4 years ago, I started getting really serious about our family budget. I decided to invest in a program called YNAB, short for You Need A Budget. 2 years ago, I told you how YNAB changed my family’s life. It’s now been 4 years since I started using our YNAB Budget. I thought it was time to update you on exactly how YNAB has helped our family become financially secure, and how it can help you too.
First, you should know that YNAB has an annual subscription fee. Right now, it’s $89 a year. This is to help the company maintain the cloud storage to house everyone’s budgets. Let me tell you, this is a total steal. You will be able to save WAY more than $89 a year by using this program. I promise. If you get your paycheck twice a month, it’s $3.71 per paycheck. Its super simple to budget for with this system.
Everyone has different situations and different goals, so everyone’s YNAB Budget journey is going to be a bit different. You might have student loan debt, or credit card debt, or you might not! Whatever your stage, YNAB will work for you. It helps you zero in on what is actually important and what can wait. If you follow Dave Ramsey or other financial gurus, YNAB can work seamlessly with those philosophies. With a YNAB Budget you tell your budget how you want to spend your money. It’s amazing!
Our YNAB Reasons
As for us, we have always lived fairly frugally. We have no debt other than our mortgage. Our cars are 10 and 9 years old. We paid off my husband’s student loans many years ago. We pay our credit cards off twice a month (because of YNAB). However, we have some large expenses that can pop up. Plus we have home projects and other goals that we need to set aside money for from every paycheck. A YNAB Budget is great for building sinking funds to stay out of debt. That’s where YNAB has really helped us the most.
If you didn’t know, we have a disabled child who requires weekly therapies, medications, and other expenses that health insurance doesn’t always cover. I always fight and appeal to get her medically necessary needs covered under our insurance policy. But, there are always things outside of that which require savings. For example, any therapies that are not covered by insurance, like hippotherapy which we’re hoping to get into, or aqua therapy, need to be paid out of pocket. Educational expenses like tutoring or Advocacy services need to be saved for. Expensive supplements or home exercise equipment for her Home Therapy routine are out of pocket expenses. Plus, while I’m appealing health insurance for extensions to her medical therapies, I end up paying for those up front.
We have to have A LOT of money set aside for medical/educational expenses for her every single year. YNAB helps us do this no sweat. We don’t even realize it anymore. This year, we cash flowed all of our out of pocket medical expenses. We were also able to pay for my son’s first round of orthodontic work up front in cash. Paying cash up front allowed us to get a cash discount. It also means we are saving our dental insurance for the more-expensive second orthodontia round.
Our Other YNAB Reasons
Other sinking funds that we have are House Projects & Maintenance, Car Maintenance & Replacement, Taxes (Property) & Insurance, Fun & Activities, Vacations, and Emergency. Every year, I do an audit of the expenses that generally fall in those YNAB Budget categories. Then, I divide that annual number by 24 because we get 2 paychecks per month. This has allowed us to fund up front with cash everything from Christmas Spending, to Vacations (we went to Disney World this year), to Birthday Parties, to our Kitchen & Laundry Room remodel, and pay for all of those items in cash.
Financial Independence
Since using YNAB, we’re also really interested in the FIRE movement. FIRE stands for Financial Independence Retire Early. These are those people who are out there maximizing their savings and retiring early to spend more time with their families and travel the world.
Way back in our early 20s when we first got married, we lived really frugally. Mostly so that we could max out our retirement accounts in order to get our income taxes as low as possible. We both worked full time and had no kids, so our taxes were a large chunk of our salaries. By maxing out our 401ks, we were able to pay less in taxes, while saving for our retirement at the same time. We still paid a lot in taxes. In fact, we filed 0 exemptions and still needed extra cash withheld just to get as close to owing $0 additional in April.
Last year, I read The Simple Path to Wealth by JL Collins, and it really sealed the deal for me with FIRE. Because we had been so frugal & financially smart in our 20s, we are now in a position where we don’t need to max out retirement savings now. Sure, we’re paying a little more in taxes. But it’s given us a little breathing room in our budget to super save for other items. We’ve been able to move that money toward future remodel projects, expensive treatments for our daughter, or to go on a much needed vacation.
We still contribute to the 401k enough to get the maximum company match (free money!). But the amount we already have invested across our 4 retirement accounts (active 401k, rollover IRA, and 2 Roth IRAs) is enough that the compounding and market growth far exceeds our contributions. Crunching these numbers and realizing that we could afford to pull back and still reach Financial Independence even though we have a medically-expensive child was extremely freeing. Our YNAB Budget plays a big piece in that, because we know where we want to direct that money.
Changing Strategies When It Comes To Savings
Using a YNAB Budget to save for our medical sinking fund allowed us to change our medical spending strategy in 2019 fairly easily. In the past, we had always maxed out our Health Savings Account. But we always spent all of it due to deductibles and co-pays. HSAs are so valuable because they are triple-tax advantaged. You put pre-tax money in there, it grows tax free, and you can withdraw it tax free to reimburse yourself for qualified medical expenses at any time provided you have the receipt. You can also invest a portion or all of your HSA in the stock market to grow even faster.
Because we always have significant medical expenses, we decided to change our strategy and set aside part of our maxed-out contribution to invest for future expenses. In 2019, the max you could put in an HSA is $6900. We decided that $5,000 of that would remain in the cash fund portion of our HSA so that we could easily reimburse ourselves if we needed to for any reason. The remaining $1900 we invested in a 0% expense ratio, Total Stock Market Index Fund. With each paycheck, $45 goes into the investment portion of the account.
Since investing a portion of our HSA in 2018, we have enjoyed a return of over 9%. That’s an extra $330 toward current or future medical expenses. Once we get enough in the cash portion to cover our large deductible this year, I’m going to send all of the contributions to the investment side. I’m still going to cash flow the deductible itself. But having a “second deductible” worth in our HSA cash fund will help us if there’s a catastrophe that makes us hit our Family Out of Pocket Maximum.
2020 Medical Spending Strategy
In 2020, our employer is going to provide additional therapy visits. So by pulling back on our schedule just a bit (once a week for each therapy), we will be able to have every visit covered except for a few OT visits at the end of the year. Knowing that, in 2020 we are able to reduce our medical sinking fund savings and put those dollars into other sinking funds. We really want to get new windows & finish out our attic. So those extra dollars will go toward House Projects for 2020.
We’re still maxing out our HSA. We’re also still sending about $375 per check to the medical savings account. But that’s significantly less than what we have been setting aside in the last few years. The $375 annualized over 24 checks is basically our deductible, an estimation of co-insurance for the other 4 of us for the year, and about 6 cash-paid OT visits. This way, we won’t need to touch the HSA unless we have a catastrophic event. SO FREEING!
This plan could change significantly if our daughter needs to start her orthodontic journey our our HVAC dies in 2020. But, with our YNAB Budget, we have that flexibility.
How We Use YNAB
With our YNAB Budget we think of everything in per-paycheck amounts. We get a paycheck twice a month, so I set aside half of each month’s category need each payday. Even if we don’t spend money from that category that pay period, it adds up and rolls over. For example, I don’t buy clothes or shoes for the family every pay period. When I do buy clothes and shoes for the family, it tends to be a significant expense. So, I set aside $50-100 a paycheck and let it grow until it’s time to buy clothes and shoes.
The same goes for little expenses that are annual. Like our ABC Mouse subscription ($2.50/check), Amazon Prime Membership Fee ($5.41/check), Monthly Subscribe & Save Subscription, even our Grove Collaborative VIP Membership ($1.67/check). I keep all of these in one Subscriptions category. In the category notes, I list out each item that is included in this category with their per-check amounts. Then, I have a total of those items for each pay check. I don’t even have to think about it when any of these annual charges pop up on my card. It’s not an emergency, I’ve already got the money set aside. My YNAB charge is in there too. See, I don’t even think twice about the cost of our YNAB Budget.
YNAB Can Change Your Life Too
In the last two years, I’ve gotten several friends hooked on YNAB, and its changed their lives too! If you’re interested in getting started with YNAB, click here for a free 30 day trial (I get a free month if you subscribe). I would suggest starting your trial on your next payday in order to maximize your free days. And make sure you follow my 7 Steps to Setting Up Your YNAB Budget for Success. Also, make sure to read the book You Need A Budget by Jesse Mecham, the founder of YNAB. It goes into detail about the philosophy and how the program works. I read it for free from the local library on my iPad!
4 years in, our journey with budgeting looks a lot different than it did when we started. It definitely took some getting used to. We had lots of things that popped up in the first few years. But now, we feel like we can handle anything thrown at us. Our lives are so much easier because we don’t have money stress. Did we go without some things? Sure. But it turns out it was nothing we couldn’t live without. With a YNAB budget, you prioritize how you want to spend your money. It gives you permission to spend, not restrict you. It’s freeing.
Is your favorite hobby budgeting like mine is? What has your budget helped you achieve? Tell me in the comments! If you haven’t started yet, tell me what you’d love to be able to do if you had the budget. As always, I’d love to answer any questions that you have. Leave them below in the comments or send me an email, and I’ll be happy to help you!
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