My Age of Money (AOM) has been hovering in the 30s for a few weeks now. Typically, its closer to the high 20s). But now, NOW…its encroaching on my actual ripened age of 39. Eeek! Yes, a (am I middle age!? Who knows – I’m young at heart) a 39 year old still working at better managing her money – and that means budgeting. How amazing will it be when the age of my money can make one feel young again? Well, its right around the corner because my AOM is currently at (drum roll please) 35!
Okay, that might seem anti-climatic, but bear with me. Check out the YNAB “How To Age Your Money” article for more information on how this works.
My AOM typically spikes and plummets in a range of high-20s to low-30s. To have it average out in the mid thirties, and hold steady for nearly a month is a HUGE accomplishment. This means I may have had a few tight months, but even still I was able to solve challenges without impacting my cushion.
The age of your money in YNAB shows (in theory) about how long you can sustain yourself without a pay check. I translate this into “number of pay check cycles I don’t need”. This might not be a direct translation, though I like it as a rule of thumb and quick gauge of success.
If it can’t be measured, it can’t be improved.
Since I am paid bi-weekly, this age of money reflects at least 2 paychecks, going on 3. This means, I am living on money from nearly 3 paychecks ago! How cool is that!? That is my measurement for improvement right now. In the future, I suspect this will evolve as my journey and focus on my personal finances continues and I explore the world of financial goals.
I obviously won’t be able to retire in my 30s, and likely not in my 40s or 50s – but if I can set a goal… it might be early retirement. Crazy, right!? A nearly 40-yr-old trying to be radical with her personal finances. I know practically speaking, its a whole other blog post – but my AOM let’s me measure the distance to a goal like early retirement. I’ll worry more about that later.
In the short term, what I like about hitting a money age of ’35’ is that it is at least two-paychecks worth of cash on hand. My new paychecks are now paying for months in the future, not weeks or even days – which there was a time in my life when they did pay for expenses the day I got paid. Paying for your future needs (even one day in the future) is a great way to chip away at the paycheck-to-paycheck cycle shackles. Sure, I can’t go too long without a pay check – but I can go a while, and it gets futher out in the future every day.
Now, I don’t include things like retirement accounts, health savings accounts, invesments or other funds locked up with restrictions in my YNAB or my AOM. My AOM is the reflection of available cash flow supporting my current, daily expenses and costs of living.
And as I focus on getting the age of money to grow, and pay myself further and further into the future, I’ll be able to see my progression towards financial independence, one step at a time. Another way for me to measure my success and progress towards goals.
So, let’s celebrate when my money is older than me – I’ll check back in a few months to see if I can sustain this when life throws curve balls, month over month.
Question for you: Do you use YNAB? I’d like to know what your thoughts are on the age of money, and how it relates to the “rat race” and the typical paycheck-to-paycheck cycle.