The story of YNAB - From Rags to Reasonable

What’s a YNAB?:

If you READ MY STORY, you know that a huge teacher in the early part of my financial education was YNAB (You Need A Budget). It’s a budget software. It’s really easy to use, and it looks great.

But the truth is it’s more than just a software. It’s a budgeting philosophy, it’s a community, and it’s a bunch of fine people who will work with you and help you get back in control of your spending and saving.

The Philosophy:

In the YNAB world there are 4 rules


These four rules, more than the software itself, are what changed the way that I spend my money. Give them a browse, I lay out the details and talk about how they work with the self-employed life. They may seem simple, but that just makes them easy to follow and they’ve really worked for me (especially Rule 4).

Story of YNAB - From Rags to ReasonableRULE 1: Give Every Dollar a Job

It’s really difficult when you’re dealing with a variable income to plan for how much money you’re going to have in a given month. Spending categories change all the time depending on how much money you have, and what the demands of the month are.

This is a great first step. Don’t worry about the big picture, just make sure that every dollar that comes in has a job.

In order to do this, you have to have an idea of what your expenses are (That’s where the money tracking comes in). It can start out pretty basic, but as you go along the more specific it gets the more fun it gets (yes, I said fun)

  • Rent
  • Groceries
  • Restaurants
  • Phone
  • Movies

So whenever a cheque comes in, it gets assigned to one of those categories.

The problem is that account balances lie. When I started to make money, I looked at my account balances and saw that I was flush with cash.” Of course I can go out for beers”. “Yes, I will take that sweater.” “Please borrow some money.” And all of a sudden I couldn’t pay my phone bill until that next cheque came in.

Money works better if it has a specific job.

It takes awhile to figure out where it’s needed, but just the simple act of being more engaged in your spending habits will start bringing up the question

“Is this something I want? Or just something that I’m buying out of habit”

How you’ll feel after living the ‘Rule 1’ life:

Knowledge that your money is going exactly where YOU WANT IT TO GO. Which means that you’re making the best use out of every dollar that’s coming in.

Also…. a fun bonus… GUILT FREE SPENDING. Once that money has that job, I don’t feel bad about spending it there. If I budget 50 dollars for movies I don’t have to bashfully slink into the theatre suspecting I’m spending my rent money on the latest Polly Shore flick. This is my movie money!!! Time to have fun.

Story of YNAB - Rule 2RULE 2: Save for a Rainy Day

I get into trouble because of my inability to think about the future. Rule 1 may be all about the present. But Rule 2 is about keeping the future from kicking you in the face.

For me as a singer, November is audition month. It requires multiple trips to New York, application fees, accompanist fees, accommodation, airfare, and all the drinks that one needs after every audition. It’s a huge cost. I know that, and yet somehow every year it comes out of nowhere.

Rule 2 is all about setting yourself up for the expected costs. Early in the year I’ll write down some numbers

Audition Season

  • Travel – $400
  • Accommodation – $200  (thank you friends couches)
  • Accompanists – $300
  • Application Fees – $100
  • Drinks – $120  (remember, budgeted expenses mean guilt free spending)

Okay. So that’s a significant amount of money. But if you put away 100 bucks a month starting in January, all of a sudden you have a thousand dollars sitting there ready for audition season, and one less thing to stress about.

This works for anything. Car payments. Accountant fees. Union Dues. I’ve been using it for Christmas the last 3 years, and it sure makes that season more fun.

Rule two forces you to break down what YNAB calls your “True Expenses”. Basically it keeps you from getting blindsided by the thing you knew was coming.

In this crazy life of SMALL BUSINESS OWNERSHIP (yup, that’s you) there will always be things that come out of nowhere. But there are lots of things that you do know are coming. Ignoring them does not make them go away. Start planning ahead, with five dollars here, and fifteen dollars there. Small amounts make it manageable to make big changes.

How you’ll feel after living the ‘Rule 2’ life.

You won’t be blindsided by big costs (at least non EMERGENCY ones). When a big bill comes up, you’ll look over at your budget and see the money all ready to jump into action.

Bill paid… and you don’t even have to eat beans and rice all month.

The Story of YNAB - From Rags to ReasonableRULE 3: Roll with the Punches

This is why the folks at YNAB are genius. This rule is essential because it addresses the main issue with all budgeting. User error.

You will screw up. It took me forever to figure out what I was spending money on, and where I wanted it to go. I still overspend in categories all the time.

Your budget can’t be rigid. Especially you. Artist. Storyteller. Creative Professional. You are not rigid, neither is your financial plan. You don’t need to be bang on to all of your categories. Life is crazy. You must react. But the great thing about this software is that it makes you see the consequences of your actions.

If I go over in this area, I have to take from another category. Money is finite. You may not have your cake and eat it too. YNAB uses the term “Flexible, but Responsible” and I think that’s perfect.

This is where YNAB really shines. It’s a really easy interface, you can see where you go over, it’s easy to move money from one category to the other, or even shunt it to next month. But that nasty red number will be irking you until you get rid of it.

How the ‘Rule 3’ life will make you feel:

Rule 3 is where the artist meets the budget. You can have a flexible, spontaneous AND budgeted life. But you’ve got to build a budget that ‘rolls with the punches’.

This rule… takes the pressure off. The pressure to nail it, to be perfect, the pressure that a budget has to be the same every month (or every week).

You’ve been given creative license. Build a budget that works for you!!


Rule 4: Live on last months income

The Story of YNAB - From Rags to ReasonableThis is the big one. The slayer of stress. The saviour of the variable income earner.

In short –  you stop living paycheque to paycheque… and start spending this month, what you earned last month.

Sounds simple and not nearly as dramatic as what I described. Try it. It will change your life.

How? Because it solves one of the biggest problems that budgeting on a variable income presents: how do I budget for the month when I have no idea how much money I’m going to make this month (or you have some idea… but it’s not guaranteed… things happen).

If you’re living on last month’s income you know exactly how much you have to live on. If it was a good month, you can loosen the belt a little bit, but if it was a lean month… better stock up on beans and rice.

No one said the variable income life was going to be easy, but when you take the unknown out of the equation, things get a whole lot more manageable.

This one takes a while:

The tricky thing about Rule 4 is that it’s tough to implement right away.

It takes awhile to shift over to living on last months income. First you have to save up a full month of expenses, so that you can make the transition.

It took me around 5 months to save up so that I could make the switch. But it’s so worth it.

Don’t stress if you can’t get there right away, just SAVE SLOWLY, and you’ll be living the ‘Rule 4’ life before you know it.

How You’re Gonna feel living the ‘Rule 4’ life:


When I finally got on the ‘living off last months income’ cycle, it was the first time in my life I felt like I wasn’t constantly playing catch up with my money.

And now, gone are the days of trying to guess about how much income I will (probably) make this month. I pay my bills on the first of the month (without timing them to my income), my budget functions much better because I know what amount I’m working with at the start of the month…. and I sleep better.

Why every Artist should try YNAB?:

There is nothing stable about the artistic life. But I’ve found there is a lot of stability to be found in this strategy.

It is by no means the only way of doing things, but it’s a flexible (and dare I say, fun!) way to decrease stress, increase disposable income, and make sure you’re living the life you want.

I don’t know if this will work for you, but I can’t recommend trying it enough. See if it fits. So far, it’s the thing that I find works best for people like us!

Their website is fantastic, it has a forum and explains the four rules in greater detail. If you’re interested check it out HERE.

The Story of YNAB - From Rags to ReasonableOkay… what’s it cost?:

  • Software: $60
  • App: FREE!

It’s not free. Sorry. But you can try it for free for 34 days, which will give you a good idea of whether you want to use it or not. The software isn’t free, but unlike some other budget software, you’ll never have to pay again. Not for updates, not for support, not for nothin’.

It may not be the right software for you. That’s fine; there are lots of other ways to budget that we’ll talk about here. But it’s definitely worth a try.

NOTE: If you are interested in buying YNAB you can use my referral code and save 6 BUCKS!!! I know.. it’s pretty amazing. Just click on THIS LINK and that discount will be applied! (full disclosure… I get 6 bucks too, so we both win… ).


  • It syncs through the cloud, so you can punch in purchases on the app right when you make them, and they’ll find their way to the main budget.
  • You can have multiple users on the same budget. So if make a family budget you can keep up to date with everyone’s spending in the same place, avoiding those awkward conversations at the end of the month when you’re looking at the account balances and wondering where all the money went.
  • If you shell out for the full version of the app you’ll get a fun function called Geo-Smart Payees, which allows the software to automatically select the payee by figuring out where you are. Fun, unless for some reason that kind of techno-stalking really weirds you out.