In my 2017 review, I wrote about a skill I’ve learned that I consider to be my superpower. That skill, believe it or not, is budgeting.
Of all the pieces of software I use frequently, my budgeting software (You Need a Budget) provides me, by far, the best return on investment. It costs only $50 / year and has already saved me many thousands of dollars, not to mention making my finances completely transparent and stress-free.
I even credit it with much of the success of my business, as it lengthened the runway I had to work on the business before I needed to earn money, and it allows me to forecast large expenses and keep our cash position healthy.
I currently have three budgets: personal, business (CAD) and business (USD).
Specifically, here’s how YNAB has benefitted me:
- It gave me much more runway (time) to try and make my business work when I was earning nothing and living in my girlfriend’s parents’ basement. No matter how good you are, building a business/skill takes time (years).
- When I started to make some money, it allowed me to keep an exact pulse on my spending, making sure I wasn’t spending too much. Read: giving me more time!
- It has allowed me to invest more money, each month than I would have been able to without such visibility. With compounding, this will add up over my life.
- It has forced me to understand, talk about, think about, etc, what’s really important to me. Where money should go. When sacrifices should be made, and when they shouldn’t.
- It has eliminated arguments and stress about money in my relationship. We’re both on the same page, and there’s no way for our individual priorities to change without having to talk about it, soon.
Here’s what the software looks like when you first create a new budget:
There are categories for expenses you pay every month, like rent, groceries, and internet. The second category – True Expenses – are the ones that used to trip me up: unexpected medical bills, needing to replace a computer, car insurance, etc. Basically, infrequent lump-sum expenses that I forgot about until it was too late.
YNAB makes sure that I budget every month for, say, my annual car insurance payment so when it comes, I have all the money and can pay it without a second thought. This is one of the four rules in the YNAB method – I highly recommend reading through all four.
I’ve customized my personal budget, but it looks similar to the stock one above.
Here’s how YNAB has benefitted my business:
- It has always kept the business in the black. As a bootstrapped company, cash is everything, and I’m proud to have never overextended the company’s finances.
- Just like budgeting for my “True Expenses” personally, I’m never worried about a large expense because I set aside money for them every month.
- I feel confident managing our cash flow. This is a huge stress-reliever and I’m grateful for it, as there’s no shortage of stress in building a business.
- It forces me to think about and understand how to best deploy cash. It’s easy to rack up recurring subscription costs for services that aren’t that useful. Getting clear about what’s necessary, and what isn’t, keeps things lean.
I’ve customized my business budget quite a bit, into key categories like Team, Admin, Office, Software, Hardware, Professional, and Marketing. I don’t use YNAB as a bookkeeping replacement (like YNAB founder Jesse does), so there’s no need to get too complex.
The way my business budgets are set up, I have visibility into key expenses, revenues, and can see, at a glance, how things are going.
I get a lot of pushback when I talk about budgeting software. It’s weird. Maybe it’s a quirk of human nature, but people can’t seem to get past spending $50 to save money. Spending money on entertainment, or on a method to make more money seems to be thought-less. But spending to save money hits resistance.
It’s obvious at this point that I’m pro-budget. I think proper budgeting should be taught in schools; rammed into our heads until we budget in our sleep. Properly managing one’s money is that important. It makes things so much easier, at a cost of simply being willing to be honest with oneself, and being enough of an adult to understand that one can’t have everything all at once.
Good things, it’s said, come to those who wait. Well, I think great things come to those who budget. The benefits I’ve experienced, and continue to experience, are remarkable. And that’s not an exaggeration.
I’ll stop preaching now. But this is potentially the most impactful piece of advice I will ever give. Just give it a try!