We have all skilled that exhilarating second once you attain into your pockets and pull out a present card, proper? It is like holding a bit slice of monetary freedom in your fingers. The probabilities are infinite, and there is an simple sense of pleasure figuring out you could indulge guilt-free in your favourite espresso store, splurge on a brand new ebook, or deal with your self to a much-needed spa day—all because of that magical piece of plastic.
However what if I advised you there is a strategy to seize that very same feeling of liberation with each greenback you earn? Think about having the facility to allocate your cash like a stack of personalised reward playing cards, every one designated for a particular objective, with out the concern of overspending or shedding monitor of your funds. Welp, that is YNAB’s Rule One in a nutshell.
While you observe Rule One: Give Each Greenback a Job, you divide your cash up into particular classes, like little digital envelopes on your {dollars}. So let’s say you put aside $50 in an leisure class. While you take your children to the bowling alley, you spend the cash out of your leisure bucket. Isn’t that lots like utilizing a present card? With YNAB, your spending is restricted to a particular objective. With a present card, it’s restricted to a particular retailer.
And there are lots of advantages to this. Reward playing cards provide you with crystal-clear readability, wholesome limits, and freedom to spend with out guilt. YNAB helps you to expertise all of those perks—with not one of the drawbacks. Let me break it down for you.
Reward Playing cards and YNAB Give You Prompt Readability
Let’s discuss an financial time period that describes why cash is helpful. Earlier than your eyes gloss over, I promise this can be enjoyable, as a result of we’re speaking about fungibility. (FUNgibility. Not FUNGIbility.)
Fungibility refers to a superb or asset that may be exchanged for an additional of the identical kind. When it refers to cash, it means any greenback is simply as worthwhile as another greenback. They’re the identical. Should you ask any economist why cash is so helpful, they’ll in all probability discuss fungibility. As a result of one greenback is precisely as worthwhile as another, we will use them to make the trade of products and companies a lot, a lot simpler.
So fungibility is a good factor, but it surely additionally makes it tougher to make spending selections. You need to use $100 to purchase ANYTHING value $100. It’s straightforward to turn into paralyzed by decisions, as a result of there are such a lot of prospects. What’s good a few reward card is it removes the fungibility. As an alternative of an enormous wad of money that may be spent on actually something, you’re holding a smaller quantity for one thing very particular. When you’ve got a present card to a neighborhood therapeutic massage parlor, you immediately know you’re going to spend it on a therapeutic massage. No second guessing.
That is why we prefer to get individuals reward playing cards as an alternative of simply giving them money. While you purchase somebody a present card, not solely are you giving them cash, however you’re taking away the burden of deciding how they need to spend that cash. That’s precisely why it feels higher to purchase a present card for somebody’s birthday current quite than simply giving them money. It’s additionally why a present card to a neighborhood restaurant feels extra considerate than a present card to Amazon. An Amazon reward card is nearly as fungible as money, as a result of they promote every thing. However a present card for one thing extra particular reveals you had been extra considerate.
Utilizing YNAB provides you a similar readability for all of your spending. While you allocate $500 to your grocery class, it’s type of like shopping for your self a $500 reward card to the grocery retailer. You now not need to make any selections about that $500. You realize you’re going to spend it on groceries.
Reward Playing cards and YNAB Assist You Set Spending Limits
That brings up one other good thing about reward playing cards that YNAB replicates completely. Reward playing cards additionally enable you set a spending restrict.
Going again to our $500 grocery class—now, once you decide up some groceries, you’ll be able to take a look at your grocery class to find out how a lot you’ll be able to spend. It’s now not an amorphous checking account stability that may be spent on actually something. Not solely do you’ve got readability on how you’re going to spend that $500, however you’ve got readability on how a lot you’ve got left to spend.
This dynamic is precisely why Starbucks is (very arguably) one of many largest banks on the earth. As of April 2023, their wildly standard rewards program held $1.8 billion (with a B) in money, both in reward playing cards or in app deposits. That’s wild, you all! Why are so many individuals keen to fork over a lot cash to Starbucks earlier than they really purchase espresso?
As a result of with out YNAB, this is likely one of the solely instruments individuals need to plan their spending. Starbucks clients load cash of their app or purchase reward playing cards largely to allow them to resolve and implement a specific amount of spending on espresso inside a selected time interval. That’s one other large good thing about reward playing cards. They enable you restrict your spending.
YNAB fulfills this want completely with out having to offer an interest-free mortgage to one of many largest companies on the earth. How a lot do I’ve left to spend on espresso? Simply test the espresso class. (Oh, and now you don’t have to purchase your espresso solely at Starbucks!)
Reward Playing cards and YNAB Take away the Guilt from Spending
One more reason we give reward playing cards is to lovingly drive somebody to spend cash on one thing particularly. While you purchase somebody a present card, you’re giving them the reward of paying for one thing, however you’re additionally giving them the reward of permission to deal with themselves. You’re taking away the guilt related to spending on one thing they could suppose is frivolous.
That’s why it’s such a pleasure to offer a present card to a very selfless particular person. You realize your mother loves pedicures, however she by no means needs to spend cash on herself. Should you purchase her a present card for a pedicure, you be sure she’ll spend it on one thing she enjoys.
So once you set cash apart in a enjoyable spending class in YNAB, you’re giving your self the identical reward. While you plan your enjoyable spending proper alongside your payments and non-monthly bills, you’ll be able to see that you simply can spend cash on one thing enjoyable with out worrying about another obligations. Assign the cash on paper first, and you may spend freely with out guilt, disgrace, or fear.
Reward Playing cards Aren’t Versatile, However YNAB Is
Reward playing cards deliver a complete lot of worth to our life, however they do have a main disadvantage. They aren’t versatile. Have you ever ever had a present card to at least one retailer and actually want you possibly can use that cash some other place? Perhaps you’ve even wished you possibly can convert a present card to money so you possibly can spend it on no matter you need. Keep in mind, reward playing cards take away among the fungibility of cash. That brings all the advantages we’ve talked about, however at the price of flexibility.
However with YNAB, you don’t have that value due to Rule Three: Roll With the Punches. A core a part of the YNAB Technique is you could change your cash plan at any time for any purpose. The cash in your YNAB classes remains to be cash in spite of everything, and meaning it’s nonetheless fungible.
If a buddy invitations you to exit to eat unexpectedly however your eating out class is depleted, you’ll be able to transfer some cash out of your trip class to cowl it. Should you overspend on a spa reward card on your mother, you’ll be able to swipe some money out of your leisure class. No drawback, no fuss. As long as you weigh the tradeoffs, you’ll be able to change your plan everytime you need.
That implies that whereas YNAB provides you gift-card readability, gift-card limits, and gift-card freedom to spend, it additionally provides you cold-hard-cash flexibility. It’s all the advantages, however not one of the drawbacks.
Would you like gift-card readability for your whole cash? Strive YNAB right now. It’s free for 34 days and it would simply change your life.