How we were successful in paying off $50,000 in debt

As you well know, our family has become big fans of You Need a Budget over the past year.

YNAB aims to be a different kind of budgeting software — one that will help you break the paycheck to paycheck cycle, get out of debt and save money, and ultimately help you live the kind of life you want.

When I shared earlier last year about how much we love this software, I was so happy to hear how many of you also loved YNAB. We recently partnered with YNAB to offer $100 Amazon gift cards to the top success stories we received from readers about how YNAB has changed your life.

We received so many wonderful success stories and it was hard to choose just a few to share here! Thank you to everyone who submitted entries! (The winners have now been contacted, and we will be posting the winning success stories over the next few weeks for all of you to read and be encouraged by.)

Here’s the third winning post…

How We Were Successful in Paying Off $50,000 in Debt

Guest post written by Stephanie by SixFiguresUnder.com

I have always been frugal and budget-minded, so when I read on the YNAB website that following YNAB’s four rules will result in an average turnaround of $200, I naturally assumed that wouldn’t happen for me. Sure, other people might suddenly “find” money, but not me because I knew where our money went.

Or so I thought.

After reading some great recommendations, talking to friends who used YNAB, and watching some YNAB online classes, I forked over the $60 to buy it. That was a big deal for a frugal girl like me. Despite my skepticism, I hoped that it would help us streamline our money management and use our funds most effectively.

YNAB turned out to be the best thing I ever did for our budget. To say it was well-worth the money would be a huge understatement.

I’ve been singing the praises of YNAB for two years now. In that time, we have paid off over $50,000 in law school student loans!

You’re probably thinking that accomplishment has more to do with our own efforts to eliminate debt and less to do with the budgeting software we use. While it’s true that much of our debt payoff comes from hard work (earning more) and sacrifice (spending less), YNAB has allowed us to put even more toward our debt.

Here is what YNAB taught us…

1. Track all of your spending.

Unlike some budgeting software and apps, YNAB does not just compile all of your financial accounts in one place. We are responsible for entering each transaction manually. With the app, we enter purchases in our smartphones wherever we are.

While it might sound daunting, it’s this daily accountability and awareness that keeps us in line and helps us really understand our habits.

2. Only budget real money.

The traditional way to budget is to plan how you will spend the money that you plan to get. You’re making plans for money that isn’t even in the bank yet.

You’re counting your chickens before they’ve hatched. With YNAB, you only budget money that you actually have — already earned, sitting in your bank account, real money!

3. Consider money as “spent” when you spend it (not when it leaves your account).

We don’t have to worry about bouncing a check or having enough left to pay the credit card that we faithfully pay in full each month. Even though the money is sitting in our account after we write a check or pay with a credit card, it’s “spent” in YNAB as soon as we spend it.

Before YNAB, we were never sure how much “extra” money we had to throw at the student loan debt that we’re working to pay off. We were always trying to time the bills and paychecks just right and erring on the safe side.

We weren’t putting as much money toward debt because we just plain weren’t sure how much money we actually had. Of course we knew how much was in the bank, but we weren’t sure which of those dollars were already spoken for (in the form of a bill that might come tomorrow).

4. Have a flexible budget.

Before making purchases, we check YNAB to see what funds we have available to spend. By paying attention to the category balances that we have set up in YNAB, we keep our spending in line with our priorities.

When our priorities change or something comes up that we had not planned for, we always have the option of moving money around from one category to another. Our pre-YNAB-selves would consider this a budget failure, but now we know it’s normal and healthy to adjust your budget any time in the month.

5. Start living on last month’s income.

YNAB opened our eyes to the idea of living on last month’s income, which has revolutionized our budget and our overall feeling of financial security. The idea is pretty simple. We hold on to ALL of the money that we earn each month and we don’t touch it until the next month.

We do this each month, so every month we’re holding that month’s income for the entire month, then spending it in the next month. Then, at the beginning of each month we know exactly how much money we have to work with.

It took a couple of months to get in the position of being a month ahead, but it was so worth it. With a variable income, living on last month’s income has given us stability. Even while working to get out of debt, we get a taste of peace and financial security by living on last month’s income. More than anything else, living on last month’s income has reduced my stress level tremendously.

So how has YNAB helped us pay off over $50,000 in debt in 2 years?

• The accountability of recording every purchase means we spend less, so we have more to put toward debt.
• Budgeting down to zero by giving every dollar a job means we can put every extra cent toward debt.
• Living on last month’s income allows us to approach the budgeting scene with a calm we’ve never had before, which means we can keep our sanity while tackling our huge goal.
• Having a budget that works is really motivating. And motivation can go a long way!

YNAB is more than just budgeting software; it’s a money-managing methodology that really works. Instead of looking back to see where our money went, YNAB has taught us to look forward and tell our money where to go. We’re counting on YNAB to help us pay off the remainder of our debt in 2016!

Stephanie makes her family’s personal finances public and shares money-saving, income-earning, and budgeting tips (using YNAB, of course) at SixFiguresUnder.com. Stephanie’s family of six is on a super frugal journey to pay off over $130K of student debt in a hurry. Follow along for ideas and encouragement!

Interested in trying out YNAB? Go here to sign up for a free 34-day trial.

This post is underwritten by YNAB. Read our disclosure policy here.