- What does it mean to give every dollar a job
- Difference with and without this idea
- How to Implement
- Benefits of this budgeting style
Giving Every Dollar A Job
Example: When someone gets their first paycheck, they can either spend it all and wonder where it went OR before they spend any of it, they can allocate every dollar to a budget item such as charity, savings, clothing, entertainment… Then they know exactly where they stand with their money, and they are in control of it.
Jessie Mecham in his You Need A Budget book has a diagram that shows money in a savings account, checking account in a gray box. On top of that are transparent colored boxes showing that a specific amount of money is allocated to clothing or food… The idea is that it shows the job of each dollar in that account. You can have the same job come out of different accounts like savings or checking.
Organized families get to say where each dollar goes. You say if it’s ready to spend today on something or if you are saving it for later to spend on something else.
Difference of Living With or Without
If you just spend what’s in the account, then it’s easy to think “oh there’s $500 still in the account, I can go get all the groceries I need or fill up the car with gas.” But what happens after you’ve done that and then a large bill comes along, and you’ve spent all the money on other little things. Then there’s nothing left to cover that bill.
If you’re married, don’t forget it’s important to coordinate with your spouse. If Amy’s thinking we need to save ahead for a new dishwasher, but Dave sees money sitting in the account, he might feel like there’s room to splurge a little and go see a movie, for example.
On the other hand, when every dollar has been assigned a job, then everyone knows that’s where it is assigned. Plus if you have earmarked those dollars for a specific item, then it’s more likely to get money saved up for it rather than just thinking in your head that someday we should save for this or that.
Dave says money not assigned is just floating, being burned up on whatever blows its way. But with a job, money has more power.
Amy likes having money assigned to a job, because when she spends it on that assigned job, then she can spend it guilt-free.
It’s important for organized families to allow for a little fun spending within reason, to give everyone a break from the budgeting discipline that we are trying to maintain day to day and to reward you for doing well.
If you don’t have some fun money, then you may end up like a teapot and just explode, go hog-wild and forget the whole budget.
Be realistic when setting job assignments, and you’ll be much more successful. Find ways to make your dollar go farther. Maybe settle for less expensive things.
Green child likes name brand clothes, so when working with $50 he’s fine to have just a few items. Blue child doesn’t care what brand, so he’s happy getting many more clothing items for the same amount of money, because he likes seeing his dollar go farther with less expensive things. You still have a choice on how you spend every dollar.
When Dave and Amy first started, it took a while to get everything saved up and in place. Be flexible in the process. There are times when something will hit you. YNAB Rule #3 says Roll With The Punches. So the Mitchells set aside a mini emergency fund that they could dip into when a bill came along that they weren’t ready for yet. Even that emergency fund had a job, and that was to help protect you in case of trouble.
Dave and Amy started off by looking at their past budget expenses, because they had been using Quicken and had tracked all our expenses for years. They took an average of what they spent on gas, groceries, electric bills, etc. each month for the past 12 months, and then that was set as their new realistic dollar assigned to that category.
Without giving every dollar a job, the Mitchells didn’t spend more than they were earning, but each month they’d put money into savings, and then have to pull it out to cover overages. They were not getting ahead.
Eventually they limited some spending in other categories and beefed up other categories to keep those realistic.
Now they are planning ahead for those big expenses and living within the budget of other categories, so they don’t have to dip into savings every month. They are better prepared with what they’ve got.
Dave can pay every bill right when it comes in, because money is sitting there waiting for that bill. No more worries about if there is going to be enough money to cover it.
They got there by setting aside that emergency account, (separate from their savings account) to help get all these categories into place with the right amount of money set for cover each monthly expense.
After doing this for awhile, Amy likes having that peace of mind to spend where the money is allocated to go.
Dave likes paying bills without worrying about being charged by the bank because there wasn’t enough money in the account. He likes not having to stress over what bills came out of the first paycheck of the month and what bills came out of the second paycheck of the month.
Conversations these days are more along the lines of shifting a few dollars here or there within different categories to meet their continuing needs.
It’s important that those conversations are equal between everyone involved in the budgeting. One person does not set the numbers, but both agree through compromising and communication.
Get started. Start small. Give every dollar a job.
We don’t have any sponsors or affiliates memberships, but check out You Need A Budget website. They have free trainings. Sign up for one of their courses. They have four rules:
- Every Dollar Gets a Job
- Save for a Rainy Day
- Roll With the Punches
- Live on Last Month’s Income
Dave Ramsey teaches similar budgeting methods.
Get online and find a class to help get you started!