This App is My Secret Weapon to Wealth

In the quest for financial freedom, a budgeting app is not just a tool, it's a financial superpower.

Why a budgeting app?

Many simply spend and save with constantly changing financial expectations as we are always being influenced by what’s around us.

On one month, you may have read a good book on personal finance and think that you should dedicate 50% to savings every month.

On another, you may have come across some YouTube videos about fashion and think that you should invest in your appearance.

Without concrete goals to work towards, we let our money habits be influenced by external forces.

You are not in control.

You can have great financial analysis for investments or a knack at running a business. But without proper money management, the path to financial independence is fraught with obstacles.

This is the problem a budgeting app can solve by helping its users achieve their financial goals over time by encouraging purposeful money allocation and consistent saving.

It’s a useful tool for financial freedom very few diligently incorporate into their everyday lives.

What budgeting app do I use?

There’s a myriad of budgeting apps out there, of which many are actually free.

I am willing to spend some money on the one I use. The principles it uses for its budgeting mechanism has completely changed the way I view money and I’m willing to pay for an app that seamlessly incorporates these principles.

This budgeting app is called You Need A Budget.

Credit: Wired

Yes, seriously. That’s its name.

In short, it’s known as YNAB.

It doesn’t come cheap at USD 109 a month (SGD 145). But let me share with you the budgeting principles YNAB uses and you may understand why I’m willing to pay that much for the YNAB app.

YNAB’s Principles of Budgeting

YNAB uses a four-rule method which is incorporated into the app.

The four rules are:

1. Give every dollar a job

For every dollar that comes into your possession, it should be assigned to an expense category. There should be no “unemployed” dollars.

I particularly like the idea the first rule brings across: that every dollar that enters your life should serve a purpose to bring you one step closer to financial freedom.

Thinking about money this way has helped me better appreciate every dollar I earn and spend.

Also, the incorporation of this rule in the app is what makes this app unique from other budgeting apps. This is why I am willing to pay that much to use it!

2. Embrace your true expenses

Think of every single thing you might need to spend on in the future. For example, a new phone you need maybe 3 years down the road when Apple pauses the updates on your current iPhone, or that dental that’s coming up in a few months’ time.

Although its impossible to think of everything you have to pay for, the key behind this rule is to break down large, infrequent expenses you don’t expect into small, manageable sums you can work towards.

This means no “Medical Fund” category where you accumulate health-related funds in not knowing where they are going to be spend on. This is akin to not following rule 1.

Instead, use more specific categories like “Dental”, “Outpatient” and “Hospitalisation Insurance” (for example) where you can visually see how your money is purposed and how much excess money can be used for other things.

3. Roll with the punches

This rule encourages you to be flexible with your budget. If one expense category runs out before the month ends, you are free to move money in between categories to fill up the deficit.

Hence, even if you overspend on a category, it does not necessarily mean you have busted your monthly budget!

4. Age your money

The most important aspect of personal finance is to save enough for your future self. If you have excess money after budgeting for the current month, throw that money into the next month, and the one after that, and after that… you get where I’m coming from.

Following this, I really appreciate how this rule eliminates the need for a separate emergency fund.

If you have 6 months’ worth of money budgeted in YNAB, it can essentially replace the 6 months’ salary rule for an emergency fund and help optimise your money allocation.

Summing up,

A budgeting app is a really powerful tool for achieving financial freedom as it helps you with money management, which is one of the foundational bedrocks of building lasting wealth.

I personally recommend the YNAB budgeting app, which uses four rules to help users budget their money in a meaningful way.

Give this app a shot if you have cash to spare. You might be surprised at how much more you can accomplish using it.

If you ever decide to subscribe to YNAB, please do use my link and we both get a free month of usage!

Referral link: https://ynab.com/referral/?ref=h805xZ6fy1GuToQk&sponsor_name=Kevin