TMMO April 2009 Progress & YNAB Pro Preview

Attending Dave Ramsey’s Town Hall for Hope web cast at the same church where Chris and I took the Financial Peace University course last year reminded me that I hadn’t reported on our progress towards debt-free status in a while. The truth is that things have pretty much been running on autopilot without much need for tinkering on our parts since we set up all of the automatic transfers through our banks and lenders.

Since October 2007, we have gotten quite a bit done, though not necessarily with what Dave Ramsey would dub gazelle intensity.

Debt Snowball:
– $4,000 HELOC for a new A/C (Paid in full)
– $3,200 used car loan (Paid in full)
– $5,600 credit cards (Paid in full)
– $12,000 student loan (Paid in full)
– $25,000 2nd mortgage ($8500 in extra principal payments made; a bit under $17,000 left to go)
TOTAL DEBT PAID SO FAR: $33,300

Savings/Retirement:
– $10,000 saved in the emergency fund
– Maximum Roth IRA contributions in 2008
– 4% ongoing contributions to 401(k) accounts
TOTAL SAVED SO FAR: $20,000 plus 401(k) contributions

Big Cashflow Items (that we didn’t have to borrow for!)
– $750 siding and garage door repairs (Cash flowed)
– $2300 hall bathroom remodel (Cash flowed)
– belated honeymoon trip this coming September (Currently saving)

What’s been the most surprising to me is how painless this process has been. We’ve been able to chuck a lot of money at our debt snowball without significantly cutting back, stopping our retirement savings, working extra hours, or selling anything big. (Bear in mind that we weren’t particularly extravagant to begin with and don’t have any kids cutting holes in our wallets yet.) It just feels like the money to pay down all of these debts has been there all along, just like the googly eyed stack of bills in the Geico commercials. We just had to make the decision to become debt-free and tell the bucks where they needed to go.

I’m still using Microsoft Money 2007 as my primary financial tracking software and supplementing with a Debt Snowball spreadsheet that I run in Google Docs, Excel, or Openoffice, but I’ve also started using a standalone budgeting program called YNAB Pro for Windows as a much more effective alternative to Money’s two built-in budgeting applets.

The difference between YNAB and every other zero-based budget spreadsheet and program I have tried in the past lies in its methodology: instead of distributing the income that you expect to come in for the current month towards expenses for the same month (Let’s use May in our example), you purposely pad your checking account with enough extra money to cover a full month’s expenses, and use that “buffer” for this month’s outflows while allowing this month’s income to pile up. When you are ready to budget for June, you actually budget for everything based on your accumulated income from May. In practice, this means that you could literally pay all of your bills and fill all of your cash envelopes on the first of June if you chose. No more juggling bills and dates throughout the month because you won’t have enough to cover the power bill until the 15th. No more splitting the grocery envelope into two withdrawals because the mortgage comes out at the same time. No more overspending because you didn’t bring in quite as much as you had predicted in a given month–an especially important benefit for folks with variable income.

It’s such a simple concept, but even Dave Ramsey, king of the zero-based budget, somehow missed the importance of the one month buffer. We are transferring a bit of money out of the emergency fund and back into checking so we can start May with a full buffer. Ultimately, we still have a three month emergency fund; it’s just that one month’s worth of it is now residing in a different account where it will make our budgeting lives much, much easier. I honestly feel like this is the next logical progression if you have already mastered the basic zero-based budget and want to truly get out of the paycheck to paycheck rut.

You can try a fully-functional copy of YNAB Pro free for 60 days. Give it a spin and poke around in the YNAB forums and online video tutorials if you need help. If you are the household Nerd, you will be playing with it happily for hours. If you are the Free Spirit type, don’t worry–you can get set up in less than 30 minutes. 😉

For those of you who get hives from touching an uncool PC, a platform-independent version of YNAB Pro is in development and scheduled for release this year. Version 3.0 will run on Windows, Mac, AND Linux.

3 thoughts on “TMMO April 2009 Progress & YNAB Pro Preview

  1. Very interesting – I was just looking at budgeting software last night, including YNAB and also Mint. YNAB looks more appealing and secure.

    I haven’t jumped on the Dave Ramsey train yet, but I need to. I have enjoyed his radio program for years (though I mostly now listen via podcasts).

  2. I know I am really late to the party on this post but just wanted to add my 2 cents. DH and I have been on TMMO since Oct 2007 as well. I tried YNAB but found the software too complicated. However, I did like the idea of living on last month’s income. So, we still do a zero-based budget but we use the paychecks from our previous month. I love being able to pay the bulk of our bills on the 1st, and also only having to make one cash withdrawal to fill the envelopes. I know a lot of folks like YNAB and I probably didn’t give it a fair shot but now that we are in a good groove I don’t want to switch (we use DR’s Excel template but I’ve hacked it up to better suit our needs). 🙂 I hope you like YNAB though!

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