Rule Three is, by far, the most elusive of the Four Rules of Cash Flow, but it's my favorite.
You've probably heard the saying, "Just roll with the punches." It means you're adaptable. The origin of the saying comes from the sport of boxing: "Said of a boxer: to move the body away from and in the same direction as an opponent's punches to reduce their impact."
If you ever watch boxing in slow motion you'll see the fighters doing this all the time. It truly does lessen the impact, and keeps them on their feet so they can continue the fight.
In budgeting, the same advice holds. We haven't talked much about how people tend to get pretty depressed and down on themselves when their budget "doesn't work." They usually throw in the towel. Okay. I'll get off the boxing thing...maybe.
What happens when you go over budget? Well, nothing. You just roll with the punches. You adjust your budget to cover the overspending, and go cuddle up with a book.
If you can't cover the overspending by pulling money from another job, then you pull it from next month's money (with my software, that's done for you automatically).
That's the gist of the rule: when overspending happens, you address it. No guilt, just new information and a reassessment of priorities.
I'll spill my guts here. My wife and I have been married almost ten years, and we have operated using the YNAB Rules of Cash Flow the entire time. We have never, ever stayed within budget for every spending category.
The key is that we still just roll with the punches. What we overspend in one month, we pay back the next. Every category is zeroed that is overspent, and every category that has a surplus carries that surplus forward (Rule Two). It's masterfully simple. You don't really even feel what the budget is doing. It just takes you by the hand, makes a few corrections, and leads you gently down a more prudent path.
Alright, that's it for Rule Three, and Day Seven. Tomorrow we'll hit the final rule, then I'll share with you some closing thoughts, and my own story from rags to...nicer rags.
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