The Power of Not Living Paycheck to Paycheck

This could also be titled, "The Power of Rule 4." You will find out why in a few paragraphs.

Yesterday I was listening to the fantastic (and new) YNAB podcast. I don't remember which episode it was as I listened to all three, but it occurred to me that the majority of our marriage, my wife and I have been living on last month's income. Or in other words, we have never lived paycheck to paycheck since using YNAB beginning in the spring of 2007.

I was reminded of this because Jesse mentioned an idea from another personal finance blogger (I forget the name) which essentially says "$1,000 is the new zero." In other words, if your bank account goes below $1,000, then it is time to be a little worried. Personally, I cannot remember the last time our bank accounts (all of them in total that is) went below even $3,000 or $4,000. I am not saying that to brag or that we are better than anyone else for having more than $1,000 in cash. I say that because of the amazing relief it is. I have never had to worry about knowing when our paychecks get deposited so that we can pay our next bill. As long as we get paid before the next month, there is always plenty of cash at hand.

Until you start living on last month's income, that amazing feeling of not worrying about cash in the bank cannot happen. Simply the best way at making that happen is by following YNAB's four rules:

1. Give every dollar a job
2. Save for a rainy day
3. Roll with the punches
4. Stop living paycheck to paycheck

The first three rules are what helps you to get to rule four. For example, my wife and I "save for a rainy day" in a number of different categories. Despite not actually having an expense every month, we budget money into our car maintenance, insurance, taxes and Christmas line items. This builds up a natural buffer (and our cash in the bank) that we can then use later. It really is financial bliss!