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15. YNAB’s 5 Question Budgeting Framework · The Money Clarity Podcast

• 0:00
  If you've been in my world for any amount of time, you likely know that YNAB a is my favorite budgeting tool.
• 0:07
  And for years, YNAB has taught its four rules as the cornerstone of using their software effectively.
• 0:13
  Rule number one, give every dollar a job.
• 0:16
  Rule number two, embrace your true expenses.
• 0:20
  Rule number three, roll with the punches and rule number four.
• 0:25
  Age your money.
• 0:26
  We went through those four rules in last week's episode, episode 14.
• 0:30
  So go ahead and go take a listen if you haven't already done so these days YNAB has refined its guidance into more of a question-based framework, and those five questions are what we are diving into today.
• 0:45
  Speaker: Welcome to the Money Clarity Podcast.
• 0:47
  Speaker: I'm your host, Lindsey Ciarrocca.
• 0:50
  Speaker: I'm a YNAB Certified Coach and a Certified Money Coach.
• 0:53
  Speaker: And I am here to help you stop feeling stressed about money.
• 0:57
  Speaker: Together we'll get your finances organized so that you can finally feel confident about not only spending and saving, but using your money as a tool to go after your biggest, wildest dreams.
• 1:08
  Speaker: Let's dive into today's episode.
• 1:13
  So I want you to think about these five questions as building blocks for a pyramid.
• 1:18
  So a pyramid of.
• 1:20
  Financial clarity, if you will, that needs to be built from the ground up.
• 1:25
  You might find yourself focusing intently on the first question initially and gradually progressing through the others as you gain more control and awareness over your money.
• 1:38
  As you make your way through these questions, each time, you will be able to add another block to your pyramid, making it and your finances even stronger every single time.
• 1:50
  So what are these questions?
• 1:53
  Question number one, the reality question.
• 1:56
  What does this money need to do before I'm paid again?
• 2:01
  At the base of our financial pyramid lies this reality question.
• 2:06
  This is the most immediate and crucial question you need to ask yourself every time money hits your account.
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  What are the absolute necessities?
• 2:17
  what bills are due, what spending is unavoidable before your next income arrives?
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  So think about this in terms of something like your rent or mortgage payments, groceries to keep you fed, transportation costs to get you to work.
• 2:36
  Essential utilities like electricity and water.
• 2:40
  these are the dollars that have a non-negotiable job to do right now.
• 2:45
  So the way YNAB excels at helping you answer this is by allowing you to categorize your income as it comes in and assigning those dollars to specific categories.
• 2:56
  And you give every dollar a job, which might sound very much like rule number one.
• 3:02
  This ensures that your immediate obligations are covered.
• 3:06
  So forming that.
• 3:08
  bed rock of a stable budget.
• 3:10
  It's about understanding your present financial reality before you can plan for the future.
• 3:19
  Question number two is about stability.
• 3:23
  What larger, less frequent spending do I need to prepare for?
• 3:29
  So once you have a handle on your immediate needs, the next level of our pyramid focuses on stability.
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  This involves looking.
• 3:38
  Beyond your next paycheck and considering those larger, less frequent expenses that are still predictable.
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  These are the costs that if you're not planning for them, can often lead to financial stress.
• 3:52
  So these are things like car maintenance, insurance premiums, if they're not paid monthly, so if they're paid annually or quarterly, for example, things like holiday gifts.
• 4:03
  Back to school shopping or an annual software subscription.
• 4:07
  While these things don't occur every month, they are a reality, so ignoring them could be a recipe for budget disaster.
• 4:17
  The way YNAB helps with this is it helps you answer this question by setting up these categories that are effectively act as sinking funds.
• 4:26
  So this is where you can allocate a small amount of money towards each category every single month.
• 4:33
  So that when the time comes, the funds are already there.
• 4:38
  This proactive approach builds financial stability and prevents those, whoops, surprise expenses from derailing your budget.
• 4:49
  Question number three, the resilience question.
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  What can I set aside for next month's spending?
• 4:59
  So as you gain control over your immediate needs and then you start to plan for those less frequent expenses, you can begin to build resilience into your budget.
• 5:10
  This question is about creating a buffer between the time you get paid and when you actually spend that money.
• 5:18
  Another way to think about this is as setting aside money this month to cover next month's expenses.
• 5:26
  Now you probably know, living paycheck to paycheck can be incredibly stressful.
• 5:33
  This resilience question encourages you to break that cycle by intentionally allocating funds to next month's categories.
• 5:44
  You give yourself breathing room imagine.
• 5:48
  Imagine knowing at the start of, let's say, June.
• 5:53
  That your essential July expenses are already funded.
• 5:59
  Trust me, it is a great feeling.
• 6:04
  So the more you can set aside for the future, the more resilient your financial situation becomes, the more options you start to give yourself.
• 6:14
  And these options are what allows you to weather those unexpected expenses.
• 6:20
  With clarity and ease.
• 6:24
  Question number four, the creation question.
• 6:28
  What goals, large or small do I want to prioritize?
• 6:34
  So now that you have this solid foundation, you're starting to build stability, growing that buffer, now we can start thinking about.
• 6:42
  Creation or aligning your budget with your goals and dreams and your biggest aspirations.
• 6:51
  So this question moves beyond just covering basic needs and starts to focus on what you actively want to achieve with your money.
• 7:03
  And this is what I like to refer to as living your greatest life.
• 7:07
  What does your greatest life look like?
• 7:10
  Let's work towards those big dreams.
• 7:13
  So this is where you get to start thinking about your financial goals, both big and small.
• 7:18
  So what do these goals look like for you?
• 7:21
  Maybe you are saving for a down payment for a house.
• 7:24
  Maybe you're planning a 40th birthday vacation like I am.
• 7:28
  Maybe you're paying off debt or investing for the future YNAB's targets and goals features allow you to visually track your progress towards these priorities.
• 7:40
  Then by asking yourself this question, you can start to intentionally direct your money towards what truly matters to you, making your budget a powerful tool for creating the life you envision.
• 7:58
  And finally, the fifth question is the flexibility question.
• 8:02
  What changes do I need to make, if any?
• 8:06
  So at the top of our pyramid is flexibility.
• 8:09
  Life is full of change and your budget should easily allow for adjustments.
• 8:16
  This question encourages you to regularly review your budget and make adjustments as needed.
• 8:23
  So did an unexpected expense pop up?
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  Did your income change?
• 8:28
  Did your priorities shift win YNAB's strength lies in this flexibility?
• 8:35
  You can easily move funds between categories to reflect your current reality based on whatever new information you have at this moment.
• 8:46
  By asking yourself this flexibility question regularly, you're able to ensure that your budget remains a relevant and useful tool.
• 8:55
  It's about staying engaged with your money, making conscious choices, and continuously optimizing your plan.
• 9:04
  To meet your evolving needs and circumstances.
• 9:08
  This ongoing process is key to long-term financial mastery.
• 9:14
  Flexibility and change is absolutely key.
• 9:19
  So here you have it.
• 9:20
  Those are the five questions.
• 9:22
  And while the five questions may sound very similar to the four rules, they are, but they aren't.
• 9:30
  Five questions.
• 9:31
  Provide a powerful and intuitive framework for taking control of your finances.
• 9:38
  Instead of thinking of them like strict rules, another way to think about them are just guidelines or questions, right, that are there to help guide you along your financial path.
• 9:52
  They take you from meeting your immediate financial needs to planning for the future, building security.
• 10:00
  Achieving your goals and staying flexible along the way because the last thing we need or want is a restrictive budget where there is no room for fun, no one's gonna stick to that.
• 10:14
  Both the rules and the questions are there to guide you.
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  So whichever one resonates with you more, go with those.
• 10:20
  I learned YNAB on the four rules, so I definitely reference those a ton.
• 10:25
  But you also hear the YNAB community referencing the five questions.
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  So here they are again for you.
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  Five questions.
• 10:33
  What does this money need to do before I'm paid again, what larger, less frequent spending do I need to prepare for?
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  What can I set aside for next month's spending?
• 10:47
  What goals, large or small do I want to prioritize?
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  And finally, what changes do I need to make, if any?
• 10:58
  By consistently asking yourself these questions and utilizing the features within YNAB, you'll be able to gain a newfound clarity and confidence in managing your money.
• 11:10
  And while the journey to financial wellbeing is ongoing, it's a journey.
• 11:15
  It's a process.
• 11:17
  YNAB's five questions are here to help provide you a roadmap to navigate it effectively.
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  Because as I always say, your biggest wildest dreams are within reach.
• 11:31
  Let's go make some money moves so that you too can start to experience financial freedom.
• 11:38
  That's all for this episode of the Money Clarity Podcast.
• 11:42
  My hope is that today's conversation gave you a little bit of clarity and confidence to take the next step.
• 11:49
  If you're ready to dive deeper into your relationship with money, you can find more resources both free and paid at theexuberantelephant.com /everything.
• 12:00
  You can also find that link in the show notes, and if you're enjoying the podcast, please leave a rating interview.
• 12:05
  It really helps the show reach more people just like you.
• 12:08
  I will talk to you next time.