Budgeting and YNAB

I’ve always been a money tracker. I still have ledger books from when I was 14 years old, with my handwriting tracking my money in and out. I would reconcile it to my bank savings account with little ticks.

I think I learned this habit watching my Mom as she would carefully manage the family finances at the kitchen table.1 There was never enough money to go around (not that I was aware of that at the time), so much of my Mom’s job was timing cheque payments, deferring bills, and calculating how much, if any, might be left over for the week. Such was life for a divorced mother of four living on not much more than a pension and without any support from her former husband and father of the aforementioned children.2

As I grew and got my first part-time job, my money-tracking ways continued. Each week I would record my income, and understand how much money I had available to get me through to the next week.

I got a bit older, graduated university and got a real job. By this point I had graduated to electronic money tracking. For a short while I used Microsoft Money, before settling on Quicken and using it for years. Each year, they would release a mediocre upgrade and I would pay the license fee to keep using it. Year after year that software got worse.

I got married and we took a traditional approach to finance by merging our money. What was mine was hers, and what was hers was mine. Fortunately, my money tracking addiction could continue since while my wife is financially aware, she didn’t have a compelling urge to record and reconcile the way I did!

Eventually Quicken became so terrible that I couldn’t bring myself to pay for it anymore. This was a dark time. There was no compelling software to adopt so I rolled my own Excel spreadsheet and used that. This was probably the first time since my ledger books that I wasn’t recording transactions. Instead, I tried to take a high-level approach by using a budgeting/forecasting model. It felt like it was working at the time but in hindsight we fell into a bit of a financial hole without realising it. We were relying on future income to cover past expenditure – what is referred to as ‘riding the credit card float’.

About 3 years ago, I realised that my carefully managed spreadsheet was busy work that was actually not helping us meet our goals. I did another software review and this time I found the application that changed everything: YNAB (short for You Need a Budget). YNAB took me back to my roots. It required transaction monitoring and was backed by a ledger that needed to be reconciled. But the magic trick of YNAB is that first and foremost, it is a budgeting system. As much as I had tracked money for all those years, and generated my income and expenditure reports, it was always backwards looking. I was auditing what had already happened, but not making commitments about what my money should do in the future. YNAB completely changed my perspective on personal finance management.

YNAB is all about giving jobs to the money you have on hand right now. You budget that available cash down to zero, then stop. You don’t live on the credit card float. You don’t plan to spend more than you have. You allocate the money to a series of planned expenditures, and then track progress against that. If you overspend you get immediate feedback and can adjust your budget through reallocation – as YNAB says, you ‘roll with the punches’.

While this seems like short-term budgeting, it actually facilitates long-term goal realisation. You suddenly realise how finite your cash supply is, especially after accounting for those recurring bills and putting money aside for the big annual bills3. With the little amounts that are left over after setting money aside for the necessities, you can make some hard decisions about what you want to do with that discretionary cash.

Since using YNAB we have never been in a more solid financial position. We can pay all our bills as and when they fall due (even the big ones). We can save and invest for our family’s future. We can set aside money for fun.

The best thing of all, though, is that we do not fight about money. We have no nagging money stress between us. We share our income, we share our expenses, and we share our savings goals and spending intentions.

After having managed my money very carefully for almost 30 years, this is the best it’s ever been. I endorse YNAB wholeheartedly. Get it, use it, love it!

  1. This was the pre-computer era, when every task people did was so much more visible.
  2. I will never cease to appreciate how my Mom was able to keep it together under such difficult circumstances.
  3. Think insurance, school fees, council rates. All the ‘oh, crap’ moments!

A Recent Customer Story

I recently worked with Asterisk Information Security on their Entrepreneurs’ Programme Business Evaluation. Asterisk provide information security advice, services and infrastructure to other companies.

The owners are dedicated to their craft and are really working hard to grow and improve their company. Through the Business Evaluation process we dug deep into their business model and identified a number of ways to improve the business even further. What’s more, is the Entrepreneurs’ Programme also provided them with $20,000 of government funding to help make their plans a reality.

Our work has been so successful that we wrote up a case study of our engagement with the business.

If you think your Australian firm would benefit from this free of charge service, please don’t hesitate to contact me.

Pricing for Profit Webinar

Yesterday I hosted a webinar on behalf of the Department of Industry, Innovation and Science that I had conceptualised, sought quotes for, and then, with the help of Departmental staff, promoted and organised. The session aimed to educate SMEs about pricing strategy, which is something I had noticed as somewhat of a generalised weak point in the various Business Evaluation engagements I had completed recently.

I was very pleased with the way it all turned out. We wrapped it up at 58 minutes and 57 seconds, after promising a one hour event, which I think is a great effort. Most of the credit goes to our key presenter, Andrew Cooke of Blue Sky GPS. Andrew did a fantastic job presenting – he knew his stuff and delivered it well.

As host of the webinar, I had to welcome our audience, introduce and frame the topic, manage and voice audience questions into the webinar that were coming through the feedback interface, and ultimately deliver the final wrap-up. Im no natural at this sort of thing, but I think I did well enough after a slightly apprehensive start. It is a strange thing sitting under studio lighting and talking into a camera having no idea how many people are watching around the country.

Much credit must go to the organisation that produced the webinar. Jared and Ray from Nallawilli Technology were extremely friendly and put us at ease immediately. Behind the scenes they made sure that everything was functioning well.

If you missed the session live, it is now available to watch on-demand. If you would like to gain some insights into how to price your products and services, I encourage you to watch.

Fastmail

I was one of the first on the Gmail bandwagon. Back when the only way to get an account on the service was to receive an invitation code from somebody else already using it. I remember desperately asking around my networks, until I finally found somebody who was able to supply me with a code – I was in!

Having an @gmail.com address was a point of pride. You were a cool kid with a cool email address, and not one of those sad hotmailers, embarrassing yahooligans, or a joker advertising your local ISP. Using Gmail was also transformational. It was probably the first web app that was genuinely better than desktop software. It was fast, had quick keyboard shortcuts, huge storage (1Gb at launch!), and of course your email archive gained the power of Google search.

Times were good. Google kept adding features, making the service better. It added storage so you really could just archive email. But over time, Gmail began to acquire cruft. It became less efficient and it started to frustrate me. The tagging system impacted IMAP compatibility and caused annoyances syncing with local mail clients.

The most frustrating aspect for me was it’s half-hearted approach to supporting custom domain names. Early on, it seemed as though Gmail were onboard with people using custom domains. As time passed though, the business imperative took over and they shifted full custom domain support to their GSuite paid service. So my @andrewcanion email would generally reveal its true Gmail nature, which annoyed me.

A couple of months ago, I decided enough was enough. It was time for a change. I wanted to find an email service that supported custom domains, that would support proper IMAP, offer push email, that would respect my privacy and not sell advertising based on my email, and be a reliable and good service. All of this necessitates payment, and at this stage of my life, I’m okay with that.

After reviewing a few options, including GSuite, Office 365, Zoho and Rackspace, I ultimately chose Fastmail. Their service ticked all the boxes and offered one extra bonus – they are an Australian company. So I could buy local (albeit in US dollars).

So far, the service has been brilliant. Their web app is great, their documentation brilliant, and their customer service quick and accessible. It’s amazing how much better a service can be when you are a real, paying customer.

I’m at the point now where I actually want more email! I don’t think I’ve ever said that before.

If you are looking to upgrade your email experience, I highly commend Fastmail. If you use my referral code to sign up, you also get a discount. I am sure you will not be disappointed.