Rule One:
Give Every Dollar a Job

Your money shouldn’t tell you what to do. You’re the boss. The drill
sergeant. The maestro. When you earn money, you plan how
you’ll use it, then you follow your plan.

Rule One

How it Works

Instead of deciding to buy something based on the big (or small) pile of money in your checking account balance, you’ll decide based on a category balance.

Without Rule One:

You see the $500 account balance, get the false idea that you’re flush with cash, and go out for sushi at your city’s finest for $100.  A few days later some bills come due and you’re in a pinch.

With Rule One:

You have $500 in your checking account.  You give each of those dollars a job by dividing the $500 into various categories:

$150 $10 $40 $100 $200
Food Eating Out Gas Utilities Car Payment
Total Budgeted: $500

Your friend invites you to go out and get some sushi.

You don’t look at your $500 account balance and say, “Wow, that’s a ton of money! Sure!” You look at your ‘Eating Out’ budget balance of $10, wince, then smile, and invite your friend over to split a $5 pizza.  A few days later some bills come due and you pay them with ease.

Why it works

You’ll Reach Your Financial Goals with Laser-Focus

Breaking your money up into smaller, laser-focused goals gives you the information you need to make good spending decisions.  If the account balance is all the information you have to make a decision, the decision won’t be a good one.  The problem is compounded if you’re in a shared-finances situation.

You’ll “Get a Raise”

When you’re proactively deciding what you want your money to do before you do it, your financial awareness increases. Nobody ever, with full awareness, says to themselves, “I’d like to bury myself in credit card debt.” Yet a lot of people end up in exactly that situation. Awareness simply assures that your money does what you want it to do.

Our users constantly write in and let us know that they “feel like [they] got a raise.” They didn’t. They’re just more aware of their money, not frittering it away on things that provide no lasting value, and as a result, there’s more of it.

No Budget Failures, Just Lots of Adjustments

Let’s say you give your money a job to replace the leaky toilet in the bathroom. You’re not a plumber, but you guess that the repair will cost $100, so that $100 goes into the ‘Leaky Toilet’ category.  It’s a guess.  You’re not naming children or picking a spouse.  (Setting up a category just for leaky toilets isn’t considered a best practice. You’d usually want to be a bit more general with your categories, such as “Home Repairs.” Unless, of course, your toilets leak all the time.)

The plumber comes and, wouldn’t you know it, it rings up at $150.

You suppress your instinct to collapse in a heap on the floor and wail that budgets are a failure. Instead, you look at your budget, see that you have $30 you can move from ‘Squeaky Toys for Fido’ and $20 that can be spared from the black-hole category known as ‘Miscellaneous.’  You make the adjustment, bumping up your ‘Leaking Toilet’ category from $100 to $150.

This type of adjusting is normal, expected, and encouraged.  It means you’re setting a plan, then adjusting that plan as new information arrives.  You may simply want to spend more money on entertainment than you originally thought you would.  Because every dollar has a job, the extra for entertainment will have to come from somewhere. You look things over, get a gauge on your priorities, and make the adjustment.

I loved the idea of giving money a "job"...I knew every last cent was spoken for.

Having worked hard to climb out of debt in the past, this family decided to change their money habits so it wouldn't happen again.
Read the full story >

Common Questions About Rule One

I feel guilty when I adjust my budget. Why?

Because you’ve been taught to feel guilty about it. If you’re "on budget" that means either 1) you exercised some discipline and spent your money according to your plan (good) or 2) something unforeseen came up and you guessed wrong (not bad).  Either one of those situations are cause for celebration. If you guessed wrong, you’re still reacting and adapting as needed. You should pat yourself on the back!

I’d like to budget a year in advance. Can I do that?

Oh, you mean like the government? Sure, it’s worked for them! (I jest...sort of). Forecasting is fun. You get to tweak and guess and dream; and that’s all okay. But then you should probably come back down to reality and deal with the coming month—or next paycheck cycle.  There’s no harm in having long-term goals. Just break those goals down into monthly chunks. You’ll see them more often, which will increase your chances of reaching them.

Can I leave some of my dollars unassigned?

No. Every dollar needs a job. If you’re needing something for spontaneity, have a ‘Spontaneous Craziness’ category and plan for it (yes, you can plan to be spontaneous).  Worried that an emergency might crop up? Assign that money to an ‘Emergency Fund’ category.  And the best category of all, let the money roll forward to be Available Next Month as part of reaching Rule Four (if you don’t get what I’m saying right here, don’t sweat it. We’ll get there.)

So I never look at my account balance?

Oh no. You will--just before you write us an email, letting us know how you used to operate at the nail-biting, nightmare-inducing, stress-causing threshold of thirty-two dollars and ten cents in your checking account. It’s now in the thousands.