Age Your Money: Mastering YNAB’s Fourth Rule
Imagine money as a fine wine—it gets better with age. YNAB’s fourth rule, “Age Your Money,” challenges you to let your dollars mature before spending them. This approach shifts you from surviving paycheck to paycheck to thriving on a cushion of cash that’s had time to grow older and wiser.
Understanding ‘Age of Money’
Think of your bank account like a giant gumball machine. Every paycheck adds new gumballs—your dollars—into the top. Each time you spend, you crank the handle and a gumball rolls out. Initially, your gumball machine might look pretty empty, and gumballs won’t stay long before they tumble out to be spent. But as you embrace YNAB and start budgeting, you begin to fill the machine faster than you spend. The age of your money is watching how long a gumball stays in the machine before it rolls out. Over time, with each paycheck and fewer impulsive spends, more gumballs fill the machine, and they stay there longer. The aim is for your gumballs—your dollars—to get at least 30 days old, meaning you’re spending money you earned last month or earlier, adding stability to your finances.
This metaphor works well until we have to try to eat a 100-day-old gumball, so let’s go back to dollars.
How to Implement This Rule
- Track the Age of Your Money: YNAB makes this easy by providing a report in the ‘Reflect’ tab that shows how many days your money has been sitting in your account before you spend it. The goal is to increase this number over time, which YNAB helps you track.
- Prioritize Saving: Consistently assign a portion of your income to true expenses and savings goals and budgeting into future months. This habit not only increases the age of your money but also builds a significant safety net.
- Spend Less Than You Earn: It sounds straightforward, but it’s crucial for aging your money. By living within or below your means, you allow your unspent money to age as it sits waiting in your financial gumball machine for its assigned job.
Connecting Rule 2 and Rule 4
Implementing Rule 2, “Embrace Your True Expenses,” plays a crucial role in aging your money. As you begin setting aside funds for future expenses, your money naturally sits in your account longer before it’s needed. This not only prepares you for upcoming costs but also extends the age of your money. By planning for future spending, you ensure that money has time to mature, which strengthens your financial stability.
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Dealing With Setbacks
As your money ages, you will still face financial hurdles. The key is to use your aged money to handle these without panic. Whether it’s an unexpected car repair or a medical bill, your funds are ready to cover these without disrupting your financial peace. This may mean that your age of money will fluctuate and this is totally normal. Keep an eye out for it as a good metric and adjust as necessary, but look for an upward trend over time, not worrying too much about a temporary dip after a large expense (I’m looking at you, taxes).
Wrapping Up
Aging your money is akin to investing in your future self. The longer your money sits in that metaphorical gumball machine, the more prepared you are for whatever life throws your way. Embrace YNAB’s fourth rule and transform your financial approach from reactive to proactive, ensuring that when it comes to your finances, you’re not just aging—you’re aging gracefully.
Want Help Aging Your Money?
Are you ready to start aging your money but unsure how to begin? As a certified YNAB coach, I can guide you through the nuances of creating a budget that allows your money to mature beautifully. Reach out today, and let’s lay the groundwork for a financially secure future.
