfather. That sounds very satisfying and special, to keep something useful in good condition and to share that connection with the men who used it before you. 

 

Kudos and great work going into more detail on budgeting. Learning how to handle my finances better changed my life. It took me a while to figure it out and get into the habit, but after practicing for several months and years it became a lot easier.

I definitely sleep better and have less stress in my life with my finances more under control and following a budget. I agree with you that finances are a great prep. I was only able to start slowly building an emergency fund because I began budgeting.

Another guide I like is “The Moneyboss Manifesto” (it’s free). The author discusses taking charge and responsibility for your own fate, something that feels well-aligned with a preparedness mentality. He walks through thinking about your goals in life, and strategies for earning more money.

I like John Stokes’ note from “Doomshopping: How to Stop Overspending” – “If you can develop the instinct of, “let me add that to my list” instead of “let me just buy it and deal with the guilt later,” you’ll be able to prep without the guilt from overspending.”.