YNAB is a powerful tool for managing personal finances and achieving financial goals, like getting out of debt. In this video, I discuss the life-changing magic of YNAB (You Need a Budget) with my friend and productivity expert Monique Malcolm.
Monique shares her debt free journey and personal experience of using YNAB to pay off $173,000 of debt and achieve a positive net worth.
She explains the four rules of YNAB, which include giving every dollar a job, embracing true expenses, rolling with the punches, and aging your money. We also discuss the learning curve of using YNAB and the importance of trusting your budget. Monique recommends using resources like the YNAB website and Reddit for support and learning. We chat about the benefits of using YNAB for managing income fluctuations and provide information on where to find resources for getting started with YNAB.
Monique Malcolm is a seasoned productivity expert, writer, and the founder of Take Tiny Action. She's talked about her debt free journey via her blog & podcast here: From $173,000 in Debt to Debt-Free: My 4-Year Journey to Financial Freedom.
She is dedicated to helping people achieve their goals in a sustainable way. Monique’s approach involves taking small and consistent steps over time, which allows people to achieve their ambitions while maintaining a healthy, balanced, and fulfilling lifestyle.
Monique is featured in this video about how to achieve your creative goals in 90 days, and she was also a guest on Episode 29 of the Badass Creatives podcast, talking about setting goals and taking action.
Ready to get started using YNAB? Sign up here with my referral link.
TAKEAWAYS
YNAB is a powerful tool for managing personal finances and achieving financial goals, especially for creatives.
The four rules of YNAB (give every dollar a job, embrace true expenses, roll with the punches, and age your money) provide a framework for effective budgeting.
Using YNAB requires a mindset shift and intentional decision-making about how to allocate and spend money.
Learning resources and community support, such as the YNAB website and Reddit, can help users navigate the learning curve and gain confidence in using YNAB.
VIDEO TRANSCRIPT:
Mallory
Monique, I'm so excited to talk with you about something that we are both very passionate about, and that is the life-changing magic of YNAB, AKA You Need a Budget.
Monique Malcolm
You need a budget and if you don't have a budget, we're going to teach you how to get a budget, because you need it.
Mallory
Get that budget. So you got started with YNAB before I discovered the life-changing magic of YNAB. Do you wanna talk a little bit about what it is, how it changed your life?
Monique Malcolm
Yes. So we got to go back to the year of 2018. So it was December 2018. I remember I had an Ulta credit card, like the store card, and it didn't have like a large credit limit on it. But I was like so close to having it maxed out. And in that moment, I felt so stressed because I was like, shit, all my credit cards are basically maxed out.
And...I was like, I can't keep living like this because it was just so stressful every month to try to balance all of these like minimum payments and then still feel like nothing's happening. So at that point, I found this debt payoff spreadsheet. I put all my debts in there, all my credit cards, my student loans, our car loan, everything in there.
I put all of our interest rates and I had a plan: I'm gonna try to pay off as much of these credit cards as I can in this one year. So that first year, I think we paid off like around $30,000 in credit card debt in that first year.
And at that point, I realized like, oh, I think we could do even more. Cause the totality of all of our debt was like $173,000... that was credit cards, student loans, cars, like everything. (No, I didn't have $173k credit card debt. It was like 100K in student loans.)
But I remember thinking like, great, this has worked out so far, but I hadn't really learned or mastered budgeting. It was working out because my husband works in sales and he gets bonuses. So we were just using like bonus money to throw at those credit cards.
But I was like, I think we could do even better if we actually really learned how to budget and like understood our numbers and ran real things in.
So fast forward to December 2019, and I'm trying to figure out, well, how are people managing their money? Because I've tried budgeting with a spreadsheet and it sucked. And I couldn't understand, like, it just, it was so manual, it took so much effort. So then I saw some friends talking about budgeting and somebody mentioned YNAB. So I looked it up.
And I was like, cool, this looks good. It has an app. It seems to make sense. And so I created my first budget and YNAB in December of 2019. So a year after I decided that I was going to start paying off those credit cards, here we are in 2024. I have not looked back. I have knocked out all $173,000 of debt for the first time. And it took us four years.
For the first time in my marriage, my husband and I have a positive net worth and we've been able to max out 40ks and IRAs and really take control of our finances because of YNAB.
Because it just made, for the first time, it really made budgeting seem less about sacrifice and more about like, what do you want? What are your priorities? How do you wanna allocate your money?
And that shift from like, you have to put $500 desire for groceries. And if you run out, like you got to sacrifice, maybe you got to buy beans and rice so you can stay there. YNAB’s four rules for budgeting changed everything.
Like this whole idea of giving every dollar a job and rolling with the punches. So if you go off budget for one of your categories, you can move money from somewhere else. That felt a lot more approachable to me than just being like, all right, you only got $50 for gas this month, so I don't know what to tell you if you run out of gas. Next month, you got 50 more. Try to get to next month. I didn't like that approach.
Mallory
Yeah, yeah, because I remember way back years ago, I tried using Mint, which doesn't even exist anymore. I think they closed down. But Mint just so we would like pull in my, you know, numbers from my different like checking accounts and credit cards accounts. But it just kind of showed me like what was happening. And I didn't have to do anything.
And I think that's part of it is that with YNAB, you actually have to bring intentionality to your money. You have to like have some awareness and some mindfulness. Actually, one of my favorite finance folks, Ramit Sethi, author of I Will Teach You to Be Rich, he even talks about this. He calls it the mindful spending plan. And in his books and stuff, he even recommends YNAB, even though he talks about like hating budgets. And then it's like YNAB is called You Need a Budget.
But I try to explain this... (when I get so hyped up. I know we both like will fangirl about YNAB, right? And we've like talked to other people into getting on the bandwagon about it...) To me, it's like, it's not really a budget in the way that people traditionally think about it, because it's not restrictive.
It's that you're just creating this awareness and mindfulness about how you're spending your money and how you're like planning to spend money in the future instead of letting it all just like be in the present moment, which is funny because I'm talking about mindfulness…
Monique Malcolm
Yeah, it's a money plan. And I don't think that when I had read about budgeting before and was trying to do all these budget spreadsheets, I mean, I have Google searched budget spreadsheets for years and like downloaded multiple ones and have tried to fill them out.
Nobody ever really, I never saw it presented as like, this is a plan for your money. It really just felt like, great, here are the categories that you have to spend money in every month. Here are the tight containers that you need to put your money in. And like, if the money runs out, you need to discipline yourself and cut back more. And while there is discipline, especially if you have six figure debt, there's a lot of discipline that needs to happen. And there are things that need to be cut back on. But I liked that their approach did not feel like it was restricting me or shaming me into, this is how you get out of debt.
Because when you have six figures of debt, there's already a lot of shame. Trust me, there's a lot of shame. There's a lot of psychological, emotional weight that you carry because you know you're not supposed to have that much debt. It's crazy. It really is crazy.
So to have a program that talked about allocating your money and really asking you to look at like, What are you spending money on every month? Okay, great. You want to have money for dining out? How much money do you want to put there? And if you run out of money for that category for the month, where are you willing to move things around from? So maybe you want to have less money for, I don't know, gas in your car. Maybe you're going to, maybe you have a fund where you're saving for a new phone. Maybe you got to take the $20 out of there and put it into the dining out category if you don't have it.
But it made it be really approachable.
And YNAB has four rules for budgeting. And it's like, your goal is to try to get to rule four. And that's when you kind of have like mastered YNAB.
So I want to share those four rules because I really liked them.
The first one is give every dollar a job.
YNAB is based on a zero-based budgeting. So the idea is that you can only spend dollars that you have.
So if you have a paycheck, it comes in, it's $1,000.
Well, your goal is to take that thousand dollars and look at all your categories in your budget and budget that thousand dollars as far across your categories as you can. You don't worry about future money that you're going to get because you don't have it yet. So it really helped me shift my mindset from just thinking about immediately what bills need to be paid with this paycheck. And it started making me think about, great, I paid all the bills that need to come out of this paycheck.
Also, let me put some dollars aside for like bills that might be coming up soon because I would just use my check and kind of be like, okay, well, I paid, I paid the mortgage. I paid this. I still got a hundred dollars left over so like we can go eat out at the sushi restaurant. But that didn't account for like what's going to happen in the future and really saving for that.
The second rule is embrace your true expenses.
So true expenses are expenses that you're eventually going to have. So it's beyond the stuff of like mortgage, groceries, utilities, is also thinking about, do you have a car? Might you need to do maintenance on your car? You might need to change your tire or oil or getting new tags for your car. Do you need clothes? You need to have like, that's an expense that's gonna come up eventually.
It's preparing for expenses that you don't have on a regular basis, but eventually, you know, you're gonna need the money. So they prepare you by having a category and you put inside a little bit of money each time.
So in preparation of that expense happening. So that's rule two.
Rule three, roll with the punches.
Because YNAB knows you're gonna overspend in some of your categories, especially early on in the process. So the whole idea is instead of feeling bad that you overspent on your dining out budget, well, you're gonna roll with the punches. You overspent, so where can you pull that money from? Is there another category that you can move money over to?
And then the fourth one is to age your money.
And this is how YNAB helps you break the paycheck to paycheck cycle.
The whole idea is that there's a little number in the top of your YNAB app that calculates like how many days has it been since you spent new money?
So let's say right now I got $1 ,000 and I don't spend any of that $1 ,000 until next month. Well, I've aged that $1 ,000 30 days. Basically, I've held on to that $1 ,000 for 30 days. And that's the goal.
When you get to the point where your money is 30 days aged, then you've broken the paycheck to paycheck cycle. Because basically you are using today's, how do you say it? We’re in March. Basically I'm using March dollars to pay April expenses. So it's super, it's so easy.
But tell me what you think about that Mallory. Like, did you find the rules really easy or like they challenged you?
Mallory
Yeah, I mean, I love the four rules and that's why I think, like when I'm trying to explain it to new people, I try to like explain kind of the basic concept of those four rules and that it is, it's a mindset shift, right?
Because as opposed to something like Mint, where it just pulls in your numbers and it just kind of tells you what you have, it's not actually having you like do anything. It's kind of like shifting the way that you're managing things and you're having to actually take action or at least like bring, mindful intention to what you're doing with those, right?
Like for example, one of the rules, like the first rule about giving every dollar a job was really important for me. And so I don't know if you do this too, but with YNAB, you can have more than one budget under your same account.
I have my personal budget, but then the really life-changing thing is then I have a separate budget for my business stuff. And this is one of those things like I wish I had known in my creative business years and years and years ago.
Because now within my business budget, I am able to plan for those true expenses, things like taxes, right? Even like sales tax, like, you know, federal income tax, all of that stuff. Also things like a lot of as a business owner, a lot of software expenses, it's better if you can do the annual cost of the software, right? Like something like, you know, Canva Pro, right? For your annual subscription is going to be cheaper than if you're paying on the monthly subscription, right? But that expense is a true expense that comes up once a year.
And with the targeting and the goals that YNAB gives you, it makes it really easy to keep setting aside just a few dollars every month towards that.
But before I was using YNAB, I had a really bad habit of money would come into my business. I kind of was looking at those checking in savings accounts, like you were saying, to kind of see, oh, this is how much money I have right now.
And I think I was like giving every dollar like two or three or four or five jobs in my head, right?
And so that's how I got into debt because I like you, I started YNAB and all this stuff a little bit after you did. And I actually found your blog post where you talked about your debt-free journey and you shared that debt tracking spreadsheet. And I use that spreadsheet myself because I had done a lot of investing in myself and investing in professional development and gotten to at least like... $30,000 in credit card debt over the course of a year.
And then the pandemic hit and everything was changed and my income tightened up. And I was like, I got to get figure this out.
And I found your blog post and I found that debt tracking spreadsheet and I discovered YNAB and I kind of switched job situations all around the same time. And kind of just like made some mindset shifts. And through that, I was similarly able to completely get myself out of debt over the course of like the next year or two and now.
It's been life changing. I have no debt anymore right now.
Monique Malcolm
You talking about mindset shifts... One of the things or a few things that I like to share with people when they start YNAB for the first time, there is a bit of a learning curve.
Once you get it and you master it, like you're golden. But there is a bit of a learning curve with setting it up.
So it is one of those things where you just kind of have to take your time and adjust over time. So like coming up with your categories and like of of places you spend your money.
Yeah, you're going to have obvious ones like groceries, rent, that kind of thing. Then you may have less obvious ones.
I have a category for like my son's glasses because they just were so expensive. And I don't know. It's like every time I got hit with the glasses bill, I was like, why is it so much? So that's like a category that I had to add so that we would just put a little bit of money aside every month for glasses because we know he's going to need them eventually. So stuff like that.
So it's being open to testing that out and changing those things. But the big one, there's two that I find are really challenging for people that they have to learn to shift.
The first one is being YNAB poor.
Being YNAB poor, this is basically so since YNAB is a zero base budget and you are budgeting for future expenses, you will find over time that when you go to add your money into your categories… It does not stretch as far as you would think. Y
ou're just like, I didn't get all the categories before the end of the month. So you kind of have to make some trade -offs of like, you know, is it important to add money to the glasses fund this month or could you skip it a few months and add money to, I don't know, the Christmas fund?
You have to make some trade -offs there because your money is only going so far. But, and that gives you this sense of like, oh, I'm not making enough money because man, like it didn't, it didn't cover the thing. That's totally fine.
You will find your rhythm over time and there will be times where you'll be like, yeah, I can skip this for a few months and I'll just make it up on the back end. So being comfortable with that.
And then the other part of that is it's kind of related, but learning to trust your budget and make buying decisions off of your budget and not your bank account. Because since you are saving for future expenses, for example, I have a category for renewing the registration on our cars. So it's a small, it's a small thing. Like it's not a lot of money, but I know every year at the end of the year, I need to renew our car tags. So I have that set up.
Well, over the course of the year, you build up these, this balance in your bank account where you're just like, man, I got a lot of money in here, but no, you don't have a lot of money in here to just spend on whatever you want. You have money in here to spend on your budgeted items.
So you have to be really mindful to not make decisions during your Target run by looking at your checking account and be like, no, I got money. I can go to Target. It's like, no, you don't. What are you in Target for? Are you in here for clothes? Are you in here for groceries? What is it? What does that look like in your budget and why now? And then make your decisions based off of that.
So those two are really important shifts of things that I had to understand.
Mallory
Yeah, for sure. Yeah, and so when I was first getting started with YNAB, I watched actually a lot of YouTube videos.
YNAB themselves have a really great YouTube channel. They have a lot of different series. They have one series that I love is called Heard It From Hannah, and she kind of explains like the four roles and gives a lot of tips about how to use the budget. I love hers because she uses a lot of emojis in her budget, which I also do because I like the little visual cues and it...makes it feel fun to use my budget every day.
Another person that I learned a lot from is Nick True of Mapped Out Money. He has some really good like deep in-depth like walkthroughs. And he also has one about setting up like some business budgets and even using Profit First, which is like a kind of like business way to think about like accounting and bookkeeping and stuff and like using that in conjunction with YNAB.
Did you use any of that stuff when you got started with YNAB?
Monique Malcolm
I use a lot of the stuff on their website. So like YNAB's website has articles, there's videos, like it's really detailed. I would go through and search there.
The place that I found a lot of YNAB information, Reddit. Reddit, there's a YNAB group on Reddit and it's very active. And I love it because there's people who are budgeting for the first time and learning the magic of YNAB and like they're super excited or sharing like, you know, "I finally have a positive net worth" and it might have like shown in the red for months or years and then it's like slightly above and it may be like $100 positive, but it's like, we saw where you came from and now look at where you are and you're on your way to something better. So Reddit has been super clutch. And I have found that Reddit has been really helpful, especially for looking for specific situations with YNAB.
So... I mentioned my husband gets bonuses. Well, I found helpful Reddit threads about like, what do you do when you get windfalls? Because bonus money, like it fluctuates and it's not the same every month. And so it's not money that that I can always like plan for because I don't know what it's going to be.
So I found some really helpful threads about stuff like that that helped me figure out like, how do people manage when they get tax refunds or they get bonuses and stuff like that? that were really helpful. I also looked up like how do people, once you master all of like the four rules and you're doing it, like what do people do next?
There are plugins and stuff that you can add. There's one called Beyond Rule Four, which helps you if you're a person who's super into like the fire movement, so financial independence, retire early. There's a Chrome extension that you can add that can help you do some calculations with that and like pull your YNAB information in. That's super cool.
There are some really great threads on like if you're a high earner, how do people who have more money work with YNAB? Because at some point, if your income increases and you don't necessarily need it for the discipline of like budgeting, but you still like the process, it's been helpful to read that for other people. Like how do they manage YNAB? Like when they are, they do have enough money to cover their expenses for them. It's like, what do you do with the overflow? And like, how do you manage that? So Reddit has been super duper clutch in that respect.
Mallory
Yeah, and I know there's some really good Facebook groups too about YNAB. I think there's like an official YNAB fans Facebook group or something like that that is very similar if you're more of a Facebook person. And what you said too about when you have income fluctuations, I think that can be one of the areas where YNAB can be really life -changing, like for a lot of creative businesses who do lots of different things and might have income that like goes up and down.
I think YNAB can really make a big impact if you're struggling with like, oh, this month I have all of the money and I can pay for all those things. And then next month I feel like I'm completely broke. Well, YNAB with the true expenses and all of that stuff helps you plan for that and like manage that so that it starts to feel more stable over the long term, the longer you use it.
Monique Malcolm
Pretty much. I mean, it is a game changer and I'm not, I, Mallory knows this because she's seen like my debt payoff journey.
It's such a life changer and it's just such a different way to really think about budgeting and saving money and really planning for money. And I think that is the part that is so missed in a lot of conversations around money and how do you make the most of it, is planning for your money and YNAB helps you do that in like a really easy way once you you get it up and running and going.
Mallory
Yeah, yeah. And so you mentioned your, your, your debt payoff journey. And I mentioned I read your blog post about it. I know you have that spreadsheet linked up to can you tell people where they can find you where they can find that blog post?
Monique Malcolm
Yeah, so you can find that on my website, TakeTinyAction.com.
I did a whole podcast episode about my debt payoff journey, how I paid off $173,000 in debt in four years, my husband and I. And so I actually link in that podcast episode, that blog post to the debt payoff calculator and some other resources that I have for YNAB because...
I just love it so much and I just want more people to learn how to use it and master your money.
Mallory
Yeah, thanks for nerding out about YNAB with me, Monique. This was so much fun.
Monique Malcolm
Same, thank you for having me.
CONNECT WITH MONIQUE MALCOLM
Website: Take Tiny Action
Monique’s book: Don't Let Fear Have All The Fun: and other advice for making bold moves even if you're afraid
Monique’s YouTube: @TakeTinyAction
