Welcome to Butch on a Budget

Hi, I’m Kaylie! I’m 25 and I’m at the beginning of my journey to financial independence (FI). I’m starting Butch on a Budget to help keep me motivated and accountable, and also share my experiences as someone who is just starting to figure out this money thing.

I don’t work in tech or make a particularly high salary. I work for a public college and make less than $45K each year, pre-tax, but I love my job. The start of 2020 marks the end of my first full year actively working towards FI. There’s still a long way to go (but much less than 40 years), and plenty of room to optimize my spending, but I’m happy with how things have progressed so far and I’m excited to continue this journey and share my experiences with you.

Like many people, I was first introduced to the concept of FI/RE through Mr. Money Mustache. I dove in, reading through the blog in its entirety. Then I found new blogs, listened to podcasts, and read the classic personal finance books, plus some that were more recently published from leaders of the FI/RE community (all checked out from the library, of course).

My now wife, Cassie, was a little skeptical at first (I’ve been known to have some crazy ideas in the past that don’t always work out according to plan), but after many conversations and dreaming up the life we want to live, she’s as excited as I am. (Though she leaves most of the research, planning, and general geeking out to me.)

This blog is a place for me to share the lessons I learn, my updates, stories, recipes — pretty much whatever I feel like writing down that’s related to money and living a good life. While it’s mostly just something I’ll use to keep me accountable and on track (and start rebuilding my writing habit), I also hope that it might be helpful to others who are just starting out or thinking about starting their own journey to FI/RE.

Oh, and the blog name? Well, I’m (soft) butch, my wife is femme, and I’m on a budget. Sort of.

Welcome, I hope you stick around!

A Simple Guide to Credit: What Credit Even Is and How You Can Improve It

In my last post we talked about paying off debt, so I figured a natural follow-up would be to talk about credit and how to improve your score.

I didn’t understand credit for a while.

I didn’t have a credit card until my last year of college and was pretty adamant about not getting one. My thoughts were that credit cards were bad and that I would never need one if I only planned to spend money that I already had.

Cassie gently explained to me that I probably needed to get one in order to start building credit, since I hadn’t needed to take out any student loans and didn’t have a car loan. At that point in time, I was pretty much a ghost to the world of credit — in fact, the first time I tried to sign up for Credit Karma, they couldn’t find me.

My principled stance against credit cards was great in theory, but not so great in the capitalist reality we currently live in. And my lack of credit at the time made it difficult to get approved for my first card, which was such a catch 22! (Thanks to Discover for approving me way back when!)

Since my first credit card, I’ve come to be a big fan of the responsible use of credit cards and currently have over $1,500 in cashback and travel rewards saved up for when I can finally travel again.

Understanding how credit and credit cards work helps you take advantage of them, rather than them taking advantage of you.

We won’t be going into all of the details of travel hacking and sign-up bonuses in this article, but we will cover the basics of understanding credit and how to improve your score (so that you’ll be able to qualify for those cards with great sign-up bonuses, when you apply!).

So, let’s dive in!

What Is Credit?

Credit is essentially money that is loaned to you with the expectation and promise that you will pay it back at a later date, usually with interest. Generally, this looks like lines of credit provided to you through credit cards, a mortgage, and other various types of loans.

There are three types of credit: Revolving, Installment, and Open.

The most common type of revolving credit is credit cards. You are only required to pay the minimum balance and the remaining balance rolls over to the next month (revolving).

Installment credit is credit that has a set payoff timeline with a fixed amount due each month, like a car loan or mortgage.

Open credit examples typically don’t have interest and are things like your utilities. You’ve received your water or electricity for the month on credit with the expectation that you will pay for it when your bill comes due at the end of the month.

However, when someone talks about your credit they are usually referring to your credit score.

How Credit Scores Work

Your credit score is a number between 300 and 850 that represents your creditworthiness based on your credit history. There are different scoring systems that have their own unique ranges bands, but FICO is the most common, and their range is as follows:

Excellent: 800 to 850

Very Good: 740 to 799

Good: 670 to 739

Fair: 580 to 669

Poor: 300 to 579

Your score is determined by a variety of things that we’ll get to shortly!

Why Credit Scores Are Important and How They’re Used

Your credit score will affect not only your ability to actually borrow money in the first place, but also the interest rate you will be required to pay on the borrowed funds.

The better your credit score, the lower the interest rate. The lower your credit score, the higher the interest rates you’ll be charged to borrow money.

By building up good credit and keeping your score high, you’ll end up saving a lot of money in the long run, thanks to those lower interest rates.  

For example, according to Nerd Wallet, someone with a FICO score of 620 would pay $65,000 more on a $200,000 mortgage than if they had a credit score of 760.  That’s a lot of dollars!

But aside from interest rates and credit applications, your credit score is used for lots of other important things. If you’re looking to rent a house or an apartment, your landlord will look at your credit score as one factor in whether or not they’ll rent to you. Your auto and home insurance premiums are partially determined by your credit score, too.

Employers will also sometimes check the credit reports (but not scores) of applicants.

For all of these reasons, it’s a good idea to pay attention to your credit and work to improve it. Next up, we’ll talk about how to do that!

What Affects Your Credit Score (and How to Improve It)

You can keep track of your current credit score by using the free app Credit Karma. Most banks and credit card companies now come with some form of a free credit score tracking service, too, which can help you catch fraud faster. If you don’t know your credit score, find it out! This will let you know where you’re starting.

You also have the right to request a free credit report from the three major credit bureaus (TransUnion, Equifax, and Experian) once a year by visiting annualcreditreport.com. Your credit report provides a much more detailed picture of your credit history and the things that are affecting your score. It’s good to look through this once a year to keep your eye out for any mistakes that may have shown up on your report and be unfairly affecting your score.

How Your Credit Score Breaks Down

Payment History: 35% of your score

Your payment history makes up the largest chunk of your credit score and therefore has the biggest impact. That’s why it’s incredibly important to avoid late payments (or missing payments entirely). They can negatively affect your score for up to seven years!

To simplify things, set up auto pay for at least the minimum payment on your credit cards and loans. That will ensure that you avoid the dings to your score and the associated fees.

If you accidentally make a payment a day or two late (and it’s not a common occurrence for you), you can usually call your credit card company and ask them to forgive your late payment this one time and not to not report it.

Credit Utilization: 30% of your score

Your credit utilization refers to the percent of revolving credit you have access to that you are actually using. So for example if you have three credit cards that when added together have a $10,000 credit limit, and your current balances add up to $2,500, then your credit utilization would be 25%. That’s because you are currently using 25% of the credit available to you.

It’s general guidance to keep this amount below 30% to not negatively affect your credit score, and if you can keep it under 10% then all the better!

Credit History Length: 15% of your score

The length of your credit history can either help or hinder your credit score. There’s nothing you can really do here — just be patient! But, this is one of the reasons why starting to responsibly use credit sooner rather than later can be helpful. Getting a 0% interest, low-limit credit card just as you start college (and paying it off consistently and completely) can help you later on. If you’re not a student, you may still be able to access credit cards designed for credit newcomers.

Credit Mix: 10%

Credit agencies like to see a mix of types of credit such as credit cards, an auto loan, mortgage, etc.

I wouldn’t worry about this too much because it doesn’t have that big of an impact on your score, relatively. I recommend having a few key credit cards that you pay off each month, but otherwise, only borrow money for things you need to borrow for.

It doesn’t make sense to take out a car loan and pay interest if you can pay cash. Same for student loans.

New Credit Lines (Hard Inquiries): 10%

If you’ve recently opened a bunch of credit cards or taken out multiple loans, this is a red flag to lenders and will impact your credit score.

When you open any new line of credit you may see your score dip immediately afterward because of the hard inquiry they made. A hard inquiry is when a lender pulls your credit report to determine whether or not to approve you for credit.

Hard inquiries stay on your credit report for up to 2 years, but as long as you don’t more than three or four inquiries in that two-year period, it shouldn’t really affect you too much.  

People sometimes get really stressed about the hard inquiries component of credit scores, but honestly, I wouldn’t worry a ton about it. The dip is temporary, and the newly available credit will reduce your credit utilization which will have a bigger net-positive impact on your score.

Important Note: The only time I would say to be wary of opening a new line of credit is if you plan on making a home purchase in the near future. This temporary dip could affect the interest rates you’re offered, and on a $200,000 mortgage that small difference in interest rate can equal a lot of money!

Your payment history and credit utilization are the things that have the biggest effect on your score, so they are definitely the ones to keep an eye on. Make those payments on time and try to keep your debts low and pay them off as soon as possible.

Credit Karma will walk you through each of these factors and explain how they are affecting your particular score, so that’s a great place to start if you’re generally new to understanding the world of credit! And remember, you may not see instant change as you work to improve your credit, but by diligently sticking with it and working to improve your score you will see slow and steady progress and get to where you want to be!

Got Debt? Here’s How You Can Deal With It.

If you have debt, you’re not alone. Not by a long shot.

The average household with a credit card has over $8,000 in credit card debt. And the U.S. as a whole totals nearly $14 trillion in consumer debt, including mortgages, auto loans, credit cards and student loans.

But just because everyone else has it, doesn’t mean it’s a good thing (or healthy for your financial and mental wellbeing, for that matter).

If you currently hold debt, it’s not something to be ashamed of or hide from, but it is something you want to actively working towards eliminating. In this post, I’m sharing six totally manageable steps to help you get out of debt and closer to financial freedom (and an update at the end on our own debt situation).

1. Figure out how much you owe.

The first step is to figure out what your debt is. Too often, we feel overwhelmed by debt and avoid facing the reality of our situation. If you want to pay off your debt (and get rid of the associated stress and monthly payments), you’re going to have to face the facts of your situation and take a close look at the amount of debt you currently have and your current living expenses.

Understanding Your Debt

First things first, you want to get a picture of how much you owe, who you owe it to, and how much it’s costing you.

To do this you’ll want to make a table, either on paper or in an Excel sheet or a tool like AirTable. Go through each of your credit cards, loans, and things in collections and make columns for your remaining balance, the interest rate, your current monthly minimum payment, the due date, the type of debt, and who you owe it to (plus a payment link) .

Seeing it laid out like that can be stressful, but the clearly-displayed information will come in handy when making your payoff plan.

Current BalanceInterest RateMin. PaymentDue DateTypeWho?
$1,50017.5%$120October 12Credit cardSouthwest Card

Your Living Expenses

Next, you’ll want to take a closer look at your monthly expenses and how that compares to your income. If you don’t already track your spending through YNAB, Mint, or some other tool, you can pull your bank and credit card statements from the past couple of months and do your best to piece together a picture of your spending.

This step is important for two reasons. First, it’s to assess if your current spending levels are causing you to go more and more into debt each month by living outside your means. If that’s the case you’ll need to have a more extended conversation with yourself about lowering your expenses and your relationship with money.

Second, having this blueprint of what you’re spending money on will help you identify funds you can redirect to debt payoff when we get to step four.

So, if you’re serious about paying off your debt and living a debt-free life, take a break from reading this article to complete step one. Come back once you’ve figured out where you stand. I’ll wait.

Back? Great! I’m so proud of you! Having the courage to face your debt head-on and take stock of what you owe can be difficult, but it is so incredibly important to making the changes that will let you live the life you want. You’ve taken a big and important step already!

2. Pick your payoff method

Okay, next up is picking your payoff method. In the world of personal finance, there are typically 3 methods of debt payoff: The debt snowball, debt avalanche or stacking, and debt consolidation. We’re going to go through them one-by-one so that you can decide which one will work best for you.

Debt Snowball

The Debt Snowball method is a debt payoff strategy popularized by Dave Ramsey, and many folks swear by it. If you are using this method, you’ll list your debts in order of smallest to biggest. You’ll make your minimum payments on all of your debts to avoid any late fees and negative effects on your credit score, but you’ll throw all of your extra cash at the debt with the smallest balance. Once you’ve paid off your smallest balance, that minimum payment and any extra cash now gets thrown at the debt with the next smallest balance.

While this strategy may not make sense if you are looking at things from a pure numbers point of view, it takes advantage of the psychology of motivation. You’ll be able to see and feel your progress faster, which is likely to inspire you to stick with it and tackle your debt more aggressively.

Debt Avalanche

The debt avalanche strategy is similar to the debt snowball method in that you will pay the minimum balance on all of your debts, but rather than throwing all of your extra cash to the account with the lowest balance, you throw your extra cash at the account with the highest interest rate first. Once you’ve payed off your debt with the highest interest rate, you’ll transition the funds from that minimum payment and your extra cash to the balance with the next highest interest rate, and so on.

This method will save you money and time, as more of your cash will be going to the principle of your debt. However, you may feel like it takes longer to see progress which might cause you to feel less motivated to stick with your payoff plan.

Debt Consolidation

If you have a lot of debt, it might be worth it to look into debt consolidation. Depending on your situation and your debt payoff timeline, this might look like a personal loan with a lower interest rate, or a balance transfer credit card with a 0% interest intro period. If you’re using a balance transfer credit card, be sure to read the terms carefully — some credit cards offer 0% interest for the first year or so, but that term doesn’t apply to balance transfers, and you may get hit with high interest there. So pay close attention.

Consolidating your debt can save you a lot of money in interest and therefore speed up your debt payoff timeline. But it can also seem more overwhelming because you’ll see your total debt in one balance rather than broken up over numerous cards and loans. The even bigger danger with debt consolidation is that if you haven’t adjusted the spending behavior that may have gotten you into consumer debt in the first place, you could just be opening the door to more debt by consolidating your credit card debt and therefore opening up your credit cards that had previously been maxed out or close to maxed out of their spending limit.

If this is something you are worried about you can call each of your credit card companies and ask if they will lower your interest rate, as this may save you a few percentage points on each. It won’t be as much as consolidating, but it’s still a good idea to do no matter which payoff method you’re using.

Choosing your debt payoff method is a personal choice and will depend on the way you think, your relationship to money, and your motivation. There is no right or wrong choice, no matter what the numbers on paper may say. The right choice is the one that will work and that you can stick with. 

3. Automate your debt payoff method

Now that you’ve chosen your payoff method, it’s time to automate it. You’ll want to set up auto pay for each of your minimum payments to avoid late fees and make sure you’re making progress. If you already know you can afford to put an extra $50 or $100 per month to your debt payoff, add that amount to your auto payment on whichever balance you are targeting first (the smallest balance if using the debt snowball, or the highest interest rate if using the debt avalanche).

Making your payoff plan automatic ensures that you’re sticking with your plan, and since the money will be automatically transferred from your account, it takes away the decision-making process and the risk of forgetting or rationalizing your way out of what you’ve planned to pay.

4. Find extra funds

If you’re serious about crushing your debt, or as you get excited seeing the progress you’re making, you may want to find extra funds to attack your debt balances. You can do this in two ways: cut current spending or earn additional income. I suggest a combined approach.

By this point you should be tracking your spending using some form of budgeting app to make sure you’re spending is in line with your income and your debt payoff obligations. If this is the case, run through your categories from the previous month and pick at least 2 or 3 categories that you think you could lower. This might be subscription services, dining out, groceries, or clothing.

Choose a few categories to cut this month and keep track of the savings you make in those few categories, then use that money to pay off more debt. If you can eliminate or lower a monthly bill, great! Now use that monthly amount towards your debt payoff.

The other way to aggressively payoff debt is to earmark any extra income for making additional debt payments. This could mean birthday money, cash your neighbor paid you for dog sitting, a tax refund, or holiday bonus. Using these extra funds to turbocharge your debt payoff is a great way to spend that money.

5. Maintain motivation

If you’re paying off large amounts of debt and have a long road ahead of you, it can feel demoralizing at times. It’s important to maintain motivation on your debt payoff journey, so here are a few suggestions:

Visually track progress

Seeing the progress you are making on your debt pay off journey can be a big motivator. Hang your payment tracker on the fridge or over your desk; basically, just put it somewhere that you will see regularly. If your partner or a friend is also trying to pay off debt, you can even create a shared spreadsheet so that you can be motivated by each other’s progress (be careful of the comparison trap, though — they might be paying off things at a faster rate than you, and that’s okay. Your debts are different).

Celebrate the smaller milestones

When you’re on a longer debt payoff journey, it’s important to celebrate milestones along the way to keep you motivated. Here are some small things you can celebrate:

  • Setting up automatic payments on all of your accounts
  • Your first $1,000 paid off
  • The first balance you eliminate
  • The first interest rate you successfully negotiate down

Designate markers for your journey and be sure to appreciate reaching them (just don’t break the bank with your celebrations!).

Set specific challenges for yourself

As humans, we like a good challenge. One way you can take advantage of this is by regularly creating challenges for yourself to turbocharge your debt payments. This might mean setting a challenge to find an extra $100 this month to put towards your debt. Or doing a “buy nothing” week or a “buy nothing” month in a specific category and using the savings for your debt. It might mean seeing how many thoughtful and creative gifts you can come up with for the holidays to save money. Get creative, and tell someone else about your challenge to add some additional accountability (remember that friend from earlier?).

6. Stay out of debt

It’s super important to also address what caused you to go into debt in the first place. Some debt may not require any kind of examination of your relationship with money, like medical debt.

But if you’re getting out of credit card debt that was caused by high spending, you’ll want to make sure you’re also addressing the habits that got you into debt in the first place or your success will be short lived and you might just end up back where you started. Make sure to live within your means, and think critically about if your spending is aligning with your values and the life you want to live – not just in the moment, but down the road.

My Debt Journey

My wife and I aggressively paid down around $15,000 in debt that we had accrued during a really rough year. You can read about that here! Since then, we’ve also paid off both of our car loans.

On the flip side, we have also accumulated more debt through our mortgage and a 0% interest home improvement credit card that we used to cover our very expensive new hurricane windows for our house.

We could have cash-flowed this update, but it would have meant pulling money out of investments that were earning money. In this case, since the windows came with a two-year 0% interest rate, it made more financial sense to keep the money invested and pay off the balance over the two-year interest free period. We have our auto pay set up so that we’ll pay off the balance a few months before that period is up, just to be on the safe side.

Once we get rid of the PMI on our mortgage, we won’t be paying it off aggressively (right now we have twice-monthly payments set up). I don’t mind having mortgage debt and as a rule, I don’t worry too much about aggressively paying off debt with an interest rate of less than 5%. Since money invested in the stock market will earn an average of 7% annually, my money will likely be better off invested and earn me more than I’ll be charged in interest. This will also be a personal call, because some folks prefer that pure, unadulterated, totally debt-free feeling.

I also recently took out my first student loan since I started grad school this semester (as an undergrad, my RA job and scholarships covered my cost of school). This was another instance where I could have not taken out the loans, but doing so let me keep more money invested and borrow the money while the interest rate was 0%. I plan on paying off this loan before the start of the next fall semester and paying for the second year of my program in cash. My original plan was cash-flowing the entire program, but since we ended up buying a house sooner than we expected (and making quite a few updates) this method gave me more flexibility with my cash and didn’t cost me anything extra.

Understanding and managing your debt can be overwhelming, I know! But it can also help you feel much more in control of your financial life, and that feeling is one worth pursuing.

Buy the Fancy Chocolate, Not the Fancy Car

I love saving money. Obviously.

But, I also love living a good life. I talk a lot about how saving money doesn’t need to mean living a life of denial or feeling deprived – in fact, I would argue that having control of your finances gives you a blissful sense of security and outright joy.

That’s because my philosophy on saving money isn’t one of “making cuts” but of “making choices” and aligning your spending with your priorities. With a few simple tweaks to your life, you could save hundreds of dollars per month and not feel deprived of anything (except stress).

I know—this sounds like a phishing scam or a pyramid scheme, but I’m serious!

I touched on this a few posts back in If You Want to Save More, Focus on Cutting These 3 Categories, but it’s such an important and game-changing concept that I felt the need to talk to y’all about it again.

And it’s my blog, so I get to do what I want.

Buying the fancy chocolate (but not the fancy car) is one ingredient in the secret sauce to becoming wealthy.

That’s because the fancy chocolate gives you that same sense of luxury and decadence, but only costs $5 more than a Hershey’s bar, while that fancy car will cost you hundreds of dollars more every month. The chocolate bar is literally treating yourself, but the fancy car is just treating you to…more expenses. Your chocolate bar doesn’t need cleaning and maintenance. It just needs to be eaten.

If you try to build in daily decadence without designing a life that cost less (by paying attention to the big 3 categories of housing, transportation, and food) you risk living beyond your means and succumbing to lifestyle inflation. That’s really easy to do with influencers and advertisers constantly selling us the *~*new perfect item*~* we simply can’t do without. Sometimes that item is a $300 pan. Sometimes it’s a brand-new car. Often, it’s a bigger, nicer, more recently renovated house.

But you don’t need that fancy car and you can probably be just as happy (if not more so) in a smaller house. Spend time with your loved ones in that smaller house rather than spending time with them at Chili’s. (No offense Chili’s…Okay, maybe a little offense.)

Lifestyle inflation is absolutely a one-way express ticket to looking cool! And to living in stress city. Nobody wants to live in stress city. Especially not you.

At least once a week I turn to Cassie and tell her that I can’t believe how luxurious and awesome our life is.

Part of this is because I’m acutely aware of how lucky we are compared to others in our life (let alone across the country and world) and I try to make it a daily habit to practice gratitude for this.

But it’s also because our life is just objectively pretty dang great.

We eat delicious food at a beautiful table (that we built). We live in a beautiful home that we’ve fixed up to our taste. We buy A LOT of craft beer and enjoy it regularly on our screened-in porch. I top my oatmeal with dark chocolate, fresh strawberries, and shredded coconut (can you taste the luxury?!?). And under normal circumstances, we travel regularly – last year even paying to bring my two brothers along to Ecuador (where we did, indeed, buy a lot of fancy chocolate).

Not to mention we have family and friends who we love and who love us. I must have been a saint in a past life or something.

So I challenge you to build decadence into your everyday life. Spend extra on the things that truly bring you joy and make you pause to appreciate them, but design a life that costs less on the things that are purely superficial (that’s where the real savings come in).

By practicing gratitude and enjoying the simple pleasures in our lives, we can start to free ourselves from the capitalist trap that more or bigger is better. Instead of fixating on the latest status symbol, focus on cultivating your community and small pleasures instead.

A Love Letter to Leftovers (and 4 Tips to Make the Most of Yours)

This weekend I was hunched over my computer working when Cassie slid a bowl in front of my face. It was filled with our leftovers from the night before — a Budget Bytes recipe for Creamy Spinach Artichoke Chicken. We had run out of egg noodles, so to beef it up, she made a box of white cheddar mac and cheese and mixed the leftover chicken and sauce in.

I swear to you, it was better than the first night’s meal.

I love leftovers, and I think you should too. They are easy and delicious. They are there for you when you need them. They are the gift that keeps on giving. I mean, really, they should be called lifesavers.

If a recipe won’t make enough for there to be leftovers the next day, I will either seriously consider not making it, or double or triple recipe. And if I go out to eat, leftovers always help me feel like I’m getting more for my money.

There’s nothing better than knowing you already have a delicious meal prepared for the next day that doesn’t require more than heating up and will result in almost no new dishes.

Leftovers help you make the most of the ingredients you buy by letting you make larger quantities, and they set you up with convenient meals down the road to avoid some of the last-minute take out decisions for convenience. If you have more leftovers from a dish than you really want to eat in the next few days, freeze them for an easy convenient meal sometime down the line. We use wide-mouth, freezer-safe mason jars to freeze leftover curry, meatballs, various sauces, and soup.

Not to mention, eating your leftovers helps cut down food waste!

To make your leftover experience as great as possible I recommend the following four things:

1. Invest in a set of quality glass Tupperware

Having a nice set of varying size glass Tupperware will make sure you always have the right container to keep your leftovers in. Plus, glass Tupperware makes heating things up much easier (some are even oven-safe) and they are super easy to clean for those times your leftovers get lost in the back of the fridge (no fighting to remove spaghetti sauce stains).

We have a set by Rubbermaid that we love, but it doesn’t seem to be available from Amazon or Target anymore. We also have some by Pyrex, which are great. But word to the wise: The Pyrex options with the snap and lock lids are great, but the ones with the plain lids suck. The lids chip and slowly fall apart.

2. Know how long things stay good for

If your someone who gets nervous about things going bad, check out stilltasty.com. It’s a website that lets you know how long things stay good for and how to store them. Knowing the proper way to store your food will help it stay better longer, whether it’s leftovers or fresh produce!

3. Make leftover-friendly recipes

I love leftovers, but I also know that some things don’t make great leftovers. Soggy second-day french fries, anyone?

If you’re looking to simplify your week, plan just two or three meals for that week that you know will make delicious leftovers. There are plenty of recipes that I think actually taste better on the second day once they’ve had time to really soak in all the flavors.

Stews and soups tend to make great leftovers, and also pretty much anything you can make in a crockpot.

Here are some of my favorite recipes to make for leftovers:

4. Get Creative!

Yes, leftovers are meant to be simple, but don’t forget you can also revamp them if you’d like some more variety.

If we have leftover chili, we’ll make chili-cheese fries or loaded baked potatoes one night. We’ll use the creamy spinach artichoke chicken leftovers for a decadent grilled cheese filling. Salsa verde chicken will be used for tacos one night and then top a baked sweet potato the next. And sometimes, all it takes is throwing a fried egg on top to make it something new.

I hope this post has rekindled a love for leftovers, or got you thinking about leftovers as the gift they truly are.

High-Interest Savings Accounts: What They Are and Why You Need One

A couple of weeks ago I received a reader question about high-interest savings accounts, so I thought I’d dedicate a blog post to talk about them. We’ll go over what they are, when to use them, and how to pick one!

What is a high-interest savings account?

Many folks keep their extra savings either just sitting in their checking account or in a savings account at the same bank as their checking. These accounts typically come with a low interest rate somewhere between 0.01 and 0.1%.

A high-interest (or high-yield) savings account is what it sounds like. It’s an account that will earn you a higher-than-average interest rate on your saved money. This means more money in your pocket. It could be a lot more.

Let’s say you have $5,000 hanging out in your bank’s savings account earning 0.1% interest (this is being extremely generous; my Chase savings account earns 0.01%). Over the course of the year, you would earn $5. Now let’s say instead you put that that same $5,000 into a high-interest savings account earning 1% interest. In this case, you’d earn $50 over the same time period—or 10 times as much.

How to compare high-interest savings accounts

Typically, high-interest savings accounts from brick-and-mortar have come with some restrictions such as high minimum balances or fees. However, given the competitiveness of online banking, it’s become increasingly easy to find a high-interest savings account that fits your needs and is super accessible!

When comparing high-yield savings accounts you’ll want to compare a few things:

  • Interest Rate: The higher the better.
  • Required Initial Deposit: This should be an amount that you feel comfortable with. It’s not uncommon to find accounts that require $1- $100.
  • Minimum Balance: This will be the amount of money the bank will expect you to keep in the account. Make sure this is realistic for you, otherwise you could incur fees. Again, it’s not uncommon now to find accounts that only require a minimum balance of $0-$100
  • Fees: Is there a fee for maintaining your account or for specific situations, such as dipping below the minimum balance?
  • Accessibility: If you need to access funds from this account, how long can you expect for it to take?

Between me and Cassie we have had high-yield accounts with a few different banks over the past few years.

I currently have a Marcus high-yield online savings account which earns 0.60% APY (it started at 2.35% when I opened it 2 years ago, but the current economic situation has led to dropped interest rates on savings accounts). I like this account because the website is super easy to use and they have solid communication and customer service.

Cassie and I also keep our joint savings in an Ally online savings account which earns 0.80% APY (this has also dropped since we first opened it, but obviously far exceeds the 0.01% we would earn in our bank’s savings account). Ally’s website is also super easy to navigate and use and they have some neat features, like tracking accounts at outside institutions. Ally also uses Zelle, so transferring money in and out of the account is very fast.

We each previously also had an HSBC Direct Savings Account but found their user interface less than stellar and also had negative experiences with their customer service help (or lack thereof).

Each of these have no monthly fees and minimum deposits/balances of $1 or less.

When should I use a high-interest savings account?

Like any savings account, you can only make withdrawals from your high-yield account six times per month. Because of this (and the fact that it’s your savings account) you’ll want to only put money in this account that you don’t plan on using anytime soon.

It’s a good idea to keep your emergency fund and any sinking fund money that you don’t plan on using for a while in a high-yield savings account. This will let that money work for you and earn you more money.

Since many of these accounts may take 2-3 days to transfer to your checking account, there’s the added protection of it not being immediately accessible. This “out of sight, out of mind” approach to savings can be super effective if you find it hard to not dip into your savings when tempted to splurge.

Also, if you’re someone who has extra money each month but isn’t comfortable investing yet, a high-interest savings account is a good option. Your money is FDIC insured, plus you’ll be earning a bit of interest.

So, whether you’re saving for a down payment, a big vacation, or peace of mind – put that money to work in a high-yield account.

Now that you now the basics, I want you to open a high interest savings account this week and set up automatic deposits to it, even if it’s just a buck or two.

The Power of Insourcing – Another Way to Pay Yourself First

When you hear the terms “insourcing” and “outsourcing”, you probably think of businesses and big corporations, but it’s a framework we can also apply to our individual lives and households as well.

Over the past few decades, millions of folks have begun outsourcing more and more tasks in exchange for money. Commonly outsourced tasks include things like cooking, childcare, yard work, general DIY tasks, house cleaning, tax preparation, car washing, moving, drink making, and tons of other small and large tasks.

Some of this outsourcing makes sense given the rise in dual-income families — sometimes you need that extra support and you just don’t have time. But I would also argue that both our wallets and mental health might stand to benefit from insourcing a few more chores and tasks.

What we’re able to insource will look different based on the amount of time we have, our physical ability, and a whole host of other factors. Here are a few examples from my personal life to get your brainstorm started.

Yard Work

To have regular upkeep of the yards on either side of the duplex we own would be around $160 each month.

Instead, I spent around $300 and bought an electric mower and trimmer to do it myself. That means after 2 months, I’ve already paid for the equipment I now own.

The mowing itself takes me about 4 hours in total each month. This means I’m essentially getting paid $40 an hour to do my own yard work because I’m saving $160 in exchange for 4 hours of my time. I don’t even make $40 an hour at my salaried job, so it wouldn’t make sense for me to work more hours at my job to pay someone else to do this.

On top of the financial benefits, it also gets me outside in the fresh air and doing light exercise a few times a month. I might be sweaty when I finish, but I always feel accomplished and less stressed. Honestly, it’s quite therapeutic.

Cooking Our Own Food

Another area of my life where I save money by insourcing is food.

Throughout the month I would say our cost per serving for the food we cook ourselves averages somewhere between $3 and $4. My cheaper meals, like bowls of oatmeal or pasta, are balanced out by other meals with higher quality meat or lots of ingredients.  

When we go out to eat or get delivery I would say our cost per serving averages around $15 after tax and tip, and it’s not wildly uncommon for it to cost us much more than this, especially if we get drinks as well. 

That’s over a $20 savings for us for each meal we cook ourselves instead of going out.

Cooking takes time and there are dirty dishes to clean at the end of it, but considering there are tons of meals that can take anywhere from 5 minutes to 30 minutes of active time, that’s a pretty good hourly rate of return.  

Plus, eating out takes time as well. This is why I try to avoid eating out for “convenience” as much as possible. Instead, I try to save my dining out dollars for when I’m craving a really specific food, want something that would be difficult to make at home, or am going out to celebrate something or someone.  

Not to mention when I eat at home I tend to eat a lot healthier and feel better day to day. I also really enjoy cooking and trying new recipes. I typically put some music on, pour myself a drink, and talk to Cassie about our days while I cook. Cooking food helps me feel capable and is also a skill I love getting to share with friends.

Installing Our Floors

When Cassie and I bought our new house, we knew we wanted to put in new floors before we moved in (OK, Cassie knew and eventually convinced me). We could have paid someone to install the flooring we had bought, but the installation alone would have cost around $2,000 for our size house, plus the materials.

Instead, we watched a few YouTube videos and set out to do it ourselves. We traded probably 60 working hours between the two of us. We effectively paid each of us over $30 an hour by installing it ourselves, since we got to keep that $2,000 in exchange for our hours.

Sure, there are a few places where you can definitely tell it’s amateur work. But overall, it looks pretty dang good and we learned a new skill that has the potential to save us more money in the future!

Getting a Haircut

My last example is my hair! Rather than getting it cut at a salon, Cassie cuts my hair whenever it starts getting a little too long for my liking. We have a buzzer, hair cutting scissors, and thinning scissors and she’s gotten really good at it over the past few years. So good that I actually prefer the haircuts she gives me over the last few I’ve got at a haircutting place.

While this isn’t something that might work for everyone’s hair (Cassie won’t let me cut her hair; she says it’s too complicated), it certainly works for mine and saves me both money and time! Instead of paying $25-$30 per cut and having to drive to the salon and wait around until it’s my turn, Cassie just sets up shop on our back porch and I’ve got a fresh cut within 30 minutes. Plus, Cassie cutting my hair is always a nice way for us to connect, since it combines my two top love languages – acts of service and touch!

While these are just a few examples that are specific to my life, I’m sure there are a few things in your world that you might be able to insource. You might be surprised by how much you could save by insourcing a few more tasks, and you might be even more surprised by the additional positive effects these activities can have on your life beyond finances.

Financial Resilience Isn’t Just About the Money You Have in the Bank

Your financial resilience is your ability to withstand life events that impact your income or assets. These life events could be the loss of a job, health problems, a divorce, your car breaking down, etc.

With a huge portion of the U.S. population facing unemployment and loss of income due to COVID-19, many folks’ financial resilience is being put to the test.

Financial resiliency is what allows you to “roll with the punches” and keeps an unexpected expense or job loss from being an immediate emergency. Life events that test your financial security usually suck, but by increasing your financial resilience, you’re able to manage life’s curveballs with a little less stress.

In light of current events I wanted to share a few ways to improve your financial resiliency, since it’s not just about the money you have in the bank.

Build an Emergency Fund

Okay, so I know I said it’s not all about the money you have in the bank, and I stand by that! But, having a solid foundation of savings provides you a pretty good baseline of financial resilience.

With the recommended 3 months of living expenses saved, you’re able to cover most of life’s unexpected expenses and you’ll have some breathing room in case of a job loss. You want to make sure your emergency fund is liquid and accessible — high-interest savings accounts are great for this.

Okay now on to the other tips!

Maintain a Flexible or Low Cost of Living

By keeping your cost of living on the lower end, you’re creating more buffer between your income and your regular expenses. This buffer lets you build up the savings mentioned above and also means you need less money to cover your essentials in the event of lost income.

When I say “flexible cost of living” I mean focusing on keeping your monthly bills low. Even if you typically spend your discretionary money on eating out and travel, those are areas you can quickly cut back in in the case of a job loss or needing to cover a major expense. It’s not as easy to cut back on your rent and car payment in a pinch.

Keep a Low Debt-to-Income Ratio

To figure out your debt-to-income ratio, you add up all of your monthly debt payments and divide it by your monthly income. This tells you what percentage of your monthly income is already accounted for by debt payments.

Keeping your debt-to-income ratio low complements the idea of keeping your overall cost of living low. If you have a lot of debt, then you probably have a lot of monthly payments that need to be paid. If you have hundreds of dollars’ worth of minimum payments on credit cards and various loans, it will be hard to cut back expenses when needed.

Purchase the Right Insurance for Your Situation

Life insurance, homeowners’ and renters’ insurance, auto insurance, unemployment insurance, disability insurance — they all provide you with a certain level of financial resilience. You want to make sure you have the appropriate amount of coverage for your situation and that you’re not overpaying.

In some situations, you may opt to self-insure. For example, if you have 6 months of living expenses saved and have a good amount of assets, it may not make sense to pay for private unemployment insurance.

If you commute a long distance to work, you may want a higher level of coverage on your auto insurance and a disability insurance policy as a way of mitigating the financial risk of a car accident.

Ultimately, your insurance needs will depend on your situation, your liabilities, and your current financial resilience.

Have Multiple Sources of Income

Another way to improve your financial resilience is by diversifying your sources of income. A lot of people have a side hustle they work or have ways of earning extra money outside of their 9-to-5 job. Even if it’s just an extra $200 a month, that’s going to improve your financial resiliency because you don’t have all of your monetary eggs in one basket.

Cassie and I have a pretty wide variety of income sources, which helped Cassie make the decision to leave her full-time office job last year. You might not turn your side income into a full-time job, but you might use it to fund your emergency fund or to get closer to paying off credit card debt.

Know and Value Your Skills

Related to having multiple sources of income is knowing what skills you have and understanding their value to others. You probably have one or more skills or hobbies that you could monetize if you needed to in a pinch. 

This might look like photography, resume writing and editing, baking, web design, being good with kids, writing, tutoring, etc. Make a list of everything you’re good at and enjoy!

Maybe you offer 30-minute gardening consults to help your friends stop killing all of their plants. Maybe your sourdough starter is thriving and you sell a few excess loaves each week. Having a few skills that you understand could be monetized if needed can help prepare you for that unexpected loss of income. Plus, it’s nice and validating when someone wants to pay you for that loaf of bread you’ve been perfecting!

Connect with Your Network and Community

Having a varied and close community is also super important to your financial resilience. We all need a little help sometimes, and having someone in your corner who you can lean on when things get rough is important — whether it’s borrowing some money or a car, or crashing on their couch.

Your network is also important because most folks get their jobs through people they know. Your connections will likely lead to your next job if you find yourself suddenly unemployed, and if you’re starting out a new side hustle (yes, even just to get rid of all of those excess sourdough loaves), your connections will likely be your first customers as well.

Reaching out to your network can feel uncomfortable, but most people are going to be more than happy to make a connection or help you out in some way.

Vote to Strengthen Social Welfare Programs

And finally, the social safety net that exists where you live will dramatically affect your financial resilience. The social welfare system in your community, state, and/or country will significantly impact your financial resilience by providing you with a liveable amount of money if you lose your job, ensuring that your food needs are met, and making sure you’re never without access to health care.

There are families in the U.S. who may seem to be doing pretty good, but a badly timed health issue could quickly leave them bankrupt (if Cassie had needed to get her appendix out three days later, she wouldn’t have had insurance, and we would have been on the hook for more than $50,000).

Badly timed health issues don’t threaten people’s financial wellness in many other countries, like our northerly neighbors in Canada.

So, voting in support of strengthening social welfare programs is also something you can do to support your long-term financial resilience — as well as that of your community.

Financial resilience isn’t just one thing. There are tons of small and large shifts you can make to help improve you and your circle’s financial resilience. Financial security is vital to your mental health and incredibly important in supporting a society that doesn’t make reactionary decisions out of fear.

The Thing That Matters More Than Money When It Comes to Doing What You Want

I’m coming up to my busiest season at work. During August, I usually work through the weekends, and my workdays lengthen late into the evenings most days of the month.

As busy as it is, I also love my job in August. My day-to-day work during this time is very different than the rest of the year, but it’s filled with excitement and building new relationships. By the end of the month, I’m exhausted but fulfilled, and somehow reenergized for the rest of the year.

But my house is also usually a wreck, my fridge is empty, and my wife misses me.

It usually takes a couple of weeks to resettle into my home life. I’ve learned to have a pretty healthy work/life balance over the years, but that goes out the window in August.

This year, my August will look different because of the pandemic and various safety-related adjustments. I’m still figuring out how exactly this August will look, but it will still certainly be just as busy.

Each year, whenever my wife or I hit a busy period of work, I’m reminded of an important lesson I learned shortly after we started gaining control of our finances. Once you’re making enough money to sufficiently support yourself, your ability to do the things you want to do is more limited by your time and energy than it is by money.

For example, traveling is one of the pricier things I like to do, but the amount I can travel is more limited by my ability to take time off work than it is by my money. Especially because slow travel is usually a lot cheaper than just visiting someplace for a week.

But even more notably (I think) is the fact that there are TONS of things I enjoy and want to do more of that cost close to nothing — but that I can’t do as much as I’d like because I don’t have time or energy.

Things like:

  • Cooking an elaborate meal
  • Having friends over for dinner and drinks
  • Reading
  • Going to the beach
  • Going hiking
  • Learning how to do things around the house
  • Taking my dog to the dog park
  • Taking mid-day naps
  • Visiting my family
  • Talking and playing cards with Cassie
  • Writing
  • Volunteering
  • Catching up with friends over coffee
  • Playing bocce with my dad
  • Painting
  • Baking
  • Strolling around the library
  • Gardening
  • Going for bike rides
  • Working on various creative projects
  • …and about a million other things I can think of.

I’m not stopped from doing these things because I don’t have enough money — most of them cost nothing and most of them I incorporate regularly into my life.

But I’m still not able to do them all as often as I want because between working, cleaning, grocery shopping, trying to stay on a decent sleep schedule, and other basic tasks of living, I only have a limited amount of free time left to do them.

I already have a ton of low-cost things I love to do that could easily fill my days, but I don’t have enough time for them all. The limiting factor here isn’t money; it’s time and energy.

After I started making a steady income and had paid off my debts, this realization led me to the idea of financial independence and to reading Your Money or Your Life. That book does a good job of tying the concept of money to time and your life energy. It helped put into perspective that even if I love what I do, I don’t necessarily want to do it for 40 years, because there’s a lot of other stuff I love to do, too.  

It showed me that instead of buying things with my money, I could also use my money to buy back some of my finite time, the most valuable resource of all.

In the meantime, I’m preparing for the August marathon (and really looking forward to the autumn slow-down).

6 Tips for Starting Your Home-Buying Process

As I’ve mentioned in a few recent posts, Cassie and I bought a house at the start of April. Since then, a few of our friends have started the house-buying process and reached out to us for tips and recommendations as they start their own search.

Since we also knew very little at the start of our process, I thought it would be a good idea to share some of what we learned.

1. Know your market

If you’re planning on buying a house in the next year, you’ll want to start regularly checking house listings on sites like Zillow and Realtor.

It’s important to begin looking at homes for sale in the area that you are hoping to buy in before you’re necessarily ready to put in an offer. Doing this lets you get to know the market and gives you a good idea about what is a fair price for the size and neighborhoods you’re looking at.

You may have your sights set on a particular neighborhood but quickly realize that the houses there are out of your price range. You may find a neighborhood you haven’t thought of before but has everything you’re looking for.

Most importantly, knowing your market ahead of time helps you identify a good deal when you see one. In competitive markets, homes that are priced well may have multiple offers on them within the first day (yes, that’s as stressful as it sounds). Knowing the market gives you a better chance of being able to jump on your perfect home at the perfect price before someone else does.

The house-buying process can feel strange. You see a few photos on the internet, decide that this house could be The One, schedule a viewing and walk around it for 15 or 20 minutes and after that short little tour, you’re being asked to make a decision of whether or not to spend hundreds of thousands of dollars.

Knowing your market can help you feel more confident in your decision when you get to that point.

The first house that we put an offer in on was 650 square feet and priced at $129,000. It was also being sold in a very strange (to us) way: It was listed on the market and the seller wouldn’t accept offers until the seventh day. At that point, everyone had to submit their offers all at once and the seller picked their favorite (which was not us).

The second house that we put an offer in on was 1,200 square feet and priced at $108,000. It was also basically next door to one of our good friends and in our perfect neighborhood – and a big fixer-upper. This one was another “submit your highest and best offer by [DATE]” listings, and even though we offered well above asking, it went to a cash buyer.

The house we ended up buying was one that we saw online and scheduled a viewing for after work that day. We put in an offer later that same night. We only felt comfortable moving this fast because we knew the house was a really good deal. Even though we moved quickly — we visited the house when it had been on the market for just a day — there was already one offer on it. The seller originally accepted that offer, but then the buyer backed out. That’s how we got our home.

2. Go with a conventional loan when possible

When getting a home loan, most folks are deciding between a conventional or FHA loan.

Conventional loans require a higher credit score (at least 620), a lower debt-to-income ratio, and a higher minimum down payment (most lenders require a minimum of 5%). Comparatively, you can receive an FHA loan with 3.5% down payment if your credit score is above 580. You’ll need at least 10% down if your credit score is below that.

Both types of loans get the job done, but there’s one reason why you’d likely prefer a conventional loan: something called Primary Mortgage Insurance (PMI).

PMI is typically 0.5 – 1% of the loan amount on an annual basis, paid monthly. This means if your mortgage was for $120,000, you would be paying an additional $1,200 each year (or $100 a month).  

With an FHA loan, you’ll be required to pay PMI for the life of the loan if you put down less than 10%, unless you refinance to a conventional mortgage at some point. (If you put down 10% or more, PMI on FHA loans will go away after 11 years).

With a conventional loan, you are only required to pay PMI if your down payment is less than 20%. If you put less than 20% down, your PMI will automatically go away once your outstanding balance drops to 78% of the original value of your home.

By not having to pay PMI for the entire life of your loan, you can save yourself thousands of dollars over the years.

Unfortunately, we ended up having to get an FHA loan because the down payment minimums are different for a conventional loan on a duplex (15%). Because of this, we plan on aggressively paying off the first chunk of the loan and refinancing to a conventional loan once we hit 20% equity in the home. Luckily this shouldn’t take too long since we came in with a good amount of equity after the first appraisal came back.

3. Shop your mortgage

When it’s time to actually get your mortgage for your home you want to make sure to shop around and not just use the broker your realtor told you about. We went through three different mortgage brokers during our house-buying process: One who gave us our very first pre-approval letter, the second who gave us a pre-approval letter for the house we bought, and the one we actually used to get our loan.

By getting a few loan quotes to compare you could save yourself thousands and thousands of dollars over the life of your mortgage.

While the difference between 3 and 3.5% interest might seem insignificant (especially compared to that 24% interest on your credit card) that half of a percent when applied to $200,000 is a big deal! That half of a percent is $1,000 added to your payments just in the first year.

By shopping around for our mortgage, we were able to get an interest rate that was a whole 1% lower than the one originally quoted to us from the company that our realtor recommended.

The whole process of getting a few quotes took probably 2 hours total and saved us over $2,500 in the first year’s payments alone.

4. Shop your inspector

Once you’re under contract on a house, you’ll schedule a home inspection to be done in the first week or two of being under contract. The home inspector will come in and, well, inspect the home. This is your chance to learn more about the place you spent 20 minutes in and decided to drop a significant amount of money on.

The job of the home inspector is to let you know of any problems in the house (the small and the big), and upcoming repairs you could expect to have to pay for.

If the house turns out to be a potential money pit, this is your chance to back out. If there are one or two medium-sized potential problems, now’s your chance to go back and negotiate the selling price, request that repairs be made, or request concessions to be made at closing. If your house is good to go, lucky you and congratulations!

The inspection is a super important part of the home-buying process, so it’s important to also find a home inspector who will be thorough and honest.

Before you select your home inspector, go online, read some reviews, and compare costs. You don’t want to necessarily go with the lowest cost inspector if they aren’t going to do a thorough job. Reading reviews will help you select a home inspector you feel confident in. You can also call and ask how long an inspection will take for the size and type of property that you’re purchasing.

The inspection will cost a few hundred dollars and should take a few hours. We did a separate pest inspection, but some home inspection companies will do both inspections at the same time.

5. Use an independent insurance broker/agent

The other thing you’ll need to have in place before you close on your house is your home insurance. I would recommend using an independent insurance broker or agent for this piece, rather than going directly to the website for whatever home insurance company you can think of at the moment.

You may think that directly shopping for your insurance would save you money by cutting out the middle man, but that may not be the case.

When you work with an independent agent, they are able to gather quotes from many companies for you to compare, and the companies providing the quotes know that. Your insurance agent has specialized knowledge about the industry but isn’t tied to one specific company. This allows them to be able to walk you through the comparisons in price and how that relates to coverage.

This was especially helpful in our case since we were buying a duplex and there are different types of insurance for multifamily homes — it wasn’t until one of our final quotes that someone finally explained what the difference between a DP3 and HO3 policy is. (We got an HO3 policy because we live in one side of the property).

6. When in doubt, ask!

My final piece of advice is that if you have a question or are in doubt, ask!

Buying a house is an exciting time and a huge deal; it’s probably the most money you’ve ever spent on anything ever! It’s totally normal to feel stressed and to have questions or feel unsure during parts of the process, especially if it’s your first time. Try not to let that uncertainty fill you with anxiety and instead, find the answers you’re looking for!

Ask friends who’ve been through the process, ask your realtor, and use Google to your heart’s content! Take some time before you start (and throughout) to educate yourself on the process and the various steps. It will help you feel more confident and let you spend more time feeling excited rather than anxious.

Whether you’re looking into starting the house buying process in the near future, or are dreaming of that perfect home a few years down the line, I hope you found some of this information helpful. If you have any specific questions about our house buying process, feel free to submit them at the link in the menu!

I Was Bad at Budgeting Until I Tried the Zero-Sum Budgeting Method. Here’s How It Works.

A lot of people are on again, off again budgeters. I get it – that used to be me.

I’d start the month off making a list of my bills and spending categories and then I’d assign the categories a random amount that I thought I would be able to stay within. Maybe it would last a month or two, but more often than not, two weeks in I’d have gone over one category and feel defeated, or be surprised by an “unexpected” expense and throw the whole month away. Or, I’d have not followed through consistently with tracking my spending and then feel overwhelmed and lost.

I wasn’t making as much progress as I wanted on my financial goals, so a few months in, I’d give the whole budget thing a go again. I tried using a homegrown excel sheet, Mint, and other random apps, but nothing seemed to stick.

That is, until I found You Need a Budget (YNAB).

YNAB is different from other budgets because it’s based on the concept of zero-sum budgeting and is based around four simple (but powerful) rules.

If you have struggled with budgeting before, I highly encourage you to give zero-sum budgeting a try, whether you use YNAB or do it on your own.

How Zero-Sum Budgeting Works

The premise of zero-sum budgeting is that you budget with the money you already have, not what you’re going to make — and that you “spend” every dollar. Or in YNAB’s words, you give every dollar a job.

So, if you were to put this in practice you’d look at the amount you currently have available in checking, savings, and cash, and then figure out what that money needed to do before you got paid again. You might apply it to upcoming bills, food, gas, debt repayments, gifts — whatever it needs to do.

You give every dollar you have a job — even the ones you don’t plan on spending. Yes, even the dollars you are saving should have a job.

Maybe it’s for a future vacation, building your emergency fund, saving for the upcoming holidays, opening a Roth IRA, or making an extra payment on your student loans. Whatever it is, that dollar needs a purpose; it needs to be put to work creating the life you want.

And then every time you get paid, you do this again with your new dollars. You give them all jobs until you’re down to $0 uncategorized. There’s no such thing as money left over at the end of the month. That’s because dollars without “jobs” tend to get thoughtlessly spent rather than put to work creating the life you want.

Zero-sum budgeting forces you to view money as the tool that it is and make decisions based on both your immediate needs and your priorities.

Because zero-sum budgeting asks you to budget what you already have rather than make a budget on your projected income, it helps budgeters prioritize their spending.

The idea is to eventually get at least a month ahead, meaning that the money you earned last month is what is paying for this month. Once you’ve reached this point, you’ve officially broken the paycheck-to-paycheck cycle and have some breathing room to start thinking about other financial goals you might have.

Between the benefits of zero-sum budgeting, YNAB’s second rule of “Embracing Your True Expenses” (aka creating sinking funds), and the fact that YNAB syncs with your accounts to make tracking your spending a breeze, I attribute a very large portion of my financial success to this company.

YNAB isn’t a free budgeting software, but I think it says a lot that even though I’m someone who is very intentional with their spending, I happily hand over the annual subscription fee. I know that I make back much much more in the savings I’m able to make by using YNAB.