How YNAB Is Like a Sensible Reward Card

We have all skilled that exhilarating second if you attain into your pockets and pull out a present card, proper? It is like holding a bit of slice of economic freedom in your arms. The chances are infinite, and there is an simple sense of pleasure understanding you can indulge guilt-free in your favourite espresso store, splurge on a brand new e-book, or deal with your self to a much-needed spa day—all due to that magical piece of plastic.

However what if I informed you there is a technique 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 present playing cards, every one designated for a selected function, with out the concern of overspending or dropping observe of your funds. Welp, that is YNAB’s Rule One in a nutshell.

Whenever you observe Rule One: Give Each Greenback a Job, you divide your cash up into particular classes, like little digital envelopes in your {dollars}. So let’s say you put aside $50 in an leisure class. Whenever you take your youngsters to the bowling alley, you spend the cash out of your leisure bucket. Isn’t that quite a bit like utilizing a present card? With YNAB, your spending is proscribed to a selected function. With a present card, it’s restricted to a selected retailer. 

And there are a variety of advantages to this. Reward playing cards offer you crystal-clear readability, wholesome limits, and freedom to spend with out guilt. YNAB allows 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 Immediate Readability

Let’s speak about an financial time period that describes why cash is helpful. Earlier than your eyes gloss over, I promise this will likely be enjoyable, as a result of we’re speaking about fungibility. (FUNgibility. Not FUNGIbility.)

Fungibility refers to a very good or asset that may be exchanged for one more of the identical kind. When it refers to cash, it means any greenback is simply as priceless as another greenback. They’re the identical. For those who ask any economist why cash is so helpful, they’ll in all probability speak about fungibility. As a result of one greenback is precisely as priceless as another, we will use them to make the change of products and companies a lot, a lot simpler. 

So fungibility is a good factor, nevertheless it additionally makes it harder to make spending choices. You need to use $100 to purchase ANYTHING value $100. It’s simple to turn out to be paralyzed by decisions, as a result of there are such a lot of prospects. What’s good a few present card is it removes the fungibility. As an alternative of a large 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 an area therapeutic massage parlor, you immediately know you’re going to spend it on a therapeutic massage. No second guessing.

Because of this we wish to get individuals present playing cards as a substitute of simply giving them money. Whenever 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 reasonably than simply giving them money. It’s additionally why a present card to an area restaurant feels extra considerate than a present card to Amazon. An Amazon present card is nearly as fungible as money, as a result of they promote all the things. However a present card for one thing extra particular reveals you have been extra considerate. 

Utilizing YNAB provides you a similar readability for all of your spending. Whenever you allocate $500 to your grocery class, it’s sort of like shopping for your self a $500 present card to the grocery retailer. You not must make any choices about that $500. You recognize 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 present playing cards that YNAB replicates completely. Reward playing cards additionally show you how to set a spending restrict.

Going again to our $500 grocery class—now, if you choose up some groceries, you’ll be able to have a look at your grocery class to find out how a lot you’ll be able to spend. It’s not an amorphous checking account steadiness that may be spent on actually something. Not solely do you may have readability on how you’re going to spend that $500, however you may have readability on how a lot you may have left to spend. 

This dynamic is strictly why Starbucks is (very arguably) one of many largest banks on the earth. As of April 2023, their wildly common rewards program held $1.8 billion (with a B) in money, both in present 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 must plan their spending. Starbucks clients load cash of their app or purchase present playing cards largely to allow them to resolve and implement a certain quantity of spending on espresso inside a specific time interval. That’s one other large good thing about present playing cards. They show you how to restrict your spending.

YNAB fulfills this want completely with out having to provide an interest-free mortgage to one of many largest firms 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 present playing cards is to lovingly power somebody to spend cash on one thing particularly. Whenever you purchase somebody a present card, you’re giving them the present of paying for one thing, however you’re additionally giving them the present of permission to deal with themselves. You’re taking away the guilt related to spending on one thing they could assume is frivolous.

That’s why it’s such a pleasure to provide a present card to a very selfless particular person. You recognize your mother loves pedicures, however she by no means desires to spend cash on herself. For those who purchase her a present card for a pedicure, you make certain she’ll spend it on one thing she enjoys. 

So if you set cash apart in a enjoyable spending class in YNAB, you’re giving your self the identical present. Whenever 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’ll spend freely with out guilt, disgrace, or fear. 

Reward Playing cards Aren’t Versatile, However YNAB Is

Reward playing cards carry an entire 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 may use that cash some other place? Possibly you’ve even wished you may convert a present card to money so you may spend it on no matter you need. Bear in mind, present playing cards take away among the fungibility of cash. That brings the entire 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 Methodology is you can change your cash plan at any time for any cause. The cash in your YNAB classes remains to be cash in spite of everything, and which means it’s nonetheless fungible.

If a pal 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. For those who overspend on a spa present card in your mother, you’ll be able to swipe some money out of your leisure class. No downside, 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 the entire 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.